cost of sales accounting and system effect

[Former Member]

Hi All,

Understand further from the forum these 2 days related to prod order settlement.

Now would like to clarify the below.

GI of manufacturing cost 750

raw 500

labour 200

prod overhead 50

GR or confirmation 500

WIP 150

var (say order teco with variance) 100 (knowing cannot have both wip and variance, this is just for the sake of asking my question)

accounting

GI (to simplify)

dr various consumption 750

cr raw stock / expenses 750

GR

dr fg 500

cr cogm 500

wip mth end

dr wip bs 150

cr wip pl 150

wip reversal next period

dr wip pl 150

cr wip bs 150

var

dr prod var 100

cr cogm 100

statement (say new production)
total manufacturing 750

opening wip 750

closing wip 150

cogm 600

1) may I know  can I say (cogm + wip pl = 750) and various consumption (750) net off in the same period in terms of FI right? of course cogm is only 600

2) may I know production variance (dr prod var of 100) has what effect to costing?

3) may I know from the production order settlement and confirmation, the purpose is to know how much already cogm, how much wip and how much variance?

Thank you very much

[jose_reddy · Accepted solution]

Hi Sapask,

1) Yes, you can say

2) You want us to consider the 2nd statement for this, is it right? By this you want to say, the total GR has been received (in system words, PO is either Delivered or TECO), is it right?

If yes to these questions, there should not be any closing WIP, what ever the balance of the order 150 (750-600) will be production variance

If No to the second question, you will have closing WIP of 150.

(In your words, its 100, same way from the 1st statement the balance/WIP you have to show it as 250)

3) GR values will be know as they are received from production order. (FI entry is posted on line basis),

WIP and Variance values, we can know as soon as we perform WIP and variance calculation steps,
By Settlement we see the postings of the above calculations and changes in Production order cost report

Regards,

Jose

[Former Member · Accepted solution]

Hi Sir,

may I  put in this way

1) what is the purpose of production variance which is the offsetting account to COGM during variance settlement. this prod variance has no CE. so what is the purpose of this prod variance?

2) what is the purpose of production order. confirmation, we know the GR. when settle we can know the WIP or variance.

Thank you again

[jose_reddy · Accepted solution]

Hi Sapask,

1) Production variance GL account is used to track the production variance from FI point of view. I understand your concern, though we dont have CE for this GL account, still we see these values in COPA by mapping variance categories to values fields in PA transfer structure and later assigning PA transfer structure in settlement profile along with selection of "Variance transfer to COPA check box" in settlement profile

2) Production order confirmation is one of the PP activity, by this they confirm the activity (in terms of qty) to be performed alone or confirmation activities along with GI/GR (based on their settings)

Are you in the same page with me related to confirmation or do you have any other meaning for it?

Regards,

Jose

[Former Member · Accepted solution]

Hi,

On variance settlement,

1 For prod variance acc, it is not cost element, also can map variance cat to value field?

2 this acc meant for reporting variance in cop a right?

3 whereas for cost of goods manufactured acc with cost element, obviously it is to tell the cost of goods manufactured by prod order, rite?

Thanks

[jose_reddy · Accepted solution]

Hi Sapask,

Yes to all, with small correction.....

Production variance account is meant for reporting in FI, not in COPA

Regards,

Jose