Finish Material GR for project and Costing and accounting entries

[solomon_macwan]

Hi guys,

I am new to PS and need your help in understanding some points. I have gone through the help and other post but unable to understand the concept behind it.

We have created project, wbs, activity and components assign to them, I am able to calculate plan cost and after confirming the activity we are able to calculate the actual cost.

please help me to understand following doubts.--

1) where can i assign finish product in project, so that i can do the gr for it, some post suggest that fg can be maintain as a -ve qty in project. but is there any other way, some post also suggest that movement type 222 q can be done, but in that case what about the accounting entries. please note that we are not doing milestone confirmation.

2) as I said we can calculate cost for the project for other activities and components but -- how can we push the cost of the project to the finished product. i think it is entirely depend upon the assignment of the finished product.

Thanks and Regards,

Solomon

[kenmelching · Accepted solution]

PS is used primarily when you are in a make-to-order business.  This is when the finished good cannot be defined prior to beginning the work or it is highly variable.

The WBS structure holds the costs and revenues and provides the vehicle to analyze profitability.  In this business environment the revenue is determined and billed on a Sales Document but it is passed to the assigned WBS for reporting.

Materials assigned to a PS structure create requirements that are fed to MRP where PP or Purchasing takes over to produce those materials.  Upon completion they are issued to the PS object and their costs are now included in the project.

If you have a predefined finished product with associated Bill of Materials then you really don't need PS.  PP would be a better fit as long as the work is repeatable. This would be more of a make-to-stock environment.

What underlying business requirement are you trying to fulfill with the Finished Good?

[solomon_macwan · Accepted solution]

hi Ken,

thank you for the reply but I do have few more doubts, hope you help me on that also.

so you mean to say that Project and finish product are entirely different, you can not connect finish product to the project. so there is not direct link between Finish goods and project.

as you said wbs hold the revenue and cost incurred. but what if i want to add finish material to the project. how can I achieve and what will be the process for costing the project and transferring it to the material.

regards,

Solomon

[kenmelching · Accepted solution]

What is your business scenario that drove you to use PS?  Is your Finished Good completely defined?

If you have a defined Finish Good with associated Bill of Material then you will also have the lower level materials and their BOM's, and their lower level materials and BOMs, etc.

Now what materials will you attach to your PS Project?  If you attach the Finished Good and some other lower level materials to the project and all materials feed into MRP you have double ordered the lower level materials.

Are you using MRP, BOMs, Routings, Purchasing, etc?

Look at it this way, start with what you are selling.

If you have a finished good material master that fully defines the product then that is what you put on your sales order.  The sales order will send that requirement to MRP.  You don't need PS in this scenario.

If you don't have a fully defined product to sell then you create a Sales Order and assign a PS structure to the Sales Order line item.  In this scenario you do not need a Finished Goods Material.

[solomon_macwan · Accepted solution]

hi Ken,

I myself a PP consultant and know all the processes very well, though i am new in PS and trying to solve one issue with a friend. let me explain the problem---

they are using a PS module only, and not using a PP module, now they are not maintaining wbs into the sales order but they are maintaining fg material into the sales order. and the same fg material they maintain in wbs with -ve qty.

now the client wants to put the actual wbs cost into the material master and settle it to the balance sheet GL account. now some post suggest to keep the value of the fg -1 USD, but if i keep it -1 then the difference it too high in GL. so what should be the correct process for that. we can not change the price of the material because that will count in audit.

This is the reason I was asking about the integration of finish material. by the meantime I will work on the integration with sd and ps module.

thanks and regards,

Solomon

[solomon_macwan · Accepted solution]

hi guys,

Please let me know whether I am following correct process -

in WBS element we have assigned a finished material as -ve qty. so whenever we do the confirmation of the last network order this qty will get generated.

we have assigned this fg material to the sales order also and link it with the wbs element.

Question1 -  for GR of finished product, are we doing the correct process. or do we need to do movement 222 Q.

question 2 - Should i maintain the Fg material as -ve qty and then run MD51.

please suggest.

Solomon

[kenmelching · Accepted solution]

The negative quantity is to trick the system.  You would post a Goods Issue to the WBS for that material but since it is a negative quantity it will act like a Goods Receipt into inventory.  There will be a credit to the WBS and a debit to Inventory on the balance sheet.

So now on the Project Structure you have captured all of the detail costs as debits and with this Goods Issue you will post a large credit.  The amount of the credit depends on the FG material master.  The balance on the WBS needs to be settled somewhere.  You indicated settling it to a B/S G/L account.  The amount of the settlement will the delta.