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period end closing for production orders

Dear all,

what is period end closing???

Pl. enlist all period end activities for product costing by order scenario.

what inventory adjustments are necessory.

what FI entries required to post??

Former Member
Former Member replied

With respect to PP- Period end closing is the procedure to close all the production orders and see that cost is flowing from production order to material

During period end - we TECO all the orders and see that production is complete from PP angle. Then costing will calculate over head/variance and settle the difference to production material or price difference a/c depending on the production material price control.

Just see below the example of a production and costing entries. Thi8s may be helpful to understand the concept.

Planned price

Planned Material cost = 115.15USD

Planned Activity cost = 6 USD

Planned Over head = 25% of material cost+ 250% of activity cost = 28.79+15=43.79

Total cost = 164.94

Product cost as per “S” price = 1 USD (example)

After GR and confirmation

Actual Material cost = 7456.55 USD

Actual Activity cost = 2USD

Total cost = 7458.55

Actual O/H = 0

Production variance = 7293.61 USD

After o/h calculation

Actual Material cost = 7456.55 USD

Actual Activity cost = 2USD

Actual O/H = 25% of material cost+ 250% of activity cost = 1869.138

Total cost = 9327.69

Production variance = 9162.75

After settlement

Actual Material cost = 7456.55 USD

Actual Activity cost = 2USD

Actual O/H = 25% of material cost+ 250% of activity cost = 1869.138

Total cost = 9327.69

Production variance = 0

Variance will be settled to Price difference a/c.

When we do the GR the FI a/c will hit as below

Production order expense a/c -

stock a/c +

When we GI the following a/c will hit

Raw material a/c -

Production order expense a/c +

When we settle

Production order expense a/c + or -ve

variance a/c = + or -ve

I hope this will help you.

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