Calculating Variances for Final Delivered Manufacturing Orders

Objective

After completing this lesson, you will be able to calculate variances for process orders with joint production

Variance Calculation

Image shows two process orders with actual costs and variances. Order 1 has a positive variance of 210, while Order 2 has a negative variance of 70. Icons indicate deliv status.

Calculating Variances

The following table shows how variances are calculated for manufacturing orders with and without co-products and with different settlement types:

CaseSettlement Type of Order ItemVariance Calculation
Manufacturing orders that have co-productsFULThe system calculates variances only when all order items have been delivered (that is, when you set the delivery completed indicator for all order items and the status DLV is set for the order).
Manufacturing orders without co-productsFULThe system calculates variances only after the user sets the status DLV for the order.
Manufacturing orders that have co-productsPERThe order balance is always interpreted as a variance (regardless of the status). The system does not calculate work in process for these manufacturing orders.
Manufacturing orders without co-productsPERThe system calculates variances and WIP using the target cost calculation.

No scrap variances can be calculated for co-products. You should therefore use a variance key for which the user has not selected the Scrap indicator.

Calculate Variances for Co-Products

ExerciseStart Exercise

Calculate Variances for Production Orders

ExerciseStart Exercise

Summary

  • When an order has the status delivered, variances are calculated.
  • Variances are calculated for manufacturing orders with and without co-products.
  • Variance calculation determines the difference between the actual costs debited to the object and the credit from goods receipts.

Learning

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