The production process is nearing completion. To finalize, the remaining input materials must to be withdrawn from stock, the remaining products need to be confirmed and delivered. The above figure illustrates the final goods issue and activity confirmation, resulting in the following actual costs:
- The final goods issue and activity confirmation increase the direct material costs and direct production costs.
- Consequently, the production and material overhead costs also rise.
- As a result of the increased actual costs, the WIP increases as well.
The following figure demonstrates these cost effects using the bike example.
Cost Analysis
In the previous figures of the bike scenario, 6 bikes had already been confirmed and delivered, leaving 4 bikes still to be produced.
The final goods issue and activity confirmation affect the order report as follows:
- The goods issue increased the direct material costs.
- The final activity confirmation increased the direct production costs. Since the assembly for the 4 bikes took longer than expected, higher production times were confirmed, resulting in higher production costs than initially planned.
- With the increased direct material and direct production costs, the event-based material and production overhead costs were updated, with the production overhead costs exceeding the planned amounts.
- The WIP balance was updated to reflect the new actual costs.
Note
In the next demo and exercise, you will perform the final goods issue to a production order. The final confirmation will be done in the next lesson in combination with the final goods receipt.