Now that all co-products have been produced, they are ready for delivery. When the final goods receipt is completed, both order items are delivered, resulting in the overall order status being updated to Delivered (DLV).
From a cost perspective, the delivery values are credited to both order items. These values are calculated by multiplying the delivered quantities of 10 PC for each co-product by their respective standard prices. The delivery of both co-products subsequently reduces the actual balance of the order items.
Final Goods Receipt and Settlement
Upon completion of the final goods receipt, the following costs are incurred in the first step:
- At the order header level, target costs are calculated and distributed to the order items based on the apportionment structure, similar to how plan costs were distributed.
- The final delivery of co-products credits each order item with its respective delivery value.
In the second step, an event-based settlement is performed as follows:
- The remaining WIP for each co-product is cleared.
- Each order item is settled, clearing its respective remaining actual balance. This is done through an event-based variance posting.
- Simultaneously with the variance posting, a variance split is performed, breaking down the variance into distinct values according to variance categories. Unlike production orders, variances are posted at the order item level.
Note
The reason for calculating and posting variances at the order item level is that the costs leading to production variances were incurred during initial activity confirmation and were distributed event-based among the order items. Therefore, variance calculation and posting are performed at the order item level. This will be demonstrated in the next exercise.
The event-based settlement marks the completion of the typical process steps in Production Accounting using process orders. Like production orders, an error handling process is available as a troubleshooting measure if any errors occur during the costing processes.