Assembly Backflush Method
In our Handlebar production scenario when operation 0020 - Assembly is finished, the actual values are entered in the Confirm Repetitive Manufacturing app using the Assembly Backflush method.
The figure above shows that using the app, again only the actual activity quantities of the Machine and Labor activity have to be entered as they differ from the default values in the routing.
The actual component quantities correspond to the default values in BOM, so using the app no data change is necessary.
When choosing the Post button, a goods issue of the two raw materials is automatically posted as the message in the figure shows.
Confirming operation 0020 also means that the production of the 10 Handlebars is finished. Therefore also a goods receipt for the S11-000 Handlebar is posted according to the message.
You will also see the Material Management document number in the posting message.
In the following we will first show the posting results on the product cost collector (Order ID 700021).
Then we will calculate all results for operation 0020.
After we will get a summary of all calculation results for operations 0010 and 0020.
Finally, we will see which documents are posted in parallel when the Post button in the Confirm Repetitive Manufacturing app is executed.
Posting Results from the Perspective of the Product Cost Collector
If you open the Product Cost Collector Details - Event-Based app you will find that at the end of operation 0020 - Assembly which represents the end of the complete production, Actual Costs of EUR 132 result and accordingly a Total Cost Variance of EUR 132. WIP is reduced to zero.
The figure also contains the Input Quantity Variance of EUR 120 and the Remaining Variance of EUR 12 since it already shows the results after the execution of the Schedule Product Costing Jobs app at the end of the production month.
Again the Remaining Variance results from an overhead production percentage of 10% which was calculated on top of the activities' amount (and here on top of the Input Quantity Variance of EUR 120).
In the following we will first see how the values on our product cost collector are calculated for operation 0020.
Then we get a summary of costs for operations 0010 and 0020.
Finally, we will have a look at the documents posted.
Calculation of Material Costs
The following figure shows how the material costs and the overhead costs are calculated.
Calculation of Production Costs
This figure calculates the production costs taking into account that the actual quantities for activity MACH are 20 min per one S11-000 Handlebar and 15 min for activity PERS. In addition, 10 % of the production costs represent the calculated production overhead costs.
Summary: Material Costs and Production Costs
The following table summarizes all determined data and shows that the total costs for creating a handlebar are EUR 385.
Of these, EUR 192,50 are the variable costs and EUR 192,50 are the fixed costs.
Calculation of Material Costs
Since operation 0020 - Assembly was the last production step, we now want to sum up the material costs for the complete production process.
Accordingly, the figure above shows the complete material costs and material overhead costs.
Calculation of Production Costs
The following figure contains the complete production costs and overhead production costs along operation 0010 and 0020.
Summary: Material Costs and Production Costs
With the help of the table in the figure you can see the material costs, the production costs, and the respective overhead costs when the production of the 10 Handlebars is finalized resulting in Total Costs of EUR 1104.
Calculation of Actual Costs
The total cost at the end of production, as already shown, is EUR 1104.
But when the semi-finished product S11-000 Handlebar is delivered to the warehouse, costs become inventory, that is, Assets.
Since these are assets, the inventory receipt in the warehouse is always valuated with the generally accepted, economically reasonable price that was calculated using the material cost estimate. In our scenario, EUR 97.20 per handlebar.
This increases the inventory value, that is, the asset for the 10 handlebars delivered to the warehouse by 10 * EUR 97.20 which equals EUR 972.
EUR 97.20 per handlebar is the economically reasonable price, since its cost estimate is based on a technical quantity structure that shows how many materials and times are required when the handlebar has to be produced.
The difference between the total costs of EUR 1104 and the asset acquisition of EUR 972 is EUR 132 and describes the actual costs incurred by non-economic activities.
Calculation of Target Costs
The following figure summarizes all the relevant data for the calculation of the Target Costs and also contains the plan cost rates of the activities.
The following figure explains how to calculate Target Costs which are always calculated dynamically but not stored in the database.
The Target Costs in our scenario are zero and since Work in Process (WIP) is valuated based on Target Costs, the result value for Work in Process (WIP) is also zero. This corresponds to the fact that Work in Process (WIP) reduces to zero when the goods to be produced are finished and the goods receipt is posted.
Calculation of Total Variance
The following figure explains how the Total Variance of EUR 132 is calculated.
As you can see, the difference between Actual Costs and Target Costs results in the Total Variance.
Calculation of Input Variance
When you use the Revaluate Orders option in the Postprocess Event-Based Postings - Product Costing job template of the Schedule Product Costing Jobs app you can manually split the total variance into variance categories.
The following figure shows the selections to be entered in this app for the Bike Company scenario.
When the production of the 10 Handlebars is finished, and the split run executed, you will find that EUR 120 of EUR 132 refer to the Input Quantity Variance and EUR 12 of EUR 132 refer to the Remaining Variance.
The following figure explains how the Input Quantity Variance is calculated.
