Actual Cost Variances Reallocation

Process Flow

 

Reallocate Your Operation and Indirect Cost Variances to Cost of Goods Sold

The operation and indirect Cost will be applied to Production Order with standard rates
When using actual Cost (FIFO-LIFO-Weighted Average – weighted average dated -LIFO dated)

  • Materials is handled by Inventory closing to ensure items is applied with actual cost and this is reflected in Cost of Goods Sold
  • For the Route operations and Indirect Cost, it will be applied with standard rate and by the month end when reaching the actual cost there will be variance which will not be reflected to the Cost OF Goods Sold.
  • This module is doing that task where it reallocates the variance to the production order and hence it is reflecting the Cost Of Goods Sold same as the material standard behavior

Purpose

  • The production order cost is calculated by end the production orders and the cost is calculated
  • The material cost is calculated before the inventory closing the system will calculate the running weighted average on issue transactions (such as sales orders and production formula/BOM components). Then when you run the inventory close process the transactions will be updated according to the inventory model that you have selected for the item.
  • The operation cost which is defined on the route and for the fixed cost which will be defined as indirect cost on the cost allocation sheet will have predefined rate.
  • The result of the production order posting will credit the applied overhead accounts.
  • The actual fixed expenses within the financial period will be recorded by the finance team during the period will be debited to range of expenses.
  • It is expected to have variance between the actual expenses and the applied overhead resulted from the production order.
  • The requirement is collecting the difference for the certain period and do adjustment for the production order before the closing so the difference between actual and estimated will be zero.
  • Standard Microsoft Dynamics 365 does not provide required options and controls. A modification is required to allocate the variance between the actual and estimated cost for the production to the concerned production orders in the period where the variance is available. so, after allocating the variance is 0.