Work in Process Standard Cost Variances (Oracle Cost Management)


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Work in Process Standard Cost Variances

Work in Process provides usage, efficiency, and standard cost adjustment variances.

Usage and Efficiency Variances

Usage and efficiency variances result when the total costs charged to a job or schedule do not equal the total costs relieved from a job or schedule at standard. Charges occur from issues and returns, resource and overhead charges, and outside processing receipts. Cost relief occurs from assembly completions, scrap transactions, and close transactions.

You can view these variances in the Discrete Job Value report, the Repetitive Value report, and by using the WIP Value Summary window.

Work in Process reports usage and efficiency variances as you incur them, but does not update the appropriate variance accounts until you close a job or period. Work in Process updates the standard cost adjustment variance account at cost update.

Usage and efficiency variances are primarily quantity variances. They identify the difference between the amount of material, resources, outside processing, and overheads required at standard, and the actual amounts you use to manufacture an assembly. Efficiency variance can also include rate variance as well as quantity variance if you charged resources or outside processing at actual.

You can calculate and report usage and efficiency variances based on planned start quantity or the actual quantity completed. You can use the planned start quantity to check potential variances during the job or repetitive schedule. You can use the actual quantity completed to check the variances before the job or period close. Your choice of planned start quantity or actual quantity completed determines the standard requirements. These standard requirements are compared to the actual material issues, resource, outside processing, and overhead charges to determine the reported variance.

Work in Process calculates, reports, and recognizes the following quantity variances:

Material Usage Variance

The material usage variance is the difference between the actual material issued and the standard material required to build a given assembly, calculated as follows:

This variance occurs when you over or under issue components or use an alternate bill.

Resource and Outside Processing Efficiency Variance

The resource and outside processing efficiency variances is the difference between the resources and outside processing charges incurred and the standard resource and outside processing charges required to build a given assembly, calculated as follows:

This variance occurs when you use an alternate routing, add new operations to a standard routing during production, assign costed resources to No - direct charge operations skipped by shop floor moves, overcharge or undercharge a resource, or charge a resource at actual.

Move Based Overhead Efficiency Variance

Move based overhead efficiency variance is the difference between overhead charges incurred for move based overheads (overhead basis of Item or Lot) and standard move based overheads required to build a given assembly, calculated as follows:

This variance occurs when you use an alternate routing, add operations to a standard routing during production, or do not complete all the move transactions associated with the assembly quantity being built.

Resource Based Overhead Efficiency Variance

Resource based overhead efficiency variance is the difference between overhead charges incurred for resource based overheads (overhead basis of Resource units or Resource value) and standard resource based overheads required to build a given assembly, calculated as follows:

Standard Cost Adjustment Variance

Standard cost adjustment variance is the difference between costs at the previous standards and costs at the new standards created by cost update transactions.