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Outside Processing Charges

Work in Process automatically creates resource transactions at the standard or actual rate for all outside processing resources with an charge type of PO Receipt or PO Move when you receive assemblies from an outside processing operation back into work in process, using the Receipts window in Purchasing. For outside processing resources with an charge type of PO Move, Work in Process also performs a move of the assemblies from the Queue or Run intraoperation step of your outside processing operation into the Queue intraoperation step of your next operation or into the To move intraoperation step if the outside processing operation is the last operation on your routing.

If you assigned internal resources to an outside operation with an charge type of Manual, you use the Move Transactions window or the Open Resource Transaction Interface to charge these resources.

If you return assemblies to the supplier, the system automatically reverses the charges to all automatic resources associated with the operation. You must manually reverse all manual resource charges using the Move Transactions window. For outside processing resources with an charge type of PO Move, Work in Process automatically moves the assemblies from the Queue intraoperation step of the operation immediately following the outside processing operation into the Queue intraoperation step of your outside processing operation. If the outside processing operation is the last operation on your routing, Work in Process automatically moves the assemblies from the To move intraoperation step to the Queue intraoperation step.

Costing Outside Processing Charges at a Predefined Rate

When you receive the assembly from the supplier, Purchasing sends the resource charges to Work in Process at either a predefined cost or actual purchase order price, depending upon how you specified the standard rate for the outside processing resource.

If you enabled Charge Standard Rate for the outside processing resource being charged, Purchasing charges Work in Process at the standard rate and Work in Process creates a purchase price variance for the difference between the standard rate and the purchase order price. The Work in Process accounting entries for outside processing items are:

Account Debit Credit
WIP accounting class outside processing valuation account XX  
Purchase price variance account (Debit when the actual rate is greater than the standard rate. Credit when the actual rate is less than the standard rate.) XX XX
      Organization Receiving account   XX

Any quantity or usage difference is recognized as an outside processing efficiency variance at period close.

The accounting entries for return to supplier for outside processing are:

Account Debit Credit
Organization Receiving account XX  
Purchase price variance account (Debit when actual rate is less than the standard rate. Credit when the actual rate is greater than the standard rate. XX XX
      WIP accounting class outside processing valuation account   XX

Costing Outside Processing Charges at Actual Purchase Order Price

If you disable Standard option for the outside processing resource being charged, Purchasing charges Work in Process the purchase order price and does not create a purchase price variance.

The accounting transactions for outside processing charges at purchase order price are:

Account Debit Credit
WIP accounting class outside processing valuation account XX  
      Organization Receiving account   XX

Any difference from the standard is recognized as a resource efficiency variance at period close.

See Also

Overview of Shop Floor Control

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