1. Product Costing and Manufacturing Accounting Implementation Guide
  2. Variances for Actual Costing

Variances for Actual Costing

When the cost method in the work order header for the end product is 02 or 09, the system applies actual costing logic. Actual costing uses variance accounting when additional work order costs are entered after completions have been done. The system retrieves the correct account number from AAI table 3210 for scrap and completions, and clears WIP.

When you run the Variance Journal Entries program (R31804) and the system discovers no unaccounted amounts, the system clears work in process and creates a new unit cost based on this calculation:

New Unit Cost = Total Actual Amount / (Completed Units + Scrapped Units)

If any unaccounted amounts exist, the Variances program creates an error message. You must run the Manufacturing Journal Entries program (R31802A) to complete manufacturing accounting to clear unaccounted units and run R31804 again.

For cost method 02 (Weighted Average Cost), the system:

  • Updates the weighted average cost.

  • Creates IC or IS journal entries to clear work in process to finished goods.

  • Creates a record in the Item Ledger table for unaccounted amounts using this calculation:

    (Actual) − (Completed) + (Scrap)

For cost method 09 (Actual or Manufacturing Last), the system:

  • Creates IV journal entries to clear work in process.

  • Transfers all work in process to finished goods by creating journal entries for completion (IC) and scrap (IS).

  • Revalues on-hand inventory based on the new unit cost (according to cost level item; item and branch; or item, branch, lot, and location).

  • Creates a record in the Item Ledger table for inventory revaluation.

  • Updates the Item Cost table.

  • Creates additional sales order lines to reflect the latest cost changes.

    The system creates these sales order lines only if the work order is closed and the 09 work order was created by the sales order. It creates additional sales order detail lines for sales order lines that contain sales from locations or lots to which the work order was completed. The Cost of Goods Sold Update program (R31805) generates a report that lists the new sales order lines by lot and location. This information is then included when you print the Update Customer Sales report (R42800).