Analyzing WIP Inventory Value in Standard Cost Environments

Periodically, you must determine the value of material in process. Use this data to verify the general ledger balance for WIP inventory as well as to provide management with an indication of in-process inventory levels.

In-process inventory includes three parts:

• Raw material or subassemblies for regular production that are issued to the shop floor not yet used in an assembly.

  This portion of in-process inventory is stored in the work center's WIP locations and is included as part of the stockroom inventory valuation. Materials in WIP locations use the issue or replenishment method of issuing material.

• Items in various stages of assembly (including material consumed from the WIP locations) as well as labor, machine, overhead, and outside processing costs that are incurred up to the point that the WIP inventory value report is run.

  Additionally, components that are kitted to a production ID are directly charged to production and are, therefore, included as part of the in-process inventory (although they might not yet be part of the assembly item). The WIP Value report does not include the costs of scrapped components or assemblies that are completed to stock.

• Rework or tear down assemblies or subassemblies that are issued to the shop floor.

  You might issue additional components to rework an item and incur additional labor and overhead expenses to rework or tear down.

PeopleSoft Manufacturing uses information that is associated with a specific production ID or production quantity as the basis for determining the WIP value; it also maintains a status for all production. WIP value comprises production with a status of:

• In process

• Pending complete

• Complete

• Closed for labor

Production with a status of entered, firmed, released, canceled, or closed for accounting status is not included in the WIP value.

PeopleSoft Manufacturing uses various records to determine WIP value:

Record	Function
Production ID Component List	Determines the components that are used. Maintains the quantity of each component that is issued into production. By costing the component's issued quantity, the system can determine the lower-level costs of the assembly. The component list also contains the rework or teardown assembly issue quantities. This value is determined by multiplying the assembly item's this-level and lower-level costs by the issued quantity.
Earned Conversion Costs	Maintains the labor, machine, and overhead costs that are incurred to date for the production ID or production quantity. This includes conversion costs that are incurred for a subcontracted operation.
Assembly Scrap Costs	Maintains the value of scrapped assemblies to subtract from the in-process value. This includes scrap costs that are incurred for a subcontracted operation.
Production Header Output Record	Contains the quantity that is completed. For a single output production ID or schedule, this is the assembly quantity. For multiple output production, this includes the quantity of primary, co-product, and by-product completions. The system also subtracts costed completions from the WIP value.