Make Sourcing Variance

If you've defined multiple sourcing rules for a manufactured item, after costing the work order close event for such an item, you'll see Make sourcing variance reported by the application.

Make sourcing variance = (Latest rolled-up cost from work definition - Weighted average cost used for product completion and product return transactions reported during work order execution) * Total completion quantity

A simple example to calculate the make sourcing variance would be as follows:

Assume that the rolled-up cost of your item using its work definition is $15.00. You have manufactured 10 units of this item and the standard cost used to revalue inventory was $10.00. Also, 2 units of the item were returned subsequently, and the standard cost of the item was recalculated as $12.00.

Here, weighted average cost = ($10.00*10.0 + $12.00*2.0)/(10.0+2.0) = $124.00/12.0 = $10.33

Therefore, the make sourcing variance = ($15.00 - $10.33) * 8 = $37.36

You can view the variances on the Variance Amounts tab in the Work Order Detailed Balances page. You can access this page from the Review Work Order Costs page.