Receipt Accounting for Outside Processing

Receipt Accounting supports manufacturing outside processing, where one or more work order operations are outsourced to a supplier who provides specialized manufacturing services. Outside processing transactions are accounted in Receipt Accounting under the Destination Type of Manufacturing.

Accounting Distributions Created for Outside Processing

Cost Accounting supports the Purchase Order Receipt into Manufacturing transaction type for the costing of outside processing items delivered to Manufacturing. The transaction processing depends on the cost method, as follows.

• Actual or Average cost method. The purchase price multiplied by the number of items received is added to the work in process valuation.

• Standard cost method. The standard cost multiplied by the number of items received is added to the work in process valuation. The difference between the purchase price and the purchase order is accounted as a purchase price variance.