Cost Accounting in Manufacturing (intro) 1/4

Manufacturing Management is not Construction Management, but usually production is the part of construction business. I told about this in my older posts. For this reason, I will write next few posts, primarily about cost account automatic calculation in NAV4Construction. Standard NAV already has Manufacturing Management module.

The goal of cost accounting is calculation of actual cost for each finish good. The process of cost accounting calculation is accomplished using the following steps:

1. Posting of Production Journal for all Released Production Orders – standard NAV solution
2. Finishing of all posted Production Orders (this is condition for actual cost amount calculation) – standard NAV solution
3. Adjust Capacity Cost automatic calculation for period – NAV4Construction process
4. Adjust Cost for Item Entries – standard NAV solution

After we change status of Production Order to Released, we have to post output and consumption using Production Journal.

Create released Production Order: Create new Released PO or create Released PO from other status PO. Put Source Type and Source No., desired production Quantity and desired Due Date on PO header. After header was made, you need to refresh PO (Functions->Refresh). PO lines will be calculated. PO created planned Routing and Components.

Production Journal posting: When you start Production Journal (Line->Production Journal), you can find the same values as in Routing and Components and planned output quantity. If you use manual flushing method, you need to do some of:

• If you have output same as quantity on PO, you have to post journal.
• If you have output different from quantity on PO but post consumption by BOM, you have to put correctly output quantity and press Calculate Consumption button. After that, you can to post journal.
• If you have output different from quantity on PO but post actual consumption not by BOM, you have to put correctly output and consumption quantities. After that, you can to post journal.

When you post journal, NAV will post consumption and capacity costs on Cost Amount Expected. If you have Expected Cost Posting to G/L market on Inventory Setup, you will get same value posted on G/L Entries.

Finishing Production Order: When you change PO status to Finished, NAV will make Cost Amount Expected correction and make new Cost Amount Actual. Values in Cost Amount Actual field for good output will be sum of all material consumption Actual Costs and evaluated Capacity Cost. Actual Capacity Cost will be calculated later when we start Adjust Capacity Cost automatic calculation (Allocation Capacity Cost).

…Next post will explain Adjust Capacity Cost automatic calculation process in NAV4Construction. This process, you do not have to use only in construction process; you can use it in all manufacturing for calculate actual cost for finish goods.