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Project Production Order Actual Costs not reflecting correctly

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Posted on by Kate Li

Hi All,

I'm new to project module and do not have much experience with it.

We are using D365 F&O and all items are costed at standard costs (item model group).

Issue: We use project item requirements to generate production orders & sub-production orders. When production orders ends and once posted packing slip, we are able to check posted transactions in projects. However, I found that the costs of the finished items in posted transactions are the standard costs we defined for product (Manage costs - item price - calculate by production orders & activate), it's not reflecting the actual costs of the production orders.

I understand this could be caused by standard cost (as a side effect), but since client doesn't want to use other costing method, is there a way to update actual costs of the finished goods in project module without changing the item model group? Or alternatively, is there a way to allocate the variance amount of that production order to project?

Many thanks for suggestions/solutions provided for this post !

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MarkB45 755 on at

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Hi Kate,

The Std cost of production is what you will see against the project when using Std cost as the stock policy, this would be no different if you were producing to stock and selling through a sales order.

In order to reflect actual costs against the project your client would need to move to a FIFO/LIFO model where items are issued at weighted average and the stock recalculation then matches the receipts/issues together and posts the actual production costs to the project be that on the first in/first out basis or last in /first out.

One option for compromise might be to treat certain BOM products as std cost and the ones which tend to fluctuate by price/quantity more frequently as FIFO/LIFO. I have done this a few times and works well as it removes the need to issue variances out to projects.

You could allocate the variances to the project module. However this would be manual process to post a GL journal from the Std Cost. variance accounts to the project. I would set up a new Expense Project category (Used in GL journal postings) for this so you can just post them back to the variance account but also posting to the project. Entry would look like this:

Cr - Variance Account No project

Dr - Variance account also post to project module as a cost.

Once this process is defined there may be some scope to automate it within PowerAutomate, worth checking it.

KR

Mark

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Kate Li 30 on at

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Hi Mark,

Really appreciated your reply on this !!

Can you further explain a bit more on allocate variances to the project module?

I created a production order a few days earlier: I use project item requirement to drive master planning & generate the production order. In this case, parent production order will have the same financial dimension as what was defined for item requirement.

Once I END the production order, I am able to see variance of this production order:

I then go to project module, release this item requirement and post a packing slip.

Now when I check in transactions created for variance, there are four transactions created and I don't know how should I read these transactions. (Note: I used same account for substitution variance, quantity variance and rounding variance):

You can see that the second transaction is rounding variance with no project dimension assigned to it. Is this the balance of substitution variance and quantity variance? The last transaction is rounding variance with project dimension - but an opposite side of the second transaction.

Are the above transactions created exactly as what you proposed?

Thanks again for your help!

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MarkB45 755 on at

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Hi Kate,

What you have highlighted there are the postings generated by the production order to account for the standard cost of materials.

The actual postings look reasonable for the substitution and qty variances. The rounding variance looks a little strange as rounding's are usually cents/pence. I would try and using different accounts for each so you can follow the audit trail a little easier.

My proposal was that if you want the "actual" costs of the item to hit the project you would need to post a "manual" journal to move these balances to the project as they are only captured against the GL at the moment with the std cost of the item on the project.

KR

Mark

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