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Dynamics 365 Community / Forums / Microsoft Dynamics GP (Archived) / Distribution for the P...
Microsoft Dynamics GP (Archived)

Distribution for the Purchase Receipt of a Normally Manufactured Item

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Posted on by RCCHULUOTA

We are on GP 2013 R2.  We are using the Manufacturing module and have our inventory setup to use standard costing.  We are looking for an explanation for the GL distribution that GP is giving us in this situation:

 

We have an item that is setup as a "Make or Buy" item.  It has a BOM and Router.  We normally write manufacturing orders to build this item.  In this case we needed to purchase the item.  We put it on a PO in the POP module.  When we received the item, the distributions caught us off guard.  Normally on a purchased item we'd see our inventory account, accrued purchases account, and inventory allowance/purchase price variance accounts being used.  However in this case, our labor and applied labor accounts were being used as well. Here’s the distribution:

 

  • Finished Goods (Debit): $6,341.44

    • (This would be the material portion of the item if manufactured)

  • Finished Goods (Debit): $2,383.60

    • (This would be the labor portion of the item if manufactured)

  • Allowance/Variance (Debit): $9,338.88

    • (This is the sum of the labor and overhead and the standard cost variance. In this case, the item’s standard cost is $14.3504 and we are buying 608 at $25.79. $25.79-$14.3504 = $11.4396. $11.4396 * 608 = $6,955.2768. $6,955.2768 + $2,383.60 (The labor and overhead) = $9,338.88)

  • Accrued Purchases (Credit): $15,680.32

    • (The amount of the PO receipt)

  • Applied Overhead (Credit): $1,787.70

    • (This would be the labor overhead if manufactured)

  • Applied Labor (Credit): $595.90

    • (This would be the direct labor if manufactured)

 

The question is, why is GP hitting our overhead and labor accounts when we purchased the item and didn’t manufacture it?

 

Thanks!

*This post is locked for comments

  • RCCHULUOTA Profile Picture
    RCCHULUOTA on at
    RE: Distribution for the Purchase Receipt of a Normally Manufactured Item

    Thanks, Dean!  I had a feeling it was going to boil down to something like this.  Good to have it confirmed.  Thanks again!

  • Verified answer
    Dean Marty Profile Picture
    Dean Marty on at
    RE: Distribution for the Purchase Receipt of a Normally Manufactured Item

    The reason is: in GP, each Item can only have one Standard Cost.  In this case, the item is set as Make/Buy and the Std Cost is comprised of the broken out accounts as you mentioned.  

    By design, GP does not distinguish between Make/Buy when it comes to the accounts to be used ( back to that idea that an item can only have one Std Cost ), and so whether the item is Manufactured or Bought, the same accounts and Std Cost make up will be used.

    Thanks!

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  • babubaskaran@outlook.com Profile Picture
    babubaskaran@outloo... 10 on at
    RE: Distribution for the Purchase Receipt of a Normally Manufactured Item

    That's look little strange let me check this and let you know my outcome.  Have tried FIFO perpetual and did the same.

  • RCCHULUOTA Profile Picture
    RCCHULUOTA on at
    RE: Distribution for the Purchase Receipt of a Normally Manufactured Item

    Sorry for the delayed reply.  I've been out of the office for Christmas and New Years.  In our training company I duplicated the original transaction.  Once I verified that the results were the same as our live company I changed the item from make to buy on the Item Engineering screen and then recreated the PO and receipt transactions.  The distributions were the same.

    I then rolled up and replaced the standard costs for the item (now that it was set to buy.  Of course nothing actually "rolled up" as it was set to Buy and so the standard cost was set to the number that was specified for the item on the Standard Item Material Costs screen). I then verified via the Standard Cost Maintenance screen that the item's standard cost no longer included anything other than a "material" portion.

    After verifying that the standard cost had been updated to reflect the item's Buy status, I recreated the PO and Receipt.  This time the distribution was as I would have expected for a bought item with none of the manufacturing overhead accounts being impacted.

    So, it would seem that the standard cost makeup of an item plays a roll in the way the distributions are created.  Of course that brings us back to the question of why GP is doing this?

  • babubaskaran@outlook.com Profile Picture
    babubaskaran@outloo... 10 on at
    RE: Distribution for the Purchase Receipt of a Normally Manufactured Item

    Have you tried to change the setup from make to buy and see whether the account coming correctly on the distribution.

  • RCCHULUOTA Profile Picture
    RCCHULUOTA on at
    RE: Distribution for the Purchase Receipt of a Normally Manufactured Item

    No, the PO in question is not created from or linked to any MOs.  It is created using the normal PO entry screen.  We are seeing this same type of distribution for any item that is setup as a Make item that we purchase on a PO as opposed to manufacturing via an MO.

    Thanks!

  • babubaskaran@outlook.com Profile Picture
    babubaskaran@outloo... 10 on at
    RE: Distribution for the Purchase Receipt of a Normally Manufactured Item

    Is this purchase order created outsourced PO from the MO, if so the account for this will come from BOM on the MO.

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