web
You’re offline. This is a read only version of the page.
close
Skip to main content

Notifications

Announcements

No record found.

News and Announcements icon
Community site session details

Community site session details

Session Id :
Dynamics 365 Community / Forums / Microsoft Dynamics AX (Archived) / Variance accounts
Microsoft Dynamics AX (Archived)

Variance accounts

(0) ShareShare
ReportReport
Posted on by lally 8

Hi All,

Assume that if the client uses standard cost ,in this case just want to understand that does  variance accounts effect during purchase/production only or sales time also ?

Thanks in advance

*This post is locked for comments

I have the same question (0)
  • Suggested answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at

    Hi lally,

    the variance account do not exert a direct influence on the sales side as the standard cost items are issued at standard costs.

    There is no 'sales price variance' or something alike as all variances are related to purchases (purchase price variance), inventory transactions (inventory cost revaluation, cost change variance) or production (lot size variance, production Price variance, quantity variance and substitution variance).

    Hope this answers your question.

    Best regards,

    Ludwig

  • lally Profile Picture
    lally 8 on at

    Thanks Ludwig for the reply,

    Assume that FG material using the Inventory value model - Standard and fixed the cost - $20 using costing version.

    FG  Cost price  - $ 20

    FG Sales Price -  $ 35

    To produce the FG material ,following raw materials will be used with prices

    R1  - $12

    R2  - $9

    These raw material rates will be fluctuating as per the market price , so when we produce the FG material  , system would post the difference amount to variance accounts.

    The question is if system does not post any variance accounts during sales then how to get the correct sales profitability as system would always take FG cost price  $ 20 only .

    Any help from your end ?

  • Suggested answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at

    Hi lally,

    If your materials have a cost price of 12$ + 9$ and the cost price is set to 20$, then the 1$ difference will be posted on the variance account, which is typically a P&L account.

    The inventory value in your Balance Sheet thus increases by 20$.

    This is also the value that will be taken when when you sell the goods.

    The sales profitability is correct and will always be the same (35$ - 20$).

    If you feel that the sales margin is not correct for your case, then the standard cost model might not be wrong for your purposes and you should better apply one of the actual costing methods such as weighted average, fifo, etc.

    Hope this helps,

    Ludwig

  • lally Profile Picture
    lally 8 on at

    Thanks Ludwig for the reply,

    Most of the manufacturing companies will use the standard cost and will change the FG cost price every 6 months or 1 year using costing version as per the raw materials price fluctuation.

    If you take the above example , then obviously profit values are wrong as per standard cost model ..In such cases what is the best way to get the real profit values even client uses the standard costing model.

    Thanks in advance.

  • Suggested answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at

    Hi lally,

    This is an interesting question :-)

    The real profit cannot be identified in the warehouse / inventory module but there is a way how you can identify that in GL.

    The way how this works is that you determine the value of the items sold for example by having a look at the issue account used when posting sales orders.

    Then you need to know the receipt value, which can be derived from the production receipt account from your production posting profile.

    The last thing you need to know are the production variances.

    With those information you can then split up the production variances by using a GL allocation rule. The basis for the allocation are your production variance accounts. The target to which those costs are allocated are (a) the issue account used when selling the goods and (b) the variance accounts used when items are produced.

    Through this allocation rule you basically adjust the issue cost (account) by a fraction of the variance that belongs to those issues. If you do all the postings with reference to a sales order financial dimension and/or customer dimension you can calculate those real profit values in GL.

    Hope this helps,

    Ludwig

Under review

Thank you for your reply! To ensure a great experience for everyone, your content is awaiting approval by our Community Managers. Please check back later.

Helpful resources

Quick Links

Responsible AI policies

As AI tools become more common, we’re introducing a Responsible AI Use…

Neeraj Kumar – Community Spotlight

We are honored to recognize Neeraj Kumar as our Community Spotlight honoree for…

Congratulations to the November Top 10 Community Leaders!

These are the community rock stars!

Leaderboard > 🔒一 Microsoft Dynamics AX (Archived)

#1
Martin Dráb Profile Picture

Martin Dráb 4 Most Valuable Professional

#1
Priya_K Profile Picture

Priya_K 4

#3
MyDynamicsNAV Profile Picture

MyDynamicsNAV 2

Last 30 days Overall leaderboard

Featured topics

Product updates

Dynamics 365 release plans