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Overhead Rate in Item Card

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Posted on by MahGah

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What is the use of Overhead Rate in Item Card (It is not available by default and I just added there)? Does this has any functions?

I think if I put any number there it will post in G/L if we buy this item. But how about MFG product? Does this cost add to item when we close production order?

Thanks

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Jun Wang 7,443 Super User 2024 Season 2 on at

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Overhead Rate in Item Card

this field is not visible out of box, so it must be exposed by a dev. also this is an optional field, putting number to this field will increase indirect costs to the production of the item.

unless you know how it flows into costing, I won't suggest not to use it.

this is the simple answer, you need to test to find out how it affect costing and decide to use it or not.

hope it helps

follow me on linkedin for more sharing

Jun Wang
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Azqar 50 on at

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Overhead Rate in Item Card

here is a bit of explaination

https://youtu.be/bFOpOSlgLEU?si=Q77Cm-_6LyFRka8T
kennykewl 5 on at

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RE: Overhead Rate in Item Card

Steven,

Assuming standard cost = 0, Overhead Rate (on item card) = 100, after finishing production order of 1 pc. Inventory is increased by 1pc, unit cost = 0 (as per standard cost) However, the Journal Entry is

Dr Variance-Mfg. OH 100

Cr FG (100)

Inventory Value is not aligned with General Ledger.

Is there a way to fix this issue?

Thanks

Ken,
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Community Member Microsoft Employee on at

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RE: Overhead Rate in Item Card

MahGah,

Adding to Josh's reply... Overhead Rate, on the Item Card, is a field where companies who want to apply an overhead to the Item would add a value (i.e. $2.00). This is a flat amount to be added to the Direct Cost of the Item. For example: You purchase Raw Material at $1.00 each. You set an Overhead Rate of .50. When you Post Invoice, the Unit Cost for the Item is $1.00 + .50, per UOM (Each). You will see this on the Value Entries. This field is in addition to the Indirect Cost %, where you can apply an Indirect Cost Percentage to the Item.

Now, this field is NOT that same, per say, as the field on the Work Center Card. The field is the same and works the same, except that the amount will only apply to the entries related to Output Routings effecting the Work Center. When you post an Output or Production Journal the additional Overhead Rate will be added and applied Direct Cost.

Now if I was Manufacturing an Item, I normally, per best practice, place an Overhead or Indirect Cost % against the Work Center. If I was apply the Landed Cost against a purchased raw material, I would utilize Charge(Item) to capture the additional costs.

Hope this helps.

Thanks,

Steve
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Community Member Microsoft Employee on at

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RE: Overhead Rate in Item Card

MahGah,

Adding to Josh's reply... Overhead Rate, on the Item Card, is a field where companies who want to apply an overhead to the Item would add a value (i.e. $2.00). This is a flat amount to be added to the Direct Cost of the Item. For example: You purchase Raw Material at $1.00 each. You set an Overhead Rate of .50. When you Post Invoice, the Unit Cost for the Item is $1.00 + .50, per UOM (Each). You will see this on the Value Entries. This field is in addition to the Indirect Cost %, where you can apply an Indirect Cost Percentage to the Item.

Now, this field is NOT that same, per say, as the field on the Work Center Card. The field is the same and works the same, except that the amount will only apply to the entries related to Output Routings effecting the Work Center. When you post an Output or Production Journal the additional Overhead Rate will be added and applied Direct Cost.

Now if I was Manufacturing an Item, I normally, per best practice, place an Overhead or Indirect Cost % against the Work Center. If I was apply the Landed Cost against a purchased raw material, I would utilize Charge(Item) to capture the additional costs.

Hope this helps.

Thanks,

Steve
MahGah 15,428 on at

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RE: Overhead Rate in Item Card

Hi Josh

Thank you. That overhead rate is in work center (unless I am missing something). Do you know what is the use of overhead rate in item card? And if overhead rate in item card has any impact on production?

Thanks
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JAngle 33,159 on at

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RE: Overhead Rate in Item Card

This blog gives a good overview: www.archerpoint.com/.../using-standard-costs-dynamics-nav

It mentions NAV but the functionality has not changed since then.