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Variance entries in Value Entries

Posted on by 280

Hello everyone.

I posted a Purchase Order with an Item and with an Item Charge.

After i posted the Purchase Order i realized that there are two entries have been created with the entry type "Variance" in the Value Entries for the related Posted Purchase Invoice.

Entry-type-variance-in-Value-Entries.png

Please explain it to my why the above variance entries have been created in the Value Entries.

Thanks and Warm Regards,

Denys De Andrado.

  • Denys De Andrado Profile Picture
    Denys De Andrado 280 on at
    RE: Variance entries in Value Entries

    Hi Steve,

    Thanks for the help.

    Sorry for the delay.

    Thanks and Warm Regards,

    Denys De Andrado.

  • Verified answer
    Community Member Profile Picture
    Community Member Microsoft Employee on at
    RE: Variance entries in Value Entries

    Denys,

    The Item you are purchasing is the Costing Method = Standard Cost? If yes, let me explain what happens when setting a purchased item to Costing Method = Standard Cost:

    Setting the Costing Method = Standard Cost means the Purchased Item has a fixed unit cost for a period of time and/or your company costing policy is standard cost for purchased items. An item's unit cost is preset based on estimated. When the actual cost is realized later, the standard cost must be adjusted to the actual cost through variance values. It is used in repetitive manufacturing, to value the costs of direct material, direct labor, and manufacturing overhead.

    Now the entries are as follows, with a Costing Method = Standard Cost (NOTE: Your Charge(Item) entry against the Items Receipt is also considered part of the Standard so the 200.00 exceeded the Direct Cost and recorded a Purchase Variance.

    pastedimage1622635913589v1.png

    Now, not knowing your Item, I think you had a Standard Cost = 3505.94. The 15,000 minus 11,494.06 reflects this. The 11,494.06 becomes the Purchase Variance. The Inbound Freight will also become a Variance as it exceeds the total Standard Cost of the single units Direct Cost.

    Hope this helps.

    Thanks,

    Steve

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