Hi Joshua,
You're absolutely right to be concerned about how subcontracted production orders affect unit cost visibility—especially when consumption is posted but the production order remains open for weeks. This delay can distort downstream costing and financial reporting.
Let’s break it down:
1. Why unit cost only reflects the subcontractor’s tolling charge
When you receive items from a subcontracted purchase order, BC posts the direct cost from the PO. However, material consumption costs only roll into the item’s total cost when:
- The Released Production Order (RPO) is closed
- And the Adjust Cost – Item Entries process runs
Until then, the item ledger entry for the output reflects only the subcontract charge.
2. How to reflect consumption cost before closing the RPO
To include full cost earlier:
- Post Output manually via the Output Journal after consumption is posted
- Run Adjust Cost – Item Entries to update unit cost with materials and routing
You can automate this via a Job Queue to run weekly or daily, especially during month-end.
3. Use routing setup to control cost behavior
If subcontracting is your final routing step, consider inserting a dummy final operation to delay automatic output posting from the PO receipt. This gives you control over when full costing occurs.
Also, use the Specific Unit Cost option on routing operations to ensure accurate cost attribution based on operation-level pricing.
4. Avoid long delays in closing production orders
Leaving RPOs open for extended periods causes:
- Misalignment between reported cost and actual usage
- Margin distortion on finished goods
- Delayed recognition of material consumption
Consider closing the RPO once manufacturing is validated, even if goods are not physically picked up yet.
Helpful references:
Subcontract manufacturing – Microsoft Learn
Adjust Cost – Item Entries: What it is and Why You Need It – Speaking BC
The Mysterious Update Unit Cost field in Production Orders – Peik’s Corner
If you find this helpful, feel free to mark this as the suggested or verified answer.
Cheers
Jeffrey
