Is there a way to treat Indirect cost variance at the end of the Production order

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Posted on by Abdo Khoury

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Dear

I am applying indirect cost to my production order but usually some indirect cost such as overall electricity bill doesn't meet the expectation , is there a way for me to enter indirect cost price variance and recalculate it over the production orders ?

regards

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Ludwig Reinhard Microsoft Employee on at

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HiI Silvano,

You entered a surcharge in your costing sheet to cover indirect costs, is that right?

What do you mean by enter indirect cost pice variance? Do you use standard costs and want to adjust/overwrite the cost price variance that AX calculates?

Ludwig

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Abdo Khoury 14,855 on at

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Yes , exactly a surcharge that covers indirect cost that were not exactly calculated or properly foretasted prior to production

well i am using the standard cost and the i am using the indirect cost as amount or % , but at the end of a certain period , we need to adjust the amount that we used as indirect cost over the production orders that we already produced ,

is there a way to do that?

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Ludwig Reinhard Microsoft Employee on at

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Hi Silviano,

The surcharge is a king of 'allocation' that you specified.

This allocation can be right or wrong; meaning that it will most probably differ from the actual costs that you experience and record.

There is no standard way of allocating the total costs that you recorded subsequently to your production orders.

In your General Ledger you will most probably have two accounts for that - one that tracks your actual costs and one that is used for posting the allocation in the costing sheet.

You could then on a GL level do a kind of allocation by using a different sub-account to get your financial reports so to say 'right'.

Yet, in the production area you cannot do that except by continuously tracking the over/underallocations that you have and adjusting the allocation % or rate that you specified in order to Keep the variance small.

Hope that helps,

Ludwig

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Community Member on at

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Hello Silvano

Try use Adjustment transaction from Closing and adjustment. If you find there only transaction with reference production (from last month) and adjustment it by amount .... May be this is a way to solve this business case.
I know it is not perfectly solution by sometimes used by clients

Best regards

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Fredrik Sætre 12,644 on at

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Is it just power or other costs like rent and such?

I can give you a pointer on the power consumption.

You probably in this case have some type of variable power consumption that you would like to add to your item cost. Right? The way to do this is simply adding this as a direct manufacturing cost as you can actually measure this quite effectively.

If you purchase your power in kWh as a service item (you need to have the "non stocked" box unchecked to be able to add it a BOM).

Then add it to your BOM as an estimated cost of x kWh and correct this by entering the right consumption like picking an item. Your cost for each kWh will be based of the purchase price. Maybe weighted average costing method is preferred.

If it is a bunch of indirect manufacturing costs, you would add these through the costing sheets as a percentage based of of one of your consumed resources. Normally we add an additional cost to the resource for things like power, rent and maintenance and for the item calculate the cost for each item for covering handling and warehouse costs.

Check out costing sheets for more info.

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