Hi everyone,
I am facing the following scenario which is, I think, very common in organizations that use production control module.
In fact, the prices of the direct manufacturing costs that are managed in the cost categories reflect an estimated cost because they are set up prior to manufacturing run. However, I didn't find any way to update them before inventory closing.-This implies a difference between, on the first hand, what has been calculated as part of the COGS and included in the inventory value, and on the other hand, the real expenses that were invoiced by vendors for example.
Example scenario :
1- During the manufacturing process, the electricity cost (as part of machine costs) is estimated to 50 $/hour.
2- At the end of the period, the total production hours is 100 hours and the electricity bill we receive incurs a cost of 6000$. Means , the real rate is 60 $/hour.
3- Thus, we have 1000$ that are not allocated to inventory. Inventory value = 5000 instead of 6000.
My questions are :
1- From an accounting point of view ,what are the best practices to manage these differences?
2- Is there a way that it is reflected on the inventory value?
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