Settle the production order cost

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Suppose i have a production order that needs to produce 1000 items. by the end of the month there are only 200 finished, and 800 are not started yet, and we also have to ship these 200 items to the client before the end of month, Since the order is not ended, how to settle the cost for this kind of production order ?

Many thanks.

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Guy Terry 28,924 Moderator on at

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Assuming your produced item has one of the actual costing methods (but not Moving average), AX will never settle receipts unless they are financially updated, which as you say means Ending the production order.

Can you create a new Production order for the remaining 800?

If you are interested in getting the best possible cost on the sale of the produced item, it may be worth ensuring 'Include Physical Value' is ticked on the Item Model Group of the produced item. If it is not ticked, AX will not include anything about the value of the 200 items in cost of the sale until after the production order is ended. Equally, if your production order's cost is not accurate until the production order is Ended, you might not want to do this!

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Weaveriski 23,620 Moderator on at

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It also depends upon how you are costing the RAF item from a production perspective. As this cost is temporary you either use the "actual" cost which is the cost of the released product, or "estimated" which is from the production estimation routine. Ultimately the "settled" cost is at the end, but you get a current cost which means you do not need to settle. Of course if you are standard costed it is only variances that impact so you have no worry.

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[quote user="Weaveriski"]

It also depends upon how you are costing the RAF item from a production perspective. As this cost is temporary you either use the "actual" cost which is the cost of the released product, or "estimated" which is from the production estimation routine. Ultimately the "settled" cost is at the end, but you get a current cost which means you do not need to settle. Of course if you are standard costed it is only variances that impact so you have no worry.

[/quote]

Hi Weaveriski,

Suppose i use the standard cost, but it seems like that those variance accounts only posted when we end the production order. If i cannot end the production order, i won't be able to know the variance, then it may has impact on my profit in that month.

Does it mean i have to end these kinds of production orders by the end of month ?

Many thanks

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Weaveriski 23,620 Moderator on at

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Profit is not monthly bound, you can only know at a point in time, and with standard cost your cost is your cost and everything else flows as it is known and therefore you cost at the standard - which is the point of it and therefore you have your cost for production and the cost of sale and therefore your profit - yes in the COA the overall profit is not known until the invoices are processed but this is an acceptable timing difference that is understood in that costing environment.

Not ending the production order is not an issue at month end, the best position cost is known, and it will change which is known and the impact will reduce profit for an unrelated item in a future month which balances out with the profit overstated previously - it is only really a concern if you are manipulating this to overstate assets etc. Everything else is explainable, auditable and acceptable.

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[quote user="Weaveriski"]

Profit is not monthly bound, you can only know at a point in time, and with standard cost your cost is your cost and everything else flows as it is known and therefore you cost at the standard - which is the point of it and therefore you have your cost for production and the cost of sale and therefore your profit - yes in the COA the overall profit is not known until the invoices are processed but this is an acceptable timing difference that is understood in that costing environment.

Not ending the production order is not an issue at month end, the best position cost is known, and it will change which is known and the impact will reduce profit for an unrelated item in a future month which balances out with the profit overstated previously - it is only really a concern if you are manipulating this to overstate assets etc. Everything else is explainable, auditable and acceptable.

[/quote]

Hi Steven

Thanks for you reply, seems the finance accountant still cannot accept this, is it possible to settle the partial finished production order without ending it ?

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Weaveriski 23,620 Moderator on at

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[quote][/quote]

Hi Steven

Thanks for you reply, seems the finance accountant still cannot accept this, is it possible to settle the partial finished production order without ending it ?

The real answer to this is no because it is possible the cost is still unknown - even ended production orders in the month can move as the purchase invoices flow in (depending upon the costing method). What your finance accountant is suggesting is for production to manually close every order at the month end and then create new ones for the remainder (with part routings and part BOM etc assuming you only consume as per the amount reported). I would imagine production will reject this. Essentially they have the costs, as accurate as it can be at the time (depending upon your settings) and this will still move after the month end even if ended - the accountant needs to understand how the system works and what is sitting in the WIP accounts and how costs move.

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