Overview: Manufacturing Order Costs
The manufacturing order costing is fully integrated with routings, labor, purchasing, and receiving. The system accumulates costs for a manufacturing order as they occur. This Overview discusses when manufacturing order cost updates occur, how costs are calculated, and programs that you can use to track costs.
This topic has these subtopics:
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Material
When you release a manufacturing order, the system captures its standard material cost based on the parent item's bill of material. Therefore, each component's standard cost is: (Quantity per assy + (Scrap % x 0.01) x Standard unit cost.
You can compare standard material cost to your choice of actual, average, or standard cost to date. Your selection for the Costing method for job cost option in the System Options Maintenance (XM) program (Manufacturing Options) for your manufacturing branch determines which of these costs the Manufacturing Order Cost Inquiry (MJI), Manufacturing Order Cost Report (MJS), and Manufacturing Order Close (MJC) programs use.
The system updates material cost when you confirm picking. The system adds the material cost of floor stock components when you receive finished goods into inventory with the Receiver Maintenance (IRC) program. If the quantity you receive differs from the order quantity (for example, you receive more or you close the order short), the system updates the quantity per assy for each component accordingly. Therefore, an order's standard material cost can change to match what actually happened.
Purchases
You may purchase raw material or a component specifically for a manufacturing order. If you want to include this special purchase in the manufacturing order's cost, the purchase order must reference the manufacturing order number.
Because this is a special purchase, it is not included in the standard cost. The system updates the actual cost that the vendor quoted you when you enter the purchase order.
Labor
Labor costs are based on direct and setup labor rates for the operation sequences for this item in the Routing Maintenance (RTM) program at the time you release the order. However, if you select an alternate routing before you release a manufacturing order, the system recalculates standard costs. If you select an alternate routing later, actual costs and variances are affected, but not standard costs.
The system updates labor costs when you enter work in process, backflush them during receiving, or enter actual hours worked.
Standard Costs through Work in Process
You can use the WIP Movement (WIPM) to track the progress of a manufacturing order and calculate labor costs per completed operation sequence. The system calculates standard labor costs based on the item's operation in the Routing Maintenance (RTM) program.
You can also enter the quantity of good pieces produced and the quantity of parent items you scrap per operation sequence. You do not need to enter data for every operation sequence. You can enter data for significant operation sequences, and the program backflushes the same data for the previous sequences.
While you can enter an employee number, the system does not track individual employee hours. You also cannot enter exceptions, such as extra hours that a operation sequence took due to a material, machine, or labor problem. This method also does not take into consideration overtime worked.
If you want to use WIP Movement, you must select W for the L=Labor entry or W=WIP movement option in the System Options Maintenance (XM) program (Manufacturing Options) for your manufacturing branch. If you also select the Mfg order receipt to backflush labor? option, you can enter significant operation sequences and have the Receiver Maintenance (IRC) program backflush the remaining steps when you receive the manufacturing order into inventory.
If you selected the Inventory interfaced to GL? option in the System Options Maintenance (XM) program (Inventory Control Options), you need to run the WIP Register (WIPR) program to update the pieces completed, labor costs, and labor overhead.
Standard Costs through Receiving
You can use the Receiver Maintenance (IRC) program to backflush labor when you receive a manufacturing order into inventory. The system calculates standard labor costs based the item's operation in the Routing Maintenance (RTM) program and the quantity you receive.
This method does not track who worked, the hours worked, or overtime. The program also does not track scrapped items or components. However, you can use the Material Issues and Adjustments (IMI) program to record scrap that occurs during the production process.
If you want to use this method, you must select the Mfg order receipt to backflush labor? option in the System Options Maintenance (XM) program (Manufacturing Options) for your manufacturing branch. You should leave the L=Labor entry or W=WIP movement option blank.
If you selected the Inventory interfaced to GL? option in the System Options Maintenance (XM) program (Inventory Control Options), you need to run the Manufacturing Order Receipt Register (MRJ), which also runs the WIP Register.
Actual Labor Costs
If you want to track the actual cost of each manufacturing order, you need to track the actual hours each employee works. Use the Labor Entry (LLE) program to enter the number of hours worked on a specific operation sequence or the time the employee signed in and out. You can distinguish between regular hours and overtime hours. You also enter the number of pieces that the employee produced that were good and that were scrapped. Alternatively, you can import this data from an ASCII file with the Labor Import (LEI) program.
If you selected the Labor interfaced to GL? option in the System Options Maintenance (XM) program (Labor Options), you can run the Labor Entry Register (LPR) program to post labor to the general ledger. Alternatively, you can print the register and use it to manually post actual labor costs weekly or monthly. Labor costs are based on hours worked, the employee's rate for regular shift hours, and the rates you set for the Labor overtime rate 1 and Labor overtime rate 2 options in the System Options Maintenance (XM) program (Labor Options).
If you want to use the Labor Entry program to enter labor hours, you must select L for the L=Labor entry or W=WIP movement option in the System Options Maintenance (XM) program (Manufacturing Options) for your manufacturing branch.
Using Labor Entry or Labor Import ensures that the most detailed and accurate labor costs are posted to your general ledger.
Note
The quantity produced includes both good and scrapped pieces (parent items)
under the assumption that time was spent working on the scrapped item
before it was declared scrap.
Outside Services
If a routing has a purchased service operation, the system creates a requisition or purchase order for the operation when you release the manufacturing order.
The standard cost for the purchase depends on the Cost per piece field for the type P operation set up in the Standard Operations Maintenance (ROM) or Routing Maintenance (RTM) programs.
The actual cost is the quoted unit cost on the purchase order. The system updates actual cost when you receive the purchase order.
Labor Overhead
The system calculates standard labor overhead from the overhead rates for the work centers used by the operations for this parent item at the time you released the order. Select overhead codes in the Work Center Maintenance (WCM) program and enter overhead percentages in the Overhead Rate Codes Maintenance (TORC) program.
If you record work in process, the system updates labor overhead when you record quantities completed in the WIP Movement (WIPM) program. If you backflush labor, the system updates labor overhead when you receive finished goods. If you enter actual labor, the system updates labor overhead when you enter hours worked in the Labor Entry (LLE) program.
Machine Overhead
For an unattended operation, machine overhead is based on the rate selected in the Machine lbr cd field in the Work Center Maintenance (WCM) program. If you did not select a rate, the system uses the Setup labor cd for the operation in Routing Maintenance (RTM).
The system updates machine overhead when you record quantities completed for that operation sequence in the WIP Movement (WIPM) program, but not if you backflush labor or enter actual labor costs.
Adjustments
You can enter adjustments in the Manufacturing Cost Adjustment (MCA) program at any time during the manufacturing process. This includes after you receive the finished goods into inventory but before you run the Manufacturing Order Close (MJC) program.
The Manufacturing Order Cost Inquiry (MJI) and Manufacturing Order Cost Report (MJS) programs report type X (miscellaneous) adjustments separately. The system adds these adjustment types to these costs:
Adjustment Type |
Adds to costs to date |
M: Material stock |
Material |
P:
Special purchase |
Purchases |
L: Labor |
Labor |
O: Labor overhead |
Labor overhead |
U: Machine overhead |
Machine overhead |
If you selected the AP interfaced to purchasing? option in the System Options Maintenance (XM) program (Accounts Payable Options), you can apply an invoice to a manufacturing order in the AP Invoice Entry (NE) program. The system adds the invoiced amount as the adjustment type you select.
Manufacturing Order Close
Final costs and variances are based on the quantity of finished goods items you receive into inventory before you close the manufacturing order. You can make adjustments at any time prior to the close.
Use the Manufacturing Order Close (MJC) program to close completed manufacturing orders, print the Manufacturing Order Close Register, and update the general ledger if you have inventory interfaced to the GL. If you select program options for the register, you can print detail for each cost type.
The system retains complete cost history after you close an order. You can drill to display detail for material, purchases, labor, and adjustments with the Manufacturing Order Cost Inquiry (MJI) program.