Hi, I am sure all of us have encountered the limitations of Navision when it comes to costing of manufactured items. It is always by the standard capacity costs and overheads defined on the work/machine centers. In reality in most of the organizations, this is not at all adequate. Most of the actual costs are incurred after the production order is finished and even the sale is posted. These actual costs can not be assigned to the production cost and COGS. ( Actual costs incurred like Electricity, Fuel consumption, additional labor overheads, the die cost etc.)There are so many like this which need to be assigned to a particular finished production order on various basis of allocation. I am interested in knowing how this is provided(Macro level ideas). Is it through G/L entries allocated with a customization to calculate allocations and postings? Or, modifying the capacity cost heads on the Work/machine centers and modifying the value entry posting routines? Regards, DD
Hi all, I hv been desperately waiting for replies. Does my topic sound too confusing? Or not explanatory? Regards, DD
Hi Dharmendra Most accountants, I believe will not go to the length of examining an electricity bill, matching this to to process time attributed to the item in the period and assignng the individual portion of cost. Most manufacturers standard cost and variance account and depending upon the company the metirc to arrive at this “cost” is differnet. I am not an accountant but I am aware that the costing principles in the UK allow you to cost at the purchase price plus any directly attributable costs to get the item to its current location in its current state. Whilst labour can be captured in the actual reporting of output, costs like electricity, fuel consumptioon and die costs will not be split out, because the information is not directly attributable, however these will be within the accounts and can be shown at the top level within overheads as a cost of sale, but not at a order by order basis. Simply as it is not directly attributable it is not analysed on an item basis. I am not aware of anyone going to or wanting this detail of indirect overheads against finished items. If they do the first thing they need is the local accounting conventions for cost, you do not want to unfairly overstate an asset in the accounts by adding in costs not seen as part of the cost. Then you need to define a manner of taking an expense, like an electricity bill, seeing it in the creditors, and at the same time attributing these costs to a “finished” produciton order. I do not believe you will easily accomplish this, and it will certainly require development work. I suggest you pose this question in that forum for ideas on assigning these costs to finished production orders. I have presumed the overhead rate does not give you the detail you require.
Thanx Steven, I agree that most of the organizations do not do this kind of costing. Even if it is done, It is primarily to control the profitability. The clients I am working with are way ahead than what we discussed but they are not unjustified. The manual system ( On MS Excel Docuement formats) they have developed is really incredible. Here the cost of electricity,labor, die costs etc comprise of a fair amount of the total cost. Profit margins are really dependet upon this. Automated machinery also is giving the reading of per job power consumption. ( Collected only at the month end.I can not tell them to assign it at the time of posting output.) Same is the case for labour and die usage. They keep manual track of expected life and actual die life. and do chnages on the job costs accordingly. I am left with the task to design batch jobs which pass on the adjustment entries to respective accounts on the Job number dimension value ( Both to COGS or Direct cost as the case may be.) Just wanted to know if this is the right practice. I do not see any reason in trying to chnage the number of cost heads on the machine center, work center table and make relevnt changes. Hope somebody has done this before so that atleast I am pacified that we are not the first ones to try this. [Sigh…] Thanx, DD
Hi DD I wish you lots of luck with the changes [:D]
Hi, Welcome to the world of manufacturing costing. This area is untouched in std. Navision for various reasons (I will not wast time on these) and requere really hard work to come even close to what manufacturing practise for cost accounting. You will have 3 ways to approach this area. 1. use the std. and apply workarounds with limit development. 2. Use requering journals with reversing functionalities 3. Make a Costing module In all case before you start make sure your client is upgarded to 4.0 especially if they not use Standard costing method. But before you start a warning… this is a hardcore area where just trying to find logic in the tick Cost Accounting terminology is a nightmare. Good luck, Henrik