Manufacturing Costing

Business Central/NAV User Forum
1

Hi all, i have a scenario here which i need some advise. the scenario is as below;

NAV5, Native DB.

To make thing simple, lets assume the FG uses 1 unit of each RM. As i understand from the manufacturing costing, it uses roll-up cost for the finished goods.

  1. FG = RM1, RM2, RM3. where
    RM1 cost = $1
    RM2 cost = $1
    RM3 cost = $1.

  2. 2 work center where cost for each WC as below
    WC1 = $0.50
    WC2 = $0.20
    WC3 = $1.00

  3. As for the scenario of producing 100 unit. i need to keep track of the rejected quantity and cost for each WC. As i go through the WC1, i have a reject of 10% of the 100 unit. Which means, 90 unit(good) and 10 unit(rejects). i have calculated my cost from the WC1 to be $45(good) and ($5(reject).

  4. when it goes to the WC2, i will only process the (Good), but not the (Reject). so the scenario as follow for WC2 will be 85unit(Good), 5unit(bad). my cost from this WC2 will be $17(Good) and $1(Reject).

  5. When i complete the whole process. i completed only 85unit to be (Good) and 15 unit to be (Rejects). my cost from WC3 will be $85(Good) and $15(Reject).

As i understand. The consumption of the RM double entries will be CR Stock(RM), DR WIP.
And my WC cost will be CR Direct Cost/Indirect Cost/Overhead Cost, DR WIP.
The output journal will be DR Stock(FG), CR. WIP to absorb the cost from the RM and WC.

I need the system to absorb all the Reject Costs to a different location. so i created another Inv Posting Group of Reject Location with a different Inv. GL A/C.
for FG(Good) Dr. Stock(FG), Cr. WIP
for FG(reject) Dr. Stock(Reject), Cr. WIP

but for the FG(Good) the cost will be RM= (85+85+85) = 255
WC = (45 + 17 + 85) = 147
FG(Good) = 255+147 = 402

FG(Reject) = RM(15+15+15) + WC(5+1+15) = 45+21 = 66

so my cost for each unit will be (402+66)/100 = $4.68/unit(this is how Navision derrive with the cost per unit)

what if i need to derrive as FG(Good) per unit = 402/85 = $4.7294/unit
FG(Reject) per unit = 66/15 = $4.40/unit

is there any way to do it? help from anyone will be much appreciated. thanks in advance!

2

What you need to do is not reject the quantities, this would be the only way to get your costs in the manner you wish, because as standard that system attibutes all of the WIP costs to the finished goods. You would need to book the goods in and at the end of the process move the rejected goods to a different location to move the costs. However I do not believe NAV costs in the manner you describe, but I am not sure on your description of “rejected”. If you only book in 85 the cost would be the total of all raw materials used plus the operation times recorded (depending upon how you get your work centre costs). So the if you took the 100 and the moved 15 to reject an element of cost would be moved, depending upon time and raw materials. Obviously this would not relfect a true value as the operation time is lessened as production rejects are encountered, but we are still booking 100 in, so you would need to possibly revalue here.

There is no standard way of splitting out your “reject” costs in teh manner you require as these ultimately uplift the production cost of the finished goods, to remove them at any point does not reflect in the COGS the cost of making the finished goods item. To book in the reject also has its own problems with the costing, so if your client has a desire to refelct the costs in this manner it would need to be a modification and probably one you really want to avoid.

3

Hi AdamRoue,

Thanks for your advise. your answer is as what i have expected earlier.

4

Hi, another query regarding the Manufacturing Costing as per my original questions.

What if i were to use Item Variant Code to differentiate the (Rejects) and the (Goods) for all the WC Capacity Cost? will it flow according to the (Rejects) and (Goods) Variant Codes?