Settling production variances when the price control of the material is "V

[Former Member]

Hi,

Scenario: 1) Materials are maintained at moving average price.

2) Production variances need to settle to material and MAP need to be adjusted.

Issue: When the closing stock of the material is less than the negative variance need to be settled from the production order the system is giving the message "Moving average price for material is negative"

Questions: 1) What is the solution for settlement of negative variance to material when there is no stock?

2) Is there is any way to settle these variances to price difference account only when the stock is not available. if stock is available the variance has to adjust the stock, if not settle to the price difference account. Is there anys standard settling for this?

Advance thanks for your help

Regards

Koteswararao Padarti

[ajaycwa1981]

Hi Rao

You should never have Price Control V for In House made material...

That will ruin your inventory valuation forever.. Consider the eg below if your price control is V

1. Your moving price in mat master is 100 USD

2. You Mfr on Jan 1 @ Actual cost = 110 in Prod order and Qty = 1.

Upon GR, GR will happen @ 100 and at period end if Qty is lying in stock, 10 variance will also be inventorized

BUT, now consider this

1. 1. Your moving price in mat master is 100 USD

2. You Mfr on Jan 1 @ Actual cost = 110 in Prod order and Qty = 1.

Upon GR, GR will happen @ 100 and variance lying is 10 in prod order

3. You Mfr on Jan 10 @ Actual cost = 110 in Prod order and Qty = 1.

Upon GR, GR will happen @ 100 and variance lying is 10 in prod order

4. On jan 15, you consume Qty 1 and qty lying in stock is 1

5. In period end, when you do settlement, following will happen

a. For prod order 1: Qty Mfd 1 and Qty lying in stock 1 - Result: variance 10 will be inventorized.

Mvg Avg price will shoot upto 110

b. For prod order 2: Qty Mfd 1 and Qty lying in stock 1 - Result: variance 10 will be inventorized.

Mvg Avg price (MAP) will shoot upto 120

System wont check whether the qty lying in stock pertains to prod order 1 or 2... It will simply check if the Qty of prod order matches with qty lying in stock. hence, it will keep on inventorizing variance in this case.... and your MAP will touch the sky

Regards

Ajay M