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TOPIC: Shop Floor Control

Shop Floor Control #11

  • Anonymous
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We are in the implementation stage of Shop Floor Control and I am trying to follow Macola's std. cost variance distributions. Does anyone have any idea how Macola uses the variables to arrive at the distribution amount on the report? I would appreciate it if anyone else using Shop Floor Control, Manufacturing Cost Accounting and Labor Performance, would let me know as I have a myriad of questions. Thanks for your help.
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Shop Floor Control #75

Hi:

Macola arrives at a manufacturing variance on a shop order as follows:

All materials are charged into WIP at the standard cost on file in the item location record at the time of issue, multiplied by the quantity issued. If the standard is changed of any material during the life of the shop order, changes will reflect in the distributions, and contribute to the manufacturing variance.

MCA distributions:
Raw or Component Inventory is credited, WIP is debited upon issue of material. The opposite occurs upon return of material.

Labor is charged into WIP based on actual hours multiplied by the work center standard labor grade as set up in the work center, which becomes part of the routing, (assuming it was not replaced by a different labor grade in the routing operation record). If you are back flushing standard labor, and not making any manual adjustments to time applied, no labor variance will fall out of WIP. Changing labor rates or grades during the life of the shop order will also contribute to the manufacturing variance.

MCA Distributions:
Labor absorbed is credited, WIP is debited upon posting activity transactions in the Mfg Cost Accounting module. Negative hour reporting will produce the opposite entries.

If overhead application is based on labor hours or labor dollars, it works similarly to labor above. The overhead rates are stored in the table on the last page of the work center. If there are no overhead rates entered there, the system uses the default table in the manufacturing set up file. (push button for burden rates).
Overhead can be also based on machine hours, per unit, or per material cost in the product structure.

Changing overhead rates or application methods during the life of the shop order can also contribute to the manufacturing variance.

MCA distributions:
Overhead absorbed is credited, WIP is debited. Negative hour reporting will produce the opposite entries assuming overhead is based on labor.

Outside process costs go into WIP at the actual price paid on the purchase order. Although there is a standard specified in the outside process routing record, no variance is calculated at the PO receipt as with a material. This variance, if any, falls out at the end of the shop order. When an outside process is processed through the PO system, the following distributions occur:

IM distributions:
Outside process expense is debited, Receiving Accrual is credited

MCA distributions:
Outside process absorbed is credited, WIP is debited

When a completion of any quantity of the maunfactured parent item is processed, the system reads the standard cost from the item location file. The standard on file multiplied by the quantity complete produces a distribution that credits WIP and debits finished goods or subassembly inventory. No variance results at this time. The value of the shop order as reflected in the MCA module is the net amount of the charges in and out. This is a potential variance, assuming all charges of material, labor, overhead and outside process costs are in, and all quantities complete are processed and posted in the MCA module.

Closing the shop order, then posting the closure record in the MCA module will create the variance distribution. The entire net difference goes to manufacturing variance.

If changes have been made to the product structure, materials, labor, outside process, or overhead during the life of the shop order, the standard cost should be rolled up prior to reporting completions. The up to date standard must be the basis for the credits out of WIP.

Running the standard cost distribution is supposed to break out the manufacturing variance into is elements of material, labor, ovehead, and outside process, but I have yet to see it work properly. I usually see a totally different variance, which makes no sense.

Give me a call if you would like to discuss this further.
Jeff
cell 508 479-0165 office 978 921-7501
Jeffrey Karp
Karp Consulting. Inc.
Cell Phone: (508)479-0165
Office Phone and Fax: (978)921-7501
"I help companies realize the value of Macola Software." Check my website for references, etc. at: www.karpconsulting.net
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