Inventory & GI value of HLAB calculate based on std price & Activity price respectively

[former_member184737]

Hi All,

     This is manufacturing process with MTS strategy (40) and follows Product costing to calculate the price of in-house produced material (HALB/FERT).For example, finished material “WXYZ” will be produced by using 4 operations, we have maintained separate part number for every of operation  output (HALB) like “W”,”X”,”Y”,”Z”. All material have BOM, routing and its activity cost.  “W” having component “ROH1”, “X” having “W”, “Y” having “X”, “Z” having “Y”, “WXYZ” having “Z”.The problem here is “The consumption of the semi finished materiel GL” value is huge than Finished material inventory GL while doing the production operation (GI, Confirmation, GR)

1. If I make the costing indicator as not relevant in BOM for the material “X”, “Y”,”Z”, system will calculate only operation cost for these material. I have also changed the BOM for “WXYZ” components as “ROH1”,”W”,”X”,”Y”,”Z”. So proposed the std price for all the material but “X”, “Y”, Z” having only operation cost.

            Issue : My inventory value shows as very low value for the materials “X”, “Y” , “Z” as well as depended requirement will be calculated twice while running MRP for the materials “X” and “ROH1”

  How to map this scenario? My inventory value wants to calculate as per std price but while issue the material(HALB) for  production, system will consider only operation cost. In this case for the first HALB  “W” will be considered “ROH1” price with activity cost  for remaining “X”, “Y”, “Z” materials it will be considered only activity cost. Correct me if I’m wrong. What was the best practice for this scenario

Thanks

[former_member208398]

Hi SKA SKA,

What if you maintain a single BOM of WXYZ with ROH1 as component, and a Routing containing 4 operations? This is simpler than having so many SFG stages.

Can you please elaborate why you need so many SFG stages? That will be helpful to understand what you are trying to achieve.

Best Regards,

Rajen

[former_member184737]

Hi Rajen,

       Thanks for your reply.Actually customer wants to maintain inventory as well as maintain OK/scrap qty at each operation level output, that's the reason we have created separate HALB for operation output.

Now the issue is, For example cost of HALB/FERT material

Cost of W = 1 euro (ROH1) cost +.4 euro (Activity cost) =1.4 euro

Cost of X = 1.4 euro (W) cost +.5 euro (Activity cost) =1.9 euro

Cost of Y = 1.9 euro (X) cost +.6 euro (Activity cost) =2.5 euro

Cost of Z = 2.5 euro (Y) cost +.7 euro (Activity cost) =3.2 euro

Cost of WXYZ = 3.2 euro (Z) cost +.2 euro (Activity cost) =3.4 euro

FERT "WXYZ" inventory GL value as 3.4 euro but for HALB consumption as 7.8 euro (1.4+1.5+2.1+2.8) instead of that we want consumption as 3.4 euro (1.4+.5+.6+.7+.2)

    Whether single material (FERT), BOM and Routing is the only option for this scenario? Yes,it's simple that if we maintain only one material for assembly and it's BOM and Routing then there is no issue at all. Could you please suggest how can map this process?

Thanks

[former_member208398]

Hi SKA SKA,

As per as my conception, the postings should be as discussed below:

Cost of W = 1 euro (ROH1) cost +.4 euro (Activity cost) =1.4 euro

GR done of W, stock of W (credit) 1.4 euro

Cost of X = 1.4 euro (W) cost +.5 euro (Activity cost) =1.9 euro

GI done of W, 1.4 euro consumed, the stock credit posted for W earlier knocked off. Total debit posting = 1 euro + .4 euro + 0.5 euro = 1.9 euro. GR done for X,  stock of X (credit) 1.9 euro

Cost of Y = 1.9 euro (X) cost +.6 euro (Activity cost) =2.5 euro

GI done of X, 1.9 euro consumed, the stock credit posted for X earlier knocked off.

Total debit posting = 1 euro + .4 euro + 0.5 euro + 0.6 euro = 2.5 euro. GR done for Y,  stock of Y (credit) 2.5 euro

Cost of Z = 2.5 euro (Y) cost +.7 euro (Activity cost) =3.2 euro

GI done of Y, 2.5 euro consumed, the stock credit posted for Y earlier knocked off.

Total debit posting = 1 euro + .4 euro + 0.5 euro + 0.6 euro + 0.7 euro= 3.2 euro. GR done for Z,  stock of Z (credit) 3.2 euro

Cost of WXYZ = 3.2 euro (Z) cost +.2 euro (Activity cost) =3.4 euro

GI done of Z, 3.2 euro consumed, the stock credit posted for Z earlier knocked off.

Total debit posting = 1 euro + .4 euro + 0.5 euro + 0.6 euro + 0.7 euro + 0.2 euro= 3.4 euro. GR done for WXYZ,  stock of Z (credit) 3.4 euro.

So, total consumption posting = 1+ 0.4 -1.4 + 1.4 + 0.5 -1.9 + 1.9 + 0.6 -2.5 +2.5 +0.7 -3.2 + 3.2 + 0.2 = 1+0.4+0.5+0.6+0.7+0.2 =  3.4 euro.

Final Inventory value for WXYZ = 3.4 euro.

The semi-finished stages are consumed against the same account they were posted as inventory and this chain process continues.

If it is not happening, please consult the FI person regarding the settings of posting.

Best Regards,

Rajen

[former_member184737]

Thanks Rajen, So as per your statement even if we maintain 'n' number of SFG stages for FERT also we will get exact consumption as well as inventory value if we configured GL account properly right? I will check this and come back if any queries.

Thanks

[former_member208398]

Hi SKA SKA,

thanks for your reply.

Please take a test case, probably the one you have put here in this discussion. Do all the postings in the test system, and check the GL entries.

Best Regards,

Rajen

[former_member184737]

Hi Rajen,

         If the combination of processed HALB materials (W,X,Y,Z) price is less than FERT price (WXYZ) then the accounting entries are looks like OK. Since, HALB/FERT material price are updated through product costing based on BOM and routing information value. So based on our input system calculate and proposed price. In most of the cases, the combination of the HALB materials price are higher than FERT. Is this make cause for these high consumption GL value? when we check GL balance report, it showing high value for Semi finished consumption GL Do we follow any procedure if we maintain separate material number for operational output?

Thanks

[former_member208398]

Hi SKA SKA,

When you run/display product costing of WXYZ, you will see the entire cost structure containing the SFG's in this hierarchy display.

The sum of total prices in this chain like structure should not be a problem because of the SFG consumption - SFG GR knocking off as discussed earlier.

I am not fluent for the GL assignments for the business transactions per valuation class in OBYC setting. Please consult your FI/CO partner if possible, and check whether the SFG GR posting and the SFG consumption postings are against the same GL account or not.

The chain like structure as explained earlier will be effective when this GR-consumption balancing is working properly.

Best Regards,

Rajen

[former_member184737]

Hi Rajen,

              Still it's not clear to me about the semi finished material consumption cost. I have checked with the full cycle, still the semi finished consumption cost GL value is going high value, because it's never ever reduced. If, both GI of HALB and GR of HALB will hit the same GL means, we can't find the consumption as well as GR qty value. If we use separate material number for operation output as HALB, the consumption cost of HALB always be high because we are create seperate production order for each HALB stage and will do GI and GR for the same. Inventory value of HALB GL only will vary based on GI and GR,but the consumption value is going high whenever we do GI of HALB for production order.For example, for producing a 5 Euro FERT, my HALB consumption GL posted with 8 Euros, But the inventory of HALB GL value is 0 euros and inventory of FERT GL value is 5 Euros because i have consumed all my  HALB stage to produce FERT. Inventory wise it's understandable, but consumption of HALB cost is always showing high since we are using separate material number for each and every operation output and will follow the prod order , GI and GR. Any suggestions

Thanks

[former_member208398]

Hi SKA SKA,

Take one simple case. suppose up to X.

W= ROH1 (1 euro) + 0.4 euro = 1.4 euro

X = W (1.4 euro) + 0.5 euro = 1.9 euro

Now in this case, (according to you) total consumption = 1 + 1.4 = 2.4 euro, right?

whereas, the GR value of X = 1.9 euro < 2.4 euro.

1. Run standard cost estimates (CK11N) for W, X. update the standard prices (CK24): W = 1.4 euro, X = 1.9 euro.

2. Create production orders for W, X (provide auto GI and auto GR for test simplicity).

3. Confirm production order of W, and check the material document. Check the FI entries by clicking the 'Accounting documents' in MB03 or MIGO display document.

4. Copy paste all the GL entries in a spreadsheet.

5. Now confirm production order of X, and check the material document. Check the FI entries by clicking the 'Accounting documents' in MB03 or MIGO display document.

6. Copy paste all the GL entries in the same spreadsheet.

7. Group entries according to the GL accounts.

Now check the consumption (debit) vs the inventory (credit).

I hope it will be clear.

Best Regards,

Rajen

[former_member184737]

Hi Rajen,

      Thanks for your reply. As i already mentioned the sum of HALB cost is less than FERT cost then there is no issue in semi finished consumption cost GL, because it's not showing much. Suppose i have 4 or 5 operations to make FERT, in this case, the sum of HALB cost is 3 times for example, higher than FERT value. I hope this is the standard scenario, Industry may maintain HALB for their operation output. We bit confused, whether our understanding is right or not in this regards. But, we practically seen our semi finished consumption GL cost is high if the situation like as i mentioned earlier (sum of HALB cost > FERT cost ). It may very helpful to make us understand this concept.

Thanks

[former_member208398]

Hi SKA SKA,

What I tried to mention from the very beginning, is the balancing of GR credit and consumption debit to the higher level for the SFG.

I would like to know the process you are using to check consumption GL cost. Maybe you have selected only the debit entries or any other filter, I cannot comment on the same until I understand the process you are using.

Suppose I have created one SFG stock by means of production order GR. There may be two cases:

(a) it is further consumed in the higher assembly, thus balancing out the stock credit.

(b) not consumed, and inventory of the same value.

Please let us know the way you are checking. I hope you have tested the scenario as I have described earlier. You may also test by increasing another level; tracking and grouping the entries in spreadsheet for analysis.

Best Regards,

Rajen