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Dec 18, 2013 at 10:09 AM

How Production Variances Can Be Created When The Stock Is Valuated Using MAP?



I was reading the following paragraph from here about using MAP price for Finished Goods, and wondering what do they mean by variances in production orders? How can variances in production orders happen when the full amount of the debit side will be posted to Stocks since the stocks are valuated with MAP price?

For example :-

Total Debit Cost of production order A = $1000

GR into inventory valuated with MAP = = -$1000

Production order A balance = $1000 - $1000 = 0

As you can see above the total cost of the production order will be posted to stocks valuated using MAP price. In this case how can there be a variance popping up in the production order all of a sudden? Please help me to understand this part :-

During the settlement of variances on manufacturing orders, the system checks whether a corresponding stock coverage exists for the respective material. If multiple manufacturing orders were completed during a period and the material stock at the end of the period is smaller than the sum of the receipts from production orders, variances from all production orders are allocated to the material stock, assuming adequate stock coverage.

The individual orders do not check whether the period ending inventory was already debited with variances from another order!