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Moving the variances at raw material level to FERT level

Former Member
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Dear experts,

We are having the scenario:

RM Level production Orders

SFG Level production Orders

FG Level Production Orders

When we are trying to close the orders at month end, there is no problem in settlement, but when we see the COPA report variance amount is appearing under the same material for which we have settled the order.

Expectation is, as we are used the RM for SFG and SFG for FG, the RM variance amount should be shown under SFG & SFG variance should be shown under  Finished product.

Is it possible..............?

Thank you...

Accepted Solutions (0)

Answers (3)

Answers (3)

Former Member
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Hi Surya,

The following is workaround solution for the same without ML

1. Create the production variance GL account as cost element

2. Assign the default cost center to production variance GL account in OKB9

3. De activate the variance to costing based PA in settlement profile.

By doing the above steps, Production variance is posted to cost centers instead of directly to COPA during the settlement.

4.Get the production variance for raw materials and SFG and FG from product costing reports.

5.Distribute the production variance from cost center to COPA (Respective product levels) through COPA assessment cycle.

Then you would be able to see the variance as per your distribution to different product levels in COPA reports.

But as per your requirement ML is best option instead of doing all the above steps.

Former Member
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Hi,

The answer to your requirement is Material Ledger.

Regards,

Szymon

Former Member
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Hi,

Thanks for the Reply.

We have not activated ML.

Then what is the use of calculating variances and settlement process without ML...?

Let me confirm one thing:

  • By month end process without ML, we can able to arrive Order level variances, not product level.

  • Product level we can, but no use as these variances are not moving to next level.

We are using COPA, how to show these  Raw material & SFG variances for a Finished product, Management is interested to see the profitability for a finished product, variances of RM/SFG are not coming for this level.

If I select Raw material can able to get the variances, but there will be no sale for that so no use.

Please provide the solution for this without ML.

Thanks

Iguacel
Advisor
Advisor
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Hi Surya,

closing process without ML allows you to identify, if production order is not finally confirmed, the WIP and, if marked as finally confirmed, the deviations in the manufacturing process due to eg an extra consumption of RM (compared to the referenced bill of materials), different routing used, less SFG / FG than originally expected, price differences due to procurement cycle etc.

material ledger allows you to capitalize the differences if the manufactured product is still in inventory or absorb it as COGS if the product has already been served. By using the multilevel approach we are able to "move" the deviations from MP to the corresponding SFG / FG and obtain an acqcurate profitability analysis / contribution margin for the products sold.

Procurement price differences can still be analyzed base on the postings done in Invoice receipt.

hope this helps.

BR,

Iguacel Ordejon

Former Member
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Hi,

  • By month end process without ML, we can able to arrive Order level variances, not product level.

Yes. Variances are calculated and settled at order level. You can report variances at material level at CO-PA or summarisation report in Cost Object Controlling.

  • Product level we can, but no use as these variances are not moving to next level.

Without ML variances from lower levels are not rolled into higher levels.

Rolling variances to higher levels is one of the main features of ML.

Without ML would be difficult. You would need to create your modification that would mimic ML functionality. I came accross a few of such developments but must say they were never 100% correct.

Regards,

Szymon

Former Member
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Thanks for the replies.

Former Member
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Dear Experts,

Is there any work around without going for ML.

rolling up the variances to next level ( Raw material variances to FG)

Let me know the process.

Thanks

kamalkumar_biswas2
Active Contributor
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Hi

  I think you have not defined input variances  like input price/usage variances in variance calculation at order level. 

  Please check variance calculation settings in SPRO