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Mar 16, 2015 at 03:35 PM

Treating of utility production in manufacturing plants



We have a plant which mainly producing steel. There's an in-house power plant, which produce and supply electricity to plant and admin buildings. The shortage is procured from outside.

In production process, we have activities defined (Power in house and power external) to capture the cost against work center (operations).

The power used by other areas (buildings, maintenance etc) which are charged to CC.

At the month end, the sum of all is the power produced by plant.

The business requirement is that, they need to capture the in-house production of power !

So, the raw materials used (coal,fuel, etc) and activities (labour, fixed costs) needs to be consumed to a cost element and produce power (which can be non-valuated material or pipeline material). Then the power produced is consumed to cost center (stock cannot exist).

If an order / cost element to be created to capture power production, should i use production order as cost element, or a CO order (CO Production order)?

There's no requirement of standard cost Vs actual (only actual will do) analysis. So, CO order can also be created and declare actual GR and GI without creating BOM structure.

My doubt is - what is the correct process? I believe power should be either a pipe line material or an activity, which shouldn't be produced to stock at first place. What is the best practice followed and how can we cater the business requirement?