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Need of release of standard cost estimate while creating production order

Hello,

I have one doubt regarding standard cost estimate.

Is it mandatory to have valid standard cost estimate of the material while creating production order?

Is there any impact on cost of production order when there is no valid standard cost estimate is present or released?

Kindly help me with this.

Thanks,

Kunal Sakpal

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4 Answers

  • Best Answer
    Posted on Jul 23, 2020 at 05:23 AM

    Hello Kunal Sakpal

    It is important to have the standard cost estimate so that you can view the difference between the planned and actual cost. The variance is loaded to inventory valuation at the month end if you use actual costing. Analyzing the variances on a rolling basis can help you understand also what action you can take to reduce the input costs like material, labour and other overheads and increase your profitability.

    Hope this helps

    Thanks & Regards

    Sanil Bhandari

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  • Posted on Jul 23, 2020 at 05:09 AM

    Hello Kunal,

    Yes. Valid cost needs to be released before production order creation and execution.

    Otherwise, you will not have the Planned cost and while executing the production order the actual cost will not update in the production order.So there will be COGM will not have the right cost.

    Please check with your internal controlling dept.

    thanks,

    kumar semmalai

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  • Posted on Jul 23, 2020 at 10:37 AM

    hello Kunal.,

    it is important to have estimated cost but not mandatory. you can create order without estimated cost also but you can not know what is the variance. and many other reporting also will affected.

    Regards,
    mahesh kumar.

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  • Posted on Jul 23, 2020 at 07:43 PM

    Hi Kunal,

    1) No,It is not mandatory to have a cost estimate for creating production order.

    2) By releasing the SCE, the estimated price will be updated in material master. But without SCE, you have to update the price manually. Other wise, material price will be posted as '0' while during goods receipt.

    Regards,

    Viswa.

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