Production Costing

[Former Member]

Hi,

I have got a scenario where my client produces two items using the same raw material but would like to split the cost of the raw material different to that of the yield i.e. it produces a yield of 50% but the cost should be allocated as 80 / 20. The reason being that the one product is actually a by-product but goes into another value adding process but is being sold at a lower selling price.

The client would thus like to see that both are making profit in relation to the cost and selling price. The implementation will be in a different country without easy access to support and we are thus trying to avoid an add-on.

Any ideas as to what I can do.

The current idea is to have the raw material on moving average and the two items being produced on standard costing and then split the cost according to their requirement. The idea was that the variance would cancel each other out when closing your respective production orders but this is not working as both post a negative variance.

Any ideas???

Jacques

[Former Member]

Hi Jacques,

To solve your dilemma, I am afraid you have to create two item codes. Simply because, they are different items no matter if they seem the same physically. There is no way to make arbitrary cost for the same item by any logical means.

Thanks,

Gordon