Inventory valuation

[Former Member]

Hi friends,,

Scenario - MTO / MTS where inventory is valuated at std price and variance settled to FI.

Is there any method to value finished goodfs at actual cost ?? ( without using Material Ledger )

Please advice...

Regards...

[ajaycwa1981]

Hi Neeraja

Without using ML, you can not value inventory at actual cost...

However, you can get COGS at actual cost without ML... The way is

1. MTO scenario

2. Sales order as cost object

3. Non valuated - instead of valuated stock

In this case, prod order settles to sales order.. Hence, entire actual cost flows to sale order... revenue is also booked on sale order.. At the end, sales order settles to COPA

NO concept of variance in this case, as the GR from prod order does not yield any credit to prod order.... Quantity tracking will be available though

Regards

Ajay M

[Former Member]

Thanks ...

It seems to be the right answer..

Anybody with a different argument .....???? or I will give deleted and close the query.

Neeraja

Moderator: Don't offer points and avoid asking basic questions

[Former Member]

If you have a one-level production process, Ajays scenario should work. If you have production orders for semi-finished goods and then make finished goods from those, I am not sure how the production orders for semi-finished products can be settled to a specific order (the variances from those orders specifically)

[Former Member]

Hi...Ajay...

What is your comment on it.

[ajaycwa1981]

Hmmm..

What Nikolas said is correct.. BUT, there is one more option to you, which is very less known but stiill used by many

In case of complex MTO, (where it is complete end-to-end from top to end)

1. A WBS/Project is created 1st of all each time you have start a new prod order against a sale order

2. All the production orders of SFG and FG are tagged to this WBS

3. All stock is valuated and all stock is project stock

4. SFGs and FGs can have price control V..

5. Upon GR, Price in material master is used to post credit to prod order...

6. At period end, when you settle prod order - Variance will get inventorised if stock is lying.... If stock is not lying, the variance will be posted against the WBS element

7. Finally, the COGS of FG will also be posted against WBS element... This way, you get end to end cost on WBS element i.e. Actual cost (if SFG stock is lying upon variance settlement) or the variance gets posted on WBS which is the central point of contact for this entire chain of SFG and FG products

Regards

Ajay M