overhead costs on raw materials

[Former Member]

Our requirement is to have some percentage overhead on raw materials. So I created a costing sheet and applied a percentage to them and did a std cost estimate. Now when GR is received it valuates against the std cost (which includes OH) and posts the difference to PPV. Client wants it to valuate against the orginal price of material (without OH)

Ex; ROH Mat A $1.00 in planned price 1

Costing sheet : 10% OH

Standard cost of this ROH A is $1.10

Purchase order will be at $1 so GR will post Dr. Inv $1.10 Cr. Gr/Ir $1.00 PPV $ 0.10

But clients want that PO price $1 to be valuated against $1 (true ROH cost) and post $0.10 to absorption account

Dr. inv $1.10, Cr Gr/IR $1 Cr abs $0.10

if P.O is $1.10 then Dr. Inv $1.10 Cr. Gr/IR $1.10 Dr.PPV $0.10 Cr ABS $0.10

I am not sure if it is even possible if not waht options do I have to have and overhead for Raw materials with out updating standard cost estimate with $1.10.

Thanks

[Former Member]

The solution to your client requirement would be to have overhead condition type in MM pricing procedure to calculate 10% absorption. You can use condition type similar to freight condition type FRB1/FRC1 and have account determination with FR1 and FR2 keys (OBYC).

Regards,

Ganesh

[ajaycwa1981]

Hi

Yes, it is possible

What you want is to Debit the inventory with 1.1 i.e. inclusive of Overhead.. But, Credit the GR/IR with 1 $ and post the 0.10 to absorption account instead of PPV... So, that PPV reflects true PPV

You need to create an accrual key for the same..

1. Create an accrual condition type and accrual account key in MM pricing procedure. In this way, there is a credit entry to the GL account represented by accrual account key. Hence the PPV represents the true value.

2. For the accrual condition type, you can create a condition record such that its value is same as your overhead. You can use the user exit to automatically populate its value from KEKO and KEPH table.

Refer this post where it was discussed a few days back

Regards

Ajay M

[Former Member]

gr8. Thanks a lot for quick reply. Let me try this and get back to you. Thanks again

[Former Member]

Hi,

I am facing the same requirement.

How did it go?

Are you pleased with this solution?

Regards,

Michaë