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Former Member
Oct 06, 2010 at 05:07 PM

overhead costs on raw materials


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.