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Production Order Variance - Journal Entry to WIP Inventory Variance Account

Hey Experts,

When there is a variance between the planned quantity of a component item and the manually issued quantity, a journal entry is created after the production order's status is changed to "closed". This journal entry does four things: 1) Credits the WIP Inventory Account, 2) Debits the WIP Inventory Variance Account, 3) Credits the WIP Inventory Variance Account, and 4) Debits the regular Inventory Account of finished goods.

In my scenario I have set the WIP Inventory Variance Account to a Shirk/Variance/Scrap gl account and want the JE to only do items 1 and 2 from above and stay in the Shirk/Variance/Scrap account. For some reason it treats it like a clearing account and moves the cost back out of the Shrink/Variance/Scrap gl account and back into the regular Inventory Account.

Is there a configuration to have this variance amount stay in the WIP Inventory Variance Account? Or can you better explain why it is moving the amount back out of this account?

To me it would make since that if scrap was used in a production order and we issued more of a component item to the production order, the difference in the amount from the Receipt from Production and Issue for Production would go to WIP Inventory Variance Account.

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2 Answers

  • Oct 12 at 09:35 AM

    Please share your SAP Version before 9.1 SAP post variances without touching product cost. Now SAP adjust product cost according to variance for example there is variance in terms of more issuance of components but the cost was 100 according to planned components so SAP dont touch cost and post variance equal to cost of components which issued more. Now SAP adjust the cost if components issues more it will increase cost of product on production order closure and similarly it will reduces if components not issued according to planned. All this adjustment posted on production order closure.

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  • Oct 12 at 05:37 AM

    Please Suggest me Also i Am Facing Issue When I map WIp Variance Account

    My Valuation is By W'se Wise .

    Accounting Entryknow-up-entry-please-check.png

    Is This is Correct? total-variance-account-required-to-closed-order.pngmapped-account.png

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