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Variance is Getting Credited to COGM Expense Account


While doing the Production process, we got 15$ variance due to the variance between Goods Receipt and Goods Issue. When i settle the production order, The above 15$ is getting debited to Variance account and posting to COPA and the is getting credited to Material COGM - Expense Account. But not going to COPA.

The above process is correct? But why is is not posting to COPA. How it will goto COPA?


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  • Posted on Dec 17, 2010 at 07:00 AM

    Hi ,

    Consumption Expenses doesnot flow to COPA from the FI /CO entry ..( Goods Issue/Variance entries)..

    Product Cost Expenses flow to COPA at the time of sales ( Billing).. as COPA taken COGS .. not COGM..It is done with a configuration in COPA using Cost Key maping..

    Hence , during consumption and variance entry.. COPA will not be affected for the consumtion..Variances are only taken to COPA.. which is happening correctly in your system..



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  • Posted on Dec 17, 2010 at 08:02 AM


    The prod order is a temporary object created for the purpose of manufacturing a specific lot size of a given product

    Debits like Raw Material And Activity confirmations post to the production order - Say, 105 USD

    Credits like Goods receipt - Posted to the production order - Say 100 USD

    In order to close the Production order, you must post the balance (variance) 5 USD also to the production order... And the account is COGM i.e. offsetting account for GR or Settlements pertaining to production order...

    .... Thats the precise reason why variance is posted to COGM account and to the production order and not COPA...

    COPA will be posted to once you sell this stuff which you have manufactured from the production order


    Ajay M

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