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Former Member
Mar 28, 2013 at 07:09 PM

Doubt in Concept of WIP calculation

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Dear SAP Gurus,

I have doubt in the concept of WIP. Please help me clarify this.

My Understanding is that WIP = Actual Cost - Goods Receipt. (correct me if I am wrong). But while calculating WIP in KKAX, the calculation considered only the Actual cost but not the goods receipt.

The details of the process are below;

Standard Cost component Structure - FG0001 Raw material cost (10 Qty from BOM * 50 USD) 500 Material Overhead (10% of the Raw Mtl price 50 Production cost (2 Hrs from Routing * Price per activity from KSPI 40 Total 590

Preliminary Costing - FG0001 Production Order for Finished good FG3001 100 Qty Raw Material (A001-RM) from BOM 100 Qty Labor from Routing 20 Hrs Preliminary Cost component Structure - FG3001 for 100 Qty Raw material cost (10 Qty from BOM * 50 USD) 5000 Material Overhead (10% of the Raw Mtl price 500 Production cost (2 Hrs from Routing * Price per activity from KSPI 400 Total 5900

1. Goods (Raw material) issue to Production order As per the plan, the quantity of Raw material required is 100. To caluclate the varainvce we will move 105 Qty. So the amount will be 50 USD (price per qty of Raw Material) * 105 (actual qty of goods issue)

Accounting Entry Raw Material Consumption Debit 5250 Raw material Inventory Credit 5250

2. Activity Confirmation Production order The planned number of hours for producing 100 Quantities of finished goods is 20 Hrs. To understand the variance, let us change the number of hours to 24 Hours. So that he variance will be 4 hrs * 20 USD(hr prer activity Unit)= 80 USD

3. Partial Goods receipt from Production out of 10 Quantities in PO we are moving only 6 quantities to calculate the WIP.The amount will be 6 Qty * Std price = 6*590 = 3540

3. Partial Goods receipt from Production out of 10 Quantities in PO we are moving only 6 quantities to calculate the WIP.The amount will be 6 Qty * Std price = 6*590 = 3540

4. Calculation of WIP Out of 10 Quantities inPO, 6 qty has been received into Finished good inventory. 4 Quantities are still in Production. Thus we have to calcutalte the WIP. WIP = Actual cost - Goods receipt.

Actual Cost (5250 + 480) 5730 Goods Receipt 3540 WIP 2190

But in the KKAX calculation, I am getting only 5730 and not 2190. Please let me know what I am missing.

Thanks

Kumar