BaanERP 5[1].0c Manufacturing - Production Order Costing

BaanERP 5.0c Manufacturing

Production Order Costing

Module Procedure UP127A US

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Document code : UP127A USDocument group : User DocumentationDocument title : Production Order CostingApplication/Package : BaanERP 5.0c ManufacturingEdition : ADate : December 1999

© Copyright 1999 Baan Development B.V. All rights reservedThe information in this document is subject to change without notice. No part of this documentmay be reproduced, stored or transmitted in any form or by any means, electronic or mechanical,for any purpose, without the express written permission of Baan Development B.V.Baan Development B.V. assumes no liability for any damages incurred, directly or indirectly, fromany errors, omissions or discrepancies between the software and the information contained in thisdocument.

Production Order Costing

Production Order Costingi

Table of contents

1. The Production Order Costing (CST) module in BaanERP 1-11.1 The CST concept as applied in BaanERP 1-11.2 CST’s functional procedures 1-21.3 The modules related to CST 1-21.4 The functionality of CST’s business objects 1-3

2. The procedure to close a production order 2-12.1 How to close a production order 2-12.2 Financial Results 2-32.3 Calculating estimated end-item unit-costs 2-42.4 Comparing actual and estimated costs 2-5

3. The subprocedure to manually issue material 3-1

4. The procedure to archive production orders and production costs 4-1

5. Parameters that affect CST 5-15.1 Production results by work center 5-15.2 The moment of freezing estimated production costs 5-15.3 Inventory valuation method 5-25.4 Multiple currencies 5-2

6. Production Order Statuses 6-1

Production Order Costingii

Production Order Costing1

About this document

Read this document to get an overview of the Production Order Costingmodule’s functionality and to learn more about the functional procedures thatare related to CST.

You need no detailed knowledge of the BaanERP software to read thisdocument. However, you are more likely to understand the contents if you arefamiliar with:

n The overall structure of packages, modules, and sessions within theBaanERP software.

n The Shop Floor Control (SFC) module procedure (UP133A US).n The general business procedures used in everyday business practice.n The basic concepts of enterprise resource planning.

For detailed descriptions of the module’s sessions, refer to BaanERP’scomprehensive online Help.

If you start BaanERP sessions with the Menu Browser, you will find thesessions in the Production Order Costing (CST) section under the Shop FloorControl (SFC) module.

To use this document

Read Chapter 1, The Production Order Costing (CST) module in BaanERP, ifyou want to know more about:

n The module’s functionality.n The relationship of the module with other modules.n The functionality of the module’s business objects.

Read:

Chapter 2, The procedure to close a production order.

Chapter 3, The sub procedure to manually issue material.

Chapter 4, The procedure to archive production orders and production costs ifyou want to know more about:

n The sessions in the procedures.n The results of the procedures.n The sessions that are related to the procedures.n The optional procedures that are related to the procedures.

Note:

Production Order Costing2

Acronyms used in this document

Acronym Meaning

ACP Accounts Payable

ACR Accounts Receivable

BOM Bills of Material

CAT Cost Accounting

CF BaanERP Configurator

COM Common Data

CP BaanERP Enterprise Planning

CPR Cost Accounting

CST Production Order Costing

FBS Financial Budget System

FIN Finance (in Common Data)

FST Financial Statements

GLD General Ledger

HRA Hours Accounting

IBD Item Base Data

IPD Item Production Data

PCS Project Control System

PUR Purchase

QM BaanERP Quality Management

ROU Routing

RPT Repetitive Manufacturing

SCS Supply Chain Solution

SFC Shop Floor Control

SLS Sales

TI BaanERP Manufacturing

TRP Tools Requirement Planning

WH BaanERP Warehousing

WIP Work in Process

Legend

ticst0201m000Close Production

Orders

Mandatory session

ticst0520m000WIP transfers

Optional session

TIPackage

SFCModule

CSTThe module that is described in this module procedure

Production Order Costing1-1

n The CST concept as applied in BaanERP.n CST’s functional procedures.n The modules related to CST.n The functionality of CST’s business objects.

1.1 The CST concept as applied in BaanERP

In order to control costs, you must know:

n What your costs are for each process that you carry out.n How those actual costs compare with estimated (planned) costs.

CST is used to calculate the production results for each closed production order,and to carry out calculations and produce reports that compare the productionresults with planned costs of production orders.

Figure 1 shows how the module is positioned in BaanERP. The diagram showsthe packages and modules that are closely functionally-related to CST. For adiagram that shows the information flow between modules, see Figure 2.

Basic data

ROU

BOM

ACR

IPD

IBD Sales and Purchase

PUR

Production

RPT

HRAFinance

SLS

QM SFC

FST

PCS

Coordinationand planning

TRP

CF

CP

WH

CAT

GLD

FBS

ACP

CPR

FIN

CST

BaanSCS

Figure 1 Position of CST in BaanERP

1. The Production Order Costing (CST) module inBaanERP

The Production Order Costing (CST) module in BaanERP


1.2 CST’s functional procedures

Production Order Costing (CST) is a part of Shop Floor Control (SFC), and sothe procedures in CST can really be seen as sub procedures of the productionorder procedure, which is described in the SFC module procedure(UP133A US). However, the following procedures are described more fully inthis module procedure:

n The procedure to close a production order. Closing a production orderresults in the calculation of the production results and the posting of thefinancial results to the General Ledger (GLD). You can also calculate enditem unit costs.

n The subprocedure to issue material.

n The procedure to archive production orders and production costs.

1.3 The modules related to CST

Figure 2 shows the modules that are related to CST. The arrows representinformation flows.

IPD

SFCPUR

ROUCPR

CSTGLD

WH

HRA

BOM

FIN

Figure 2 Modules related to CST

The main links with CST are to the General Ledger (GLD) in BaanERPFinance, data that relates to Finance (FIN) in the BaanERP Common Datapackage, and in Shop Floor Control (SFC). When production orders (from SFC)are closed in CST, the financial results are calculated and posted to GLD.Before orders are closed, CST checks that a number of conditions are met,including that:

n Hours are posted (HRA).n Subcontracting orders are processed (PUR).n Materials are issued and warehouse orders are completed (WH).n Backflushing is carried out (SFC, HRA, WH).



Furthermore, a close relationship exists between CST and the BaanERPWarehousing (WH) package. The following issues are handled:

n The material to issue.n The WIP transfers (intra company).n The financial postings related to the issue and the receipt of materials.n The update of the Moving Average Unit Cost (MAUC) history in case of

Fixed Transfer Pricing (FTP).n The update of the inventory value in case of actual costing.

When CST is used to compare estimated hour costs and material costs withactual costs, the other modules shown in Figure 2 are used:

n Bill of Material (BOM).n Routing (ROU).n Item Production Data (IPD).n Cost Price Calculation (CPR).

1.4 The functionality of CST’s business objects

CST contains the following business objects:

n Production Order Costs.n WIP Transactions and Production-Order Closure.n Production Order History.

Production Order Costs

You can use this business object to produce reports about the following topics:

n Estimated and actual hours costs.n Estimated and actual material costs.n Estimated and actual end-item unit-costs.n Work in Process (WIP)n WIP transactions by project, order, and so onn Actual production costs.n Operation-time deviations from norm values.

WIP Transactions and Production Order Closure

Use this mandatory business object to:

n Close production orders, that is to:− Calculate and post the financial result (or just simulate the calculation).− Update the history of the actual costing and hours accounting.− Change the production-order status from Completed to Closed.

n Reset the status from Closed to Completed.n Print the posted production results by work center.



Production Order History

This optional business object can be used to:

n Archive production orders and costing history.n Print various reports about costing history.


This chapter describes:

n How to close a production order.n The results of closing a production order.

2.1 How to close a production order

When the status of a production order changes from Completed to Closed:

n The financial results are calculated.n The results are posted to the general ledger (GLD) in BaanERP Finance and

to the Finance (FIN) module in the BaanERP Common Data package.n The actual costing and hours accounting history is updated.

You can alter the calculation of financial results with several parameters,including (see Section 2.3):

n Whether the WIP is calculated by work center.n The moment of freezing estimated production costs.n Inventory valuation method.n Multiple currencies.

2. The procedure to close a production order

The procedure’s result s

The procedure to close a production order


Figure 3 shows the steps in the procedure.

Production-OrderProcedure in SFC

Report OperationsCompleted

(tisfc0530m000)

Report Orders Completed(tisfc0520m000)

Close Production Orders(ticst0201m000)

Archive Production Orders(ticst0250m000)

Cancel Production Orders(tisfc0203m000)

Reset Production Order Status

(ticst0203m000)

Archive Costing History(ticst2250m000)

1

2

3

4

6

7

1a

5

Figure 3 To close a production order

The procedure consists of the following steps:

Step 1 Production-Order Procedure in SFC

The procedure to close a production order in CST can be seen as part of theproduction-order procedure. For more information about the entire procedure,see the SFC module procedure (UP133A US).

Step 1a Cancel Production Orders (tisfc0203m000)

You can cancel the production order at this point.

Step 2 Report Operations Completed (tisfc0530m000)

In this optional step, you can report some of the operations completed, ratherthan the whole order.



Step 3 Report Orders Completed (tisfc0520m000)

You must carry out this step before you can close the production order. Thefollowing conditions must also be met before you can carry out step 4:

n Allocated materials are issued.n Warehousing orders are completed.n Inspection orders are processed.n Hours entered are posted.n Subcontracting orders are processed.n Purchase invoices for subcontracting are approved.n Backflushing is performed.

Step 4 Close Production Orders (ticst0201m000)

Use this step to set the production-order status to Closed (see Chapter 5).

When you close the order, BaanERP:

n Calculates the actual end-item unit-cost.n Calculates the financial results of the production order (see Section 2.2 for

more information).n Updates the history of the actual costing and hours accounting.n Corrects surcharges based on actual costs.n Deletes the production-order planning of the order.

You must enter a closing date (which may be in the past) for the productionorder. You can also use this step to simulate the results, that is to calculate thefinancial results, but not to post the calculated results to the general ledger orclose the order. You can also post the results without closing the order.

Step 5 Reset Production Order Status (ticst0203m000)

When a production order is closed, you cannot issue materials or account hoursfor that order. If you need to assign additional materials or hours to a productionorder, you must use this step. The status is reset from Closed to Completed(see Chapter 3).

2.2 Financial Results

BaanERP calculates the following results:

n Price variance*: the difference between estimated and actual price of aproduction order for materials or hours.− Price variance = (estimated price – actual price) × actual quantity.

* A variance is a measure of the difference between the estimated (planned or budgeted)costs and the actual costs. You do not have to calculate both price and efficiencyvariances.



n Efficiency variance: the difference between actual and planned productionorder quantities for materials or hours.− Efficiency variance = (estimated quantity – actual quantity) × estimated

price.

n Calculation variance: the variance in production results that is notaccounted for by price variance and efficiency variance. It can be caused byactions such as altering the fixed transfer price (FTP) of end items, ordifferences between estimated and actual surcharges. It is used to clear theWIP.− Calculation variance = production results - price variance - efficiency

variance.

2.3 Calculating estimated end-item unit-costs

The end-item unit-cost is also known as the order cost-price.

There are three circumstances under which BaanERP estimates the end-itemunit costs:

n When you change the order status (depending on the value of the Momentof Freezing Estimated Unit Costs field in the Production Orders(tisfc0101s000) session.

n When you use the Calculate Estimated End Item Unit Costs(ticst0210m000) session.

n When you use the Print Differences between Frozen and Current EstimatedCosts (ticst0411m000) session. When you use this session, the costs are notstored.

When BaanERP estimates the end-item unit costs, it calculates the followingcosts:

n Operations (that is, hours). Baan uses all estimated data about productiontimes, and man and machine hours to calculate the cost per end-item unitfor operations based on total costs of employees, machines and overheads.

n Materials costs. Baan uses the standard costs price to calculate the materialcosts for each component.

n End-item surcharges. You define which surcharges you will use formaterials and operations in the Cost Price Calculation (CPR) module.

n WIP transfer prices. This is only calculated if the Production Results perWork Center check box is selected and the Transfer WIP Method isother than Not Implemented (both in the SFC Parameters (tisfc0100s000)session).



When you have calculated the end-item costs, you can display the results in thefollowing sessions:

n End Item Unit Costs (ticst0510m000) session.n Print Estimated versus Actual End Item Unit Costs (ticst0410m000)

session.n Print Differences between Frozen and Current Estimated Costs

(ticst0411m000) session.

2.4 Comparing actual and estimated costs

A number of sessions are available to enable you to compare actual andestimated costs for materials and for hours. These sessions include:

n Print Estimated versus Actual Material Costs (ticst0401m000).n Print Estimated versus Actual Hours Costs (ticst0402m000).n Print Actual Production Costs (ticst0415m000).n Print WIP Transfers (ticst0420m000).n Print Posted Production Results by Work Center (ticst1401m000).n Print Operation Times Deviation against Norm (ticst1402m000).n Print Work-in-Process (ticst0450m000).n Print Estimated versus Actual End Item Unit Costs (ticst0410m000).

Of course, the correct parameters (see Section 2.3) must be selected to producereports at a particular level. For example, if you are not using WIP transfers,you cannot print the related reports.

More details of the exact contents of the reports are given in the online Help.There are also display sessions provided to show the same data.


A part of the production-order procedure involves issuing material forproduction orders. The production-order procedure is more fully described inthe Shop Floor Control (SFC) module procedure (UP133A US).

The steps involved to release material manually (without backflushing) are asfollows:

1

2

3

4

5

6

Shop Floor ControlProcedure

Report Operations Completed

(tisfc0530m000)

Material to Issue forProduction Orders(ticst1501m000)

Initiate Inventory Issue(tisfc0207m000)

Report Orders Completed(tisfc0520m000)


Figure 4 The procedure to issue materials

Step 1 The production-order Procedure

This procedure is an integral part of the production-order procedure in shopfloor control. The production order status must be Released before you canissue material.

Step 2 Material to Issue for Production Orders (ticst1501m000)

Use this step to adjust your plans for the material you require for the productionorder. This step is mandatory if:

n The Manual Issuing check box is selected in the SFC Parameters(tisfc0100s000) session.

n The material concerned is not backflushed.

3. The subprocedure to manually issue material

The subprocedure to manually issue material


Step 3 Initiate Inventory Issue (tisfc0207m000)

Use this Step to issue the components from the warehouse. When you do this(or when you book hours) the production order status becomes Active.

Steps 4-6 Continue with production-order procedure

The other steps in the production-order procedure must now be carried out, atleast until the production order is Closed.


When you have finished using the costing data, you can move the data to anarchive company. In BaanERP, separate companies are separate data sets.

The archiving procedure has the following steps:

1

2

3


Archive Production Orders(ticst0250m000)

Archive Costing History(tisfc0530m000)

Figure 5 The archiving procedure

Step 1 Close Production Orders (ticst0201m000)

Before you can archive production data, the orders must have the status Closed.Subcontracted operations must also have been completed.

Step 2 Archive Production Orders (ticst0250m000)

Use this step to move the actual costing data and production-order data ofclosed production orders into a separate archive company. The data from yourlogistic company is then deleted.

Step 3 Archive Costing History (ticst2250m000)

This optional step can be used to move historical data of closed productionorders to an archive file. The historical data are:

n Material usage.n Hours spent.n Operations time spent by item.

4. The procedure to archive production ordersand production costs

The procedure to archive production orders and production costs



You can alter the way that CST calculates production results with severalparameters. More details are given in the online Help, but four of the moreimportant ones are outlined here:

5.1 Production results by work center

You can select the Production Results per Work Center check box in theSFC Parameters (tisfc0100s000) session to define whether the productionresults are calculated by work center. If so, WIP transfers are possible, if theTransfer WIP Method is other than Not Implemented. You can also checkwhether price and efficiency variances are posted to each work center, or to theproduction order’s calculation office.

A WIP transfer is the transfer of the value of the work in process from one workcenter to the next, in accordance with the physical transfer of a subassembly tothe work center where the next operation must be performed.

You can use WIP transfers to make sure that the work in process is recorded inthe work center that is actually working on the order. This is useful if:

n The WIP is a high value.n There is a long production time.n Or the different work centers use different currencies.n The different work centers belong to different enterprise units.

5.2 The moment of freezing estimated production costs

You can use the Production Orders (tisfc0501m000) details session todetermine when the cost estimates are frozen (that is, when they cannot bealtered anymore):

n At production-order creation.n At order release.n Before the first WIP transaction.

A WIP transaction is any action that affects the work in process of a productionorder or work center such as the issue of material, or the booking of hours.

The moment of freezing can affect the value of the estimated cost, and so affectthe comparison between estimated and actual costs.

5. Parameters that affect CST

Parameters that affect CST


5.3 Inventory valuation method

You can use the Inventory Valuation Methods (whina1100m000) session toselect an inventory valuation method. The method you choose will affect thevalue of your materials, and so the actual costs.

n First In, First Out (FIFO) assumes for calculation purposes that the oldestinventory (first in) is the first to be used (first out).

n Last In, First Out (LIFO) assumes for calculation purposes that the mostrecently received (last in) item is the first to be sold (first out).

n Moving Average Unit Cost (MAUC) uses the arithmetic mean value of adefined amount of the most recent inventory.

n Lot Costing is a method in which the valuation price or cost price iscalculated separately for each lot.

n Fixed Transfer Pricing (FTP) is not an actual valuation method; acalculated value is used to value the inventory. If you use FTP valuationyou can choose where to post price variances and efficiency variances:− On the production order.− On the work center (if applicable).− Included in the calculation variance.

If one of the first four methods is used (that is, an actual valuation method), theproduction results are posted to BaanERP Warehousing (that is, the end item’swarehouse) rather than to a work center.

5.4 Multiple currencies

When you install BaanERP, you select one of the following modes:

n Single currency system. All costing data is entered in the same currencyfor each logistic company.

n Independent currency system. All transactions are done in up to threecurrencies, which entered independently. Actual and estimated costs arecalculated in the three currencies.

n Dependent currency system. Each work center can have its own currency,and exchange rates are used to process transactions between work centersthat operate under different currencies.


When you are working with production orders, they pass through a number ofdifferent statuses. These statuses are summarized in the following table andfigure.

The status changes of production orders

From status To status/CST action Session

— Planned Production Orders(tisfc0501m000)

Planned Scheduled The Scheduled status onlyappears when the productionorder is scheduled by BaanSCSScheduler.

Planned Sequence Phase Generate Line Sequences(tisfc7230m000)

The Sequence Phase status isonly valid for FAS item productionorders.

Planned, Scheduled orSequence Phase

Order DocumentsPrinted

Print Production OrderDocuments (tisfc0408m000)

Planned, Scheduled orOrder Documents Printed

Released Release Production Orders(tisfc0204m000)

Released Active(Material costs posted)

Initiate Inventory Issue(tisfc0207m000)

Released Active(Actual operationcosts posted)

Process Hours Accounting(tihra1210m000)

Released Canceled Cancel Production Orders(tisfc0203m000)

Released, orActive

Completed Report Orders Completed(tisfc0520m000)

Completed Closed Close Production Orders(ticst0201m000)

Closed Completed Reset production-order status(ticst0203m000)

Closed Archived Archive Production Orders(ticst0250m000)

6. Production Order Statuses

Production Order Statuses


Order documents printed

Planned

Released

Active

Canceled

Completed

Closed

Archived

Sequence Phase

FAS Items only

CST

Scheduled

Production orders scheduled byBaanSCS Schedulder

Figure 6 The statuses of a production order

BaanERP 5[1].0c Manufacturing - Production Order Costing

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