Manufacturing Order Variances Understanding the Variances Created during MO Close and Purge.

Manufacturing Order Variances

Understanding the Variances Created during MO Close and Purge

Overview

• MO variances are created during the MO Close & Purge

• MO Close and Purge is the equivalent of a period close for WIP

• XA creates multiple variances for each MO

• These variances can be booked to a single account or to multiple accounts depending on the rules

‘T’ Accounts -Material

Inventory WIP

IP

IUIP

IU

IX

Uncontrolled Floorstock

IX

‘T’ Accounts - Labor

Inventory WIP

IP

IUIP

IU

IX

LSSA

LRSA


IX

Earned Labor

LSSA

LRSA

‘T’ Accounts - Overhead

Inventory WIP

IP

IUIP

IU

IX

LSSA

LRSA

LOHD


IX

Earned Labor

LSSA

LRSA

Overhead Absorption

LOHD

‘T’ Accounts – Material Receipt

Inventory WIP

IP

IUIP

IU

IX

LSSA

LRSA

LOHD


IX

Earned Labor

LSSA

LRSA

Overhead Absorption

LOHD

RM

RM

Variances

• VMCS – Material Cost Variance

• VMUS – Material Usage Variance

• VSCO – Setup Labor Cost Variance

• VSUS – Setup Labor Efficiency Variance

• VRCO – Run Labor Cost Variance

• VRUS – Run Labor Efficiency Variance

• VOCO – Overhead Cost Variance

• VOUS – Overhead Efficiency Variance

Variances

• VEAC – Miscellaneous Charge Cost Variance• VCLO – Order Closeout• Total Order variance is reported on the ‘Order Closeout

Accounting Detail’ report– Order Closeout Report can be re-run from the MO History

Reports

• Detail variances are reported on the ‘Order Closeout Variance Report’ at time of Close and Purge– Close and Purge is the only time that ‘Order Closeout Variance

Report’ is created, it cannot be re-run at a later date

Order Detail Accounting Format

Order Summary

Material Detail

Operation Detail

Order Detail Accounting Format

Order Totals

Formula for calculating variance is:

Setup (lbr) + (Run) Labor + Overhead + Mtl & Pur + Miscellaneous = Total Actual

Total Actual – Receipt (RM) = Difference (Variance)

“T” Account - WIP

Setup Labor – 27.31

Run Labor – 221.05

Overhead – 918.94

Material & Purchase – 135.26

Miscellaneous – 0.00

Total ‘Actual’ – 1,302.56 Receipt (RM) – 703.14

Variance (to zero out the value in WIP) – 599.42

GLI History

• XA has always had the option to create the ‘Order Detail Accounting Format’ report for total variance

• When GL Interfaces were created, individual variances were required

• ‘Order Closeout Variance Analysis’ report was created to detail the individual variances– Report shows each item and operation to calculate variances

– Variances are summarized on last page

• Sum of the variances must equal the variance on the ‘Order Closeout Accounting Detail’ report

VMCS

VSCO

VRCO

VOCO

VEAC

VMUS

VSUS

VRUS

VOUS

Material Variances

• VMCS – Material Cost Variance– When the MO is created, the bill of material is copied to

the MO– The standard cost of each component part is copied to

the MO– If the cost of the component is changed between the

time that the MO is created and the time of the IP transaction, a VMCS variance will be created

Material Variances

• VMUS – Material Usage Variance– When the bill of material is copied to the MO, the

extended quantity of each component is copied as the ‘standard’ quantity

– If an Unplanned Issue (IU) transaction is entered, and the ‘Standard Quantity’ is entered, it will be used to calculate Usage variance

– Any difference between ‘standard’ quantity and quantity issued will be part of the VMUS

Material Variances

Labor/Overhead Variances

VMUSVMCS

‘T’ Accounts – Material Variances

Inventory WIP

IP

IUIP

IU

IX

LSSA

LRSA

LOHD


IX

Earned Labor

LSSA

LRSA

Overhead Absorption

LOHD

RM

VMCS= .01

VMUS= 12.32

RM

Variances

VMCS

VMUS

Labor Variances

• VSCO/VRCO – Setup and Run Cost Variances– PC&C tailoring determines if labor will be valued at

Production Facility standard or employee pay rate (requires XA Payroll)

• If tailored for Payroll, difference between Facility standard and employee pay rate will be reported in the ‘CO’ variances

– If Facility Standard Cost is changed from the time that the MO is created, difference will be ‘CO’ variance

• PC&C tailoring question determines if MO standard will be changed when Facility standard is changed

Labor Variances

• VSUS/VRUS – Setup and Run Labor Efficiency Variances– If the actual time charged to the job is different from the

standard, difference will be charged to the ‘US’ variance– If a Time Basis Code was used in the operation (Run

Labor), XA will calculate the hours per piece – Actual Run Hours will be divided by the quantity

complete plus quantity scrapped to determine per piece actual time

VSUS

VRUS

VSCO

VRCO

‘T’ Accounts – Labor Variances

Inventory WIP

IP

IU


IX

Earned Labor

LSSA

LRSA

Overhead Absorption

LOHD

RM

Material Variances

VMCS

VMUS

Labor Variances

VSCO

VRUS

VRCO

RM

VMCS= .01

VMUS= 12.32

VSCO= 27.31

VRUS=105.44

IP

IU

IX

LSSA

LRSA

LOHD

VRCO = 19.22

Overhead Variances

• VOCO – Overhead Cost Variance– If the overhead rate/percent changes from the time that

the MO was created to the time that labor was charged to the operations, difference will be reported in the VOCO transactions

– PC&C tailoring question determines if facility rates in the MO are updated when the facility costs are changed

– Machine variances (if machine time is entered in the routing) will be included in the Overhead Variances

Overhead Variances

• VOUS – Overhead Efficiency Variances– Setup and Run Labor Efficiency variances will be

extended by the overhead rate/percent (depending on the Overhead Code of the facility)

– If Machine times are entered in the routing, Machine cost variances will be included with the overhead variances

VOUSVOCO

‘T’ Accounts – Overhead Variances

Inventory WIP

IP

IUIP

IU

IX

LSSA

LRSA

LOHD

VRCO = 29.22


IX

Earned Labor

LSSA

LRSA

Overhead Absorption

LOHD

RM

Material Variances

VMCS

VMUS

Labor Variances

VSCO

VRUS

VRCO

Overhead Variances

VOCO

VOUS

RM

VMCS= .01

VMUS= 12.32

VSCO= 27.31

VRUS=105.44

VOCO= 29.91

VOUS=390.15

Order Closeout Variance

• Cost, Efficiency and Usage Variances are totaled

• Sum of these variances are subtracted from the total variance as calculated by the ‘Order Closeout Accounting Detail’ report

• Difference is the VCLO – Order Close Variance

Calculation

VCLO


Inventory WIP

IP

IUIP

IU

IX

LSSA

LRSA

LOHD

VRCO = 29.22


IX

Earned Labor

LSSA

LRSA

Overhead Absorption

LOHD

RM

Material Variances

VMCS

VMUS

VCLO

Labor Variances

VSCO

VRUS

VRCO

Overhead Variances

VOCO

VOUS

RM

VMCS= .01

VMUS= 12.32

VSCO= 27.31

VRUS=105.44

VOCO= 29.91

VOUS=390.15

VCLO= 53.50

Potential Reasons for VCLO

• VCLO records ‘unexplainable’ (by XA) variances

• Incorrect/missing cost for item ordered (i.e. cost on RM is wrong)

• Unplanned Issue (IU) transactions where ‘Standard Quantity’ is entered

• Operation added to MO

• Scrap

Scrap

• Scrap costs can be collected via – The SM transaction in Inventory Management – The SCRP transaction in PC&C

• SM transaction is valued at the finished item’s standard cost

• SCRP transaction is valued at the pro-rated cost of scrap at the operation where scrap was reported

• Cost of Scrap is included in MO Closeout Total Cost so it needs to be booked to the variance account to remove scrap from variance

Cost Total Sheet

Pro-rated cost of Scrap (SCRP)


Inventory WIP

IP

IUIP

IU

IX

LSSA

LRSA

LOHD

VRCO = 29.22


IX

Earned Labor

LSSA

LRSA

Overhead Absorption

LOHD

RM

Material Variances

VMCS

VMUS

VCLO

Labor Variances

VSCO

VRUS

VRCO

Overhead Variances

VOCO

VOUS

RM

VMCS= .01

VMUS= 12.32

VSCO= 27.31

VRUS=105.44

VOCO= 29.91

VOUS=390.15

VCLO= 53.50

Scrap

SCRPSCRP

Rules

• Individual rules for each variance type do not have to be created

• GL rules for transactions with asterisks in them are ‘wildcard’ transactions and can be used to create a single rule for multiple transactions

• For example, all MO variances could be booked to the same account with a rule for ‘V***’

Variance Transactions

Summary

• MO Variances provide a diagnostic tool to review the accuracy of the bill of material, material movement transactions and routing standard times

• By analyzing the orders with the largest variances (favorable or unfavorable) and correcting the condition that caused them will make a company’s data/information much stronger!

Manufacturing Order Variances Understanding the Variances Created during MO Close and Purge.

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