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 Uncontrolled Floorstock Inventory WIP IX IP IU IP IU IX

‘T’ Accounts - Labor Uncontrolled Floorstock Inventory WIP IX IP IU IP IU IX LSSA LRSA Earned Labor LSSA LRSA

‘T’ Accounts - Overhead Uncontrolled Floorstock Inventory WIP IX IP IU IP IU IX LSSA LRSA LOHD Overhead Absorption Earned Labor LOHD LSSA LRSA

‘T’ Accounts – Material Receipt Uncontrolled Floorstock Inventory WIP IX IP IU IP IU IX LSSA LRSA LOHD RM RM Overhead Absorption Earned Labor LOHD LSSA LRSA

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

VMUS VMCS

‘T’ Accounts – Material Variances Uncontrolled Floorstock Inventory WIP IX IP IU IP IU IX LSSA LRSA LOHD RM VMCS= .01 VMUS= 12.32 RM Overhead Absorption Earned Labor LOHD LSSA LRSA 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 Uncontrolled Floorstock Inventory WIP IX IP IU IP IU IX LSSA LRSA LOHD VRCO = 19.22 RM VMCS= .01 VMUS= 12.32 VSCO= 27.31 VRUS=105.44 RM Overhead Absorption Earned Labor LOHD LSSA LRSA Material Variances Labor Variances VMCS VMUS VSCO VRUS VRCO

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

VOUS VOCO

‘T’ Accounts – Overhead Variances Uncontrolled Floorstock Inventory WIP IX IP IU IP IU IX LSSA LRSA LOHD VRCO = 29.22 RM VMCS= .01 VMUS= 12.32 VSCO= 27.31 VRUS=105.44 VOCO= 29.91 VOUS=390.15 RM Overhead Absorption Earned Labor LOHD LSSA LRSA Material Variances Labor Variances Overhead Variances VOCO VOUS VMCS VMUS VSCO VRUS VRCO

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

‘T’ Accounts – Overhead Variances Uncontrolled Floorstock Inventory WIP IX IP IU IP IU IX LSSA LRSA LOHD VRCO = 29.22 RM VMCS= .01 VMUS= 12.32 VSCO= 27.31 VRUS=105.44 VOCO= 29.91 VOUS=390.15 VCLO= 53.50 RM Overhead Absorption Earned Labor LOHD LSSA LRSA Material Variances Labor Variances Overhead Variances VOCO VOUS VMCS VMUS VCLO VSCO VRUS VRCO

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)

‘T’ Accounts – Overhead Variances Uncontrolled Floorstock Inventory WIP IX IP IU IP IU IX LSSA LRSA LOHD VRCO = 29.22 RM VMCS= .01 VMUS= 12.32 VSCO= 27.31 VRUS=105.44 VOCO= 29.91 VOUS=390.15 VCLO= 53.50 RM Overhead Absorption Earned Labor LOHD LSSA LRSA Material Variances Labor Variances Overhead Variances Scrap VOCO VOUS VMCS VMUS VCLO SCRP SCRP VSCO VRUS VRCO

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

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!