Inventory Costing October 17th, 2018 Presented by: Bryan Dehler

Agenda: Overview of Inventory Item Costs Auditing Inventory Production Variance Labor and Overhead Q&A

Agenda: Overview of Inventory Item Costs Auditing Inventory Production Variance Labor and Overhead Q&A

Inventory Overview Know how the systems tracks cost Be confident in the COGS True costs of goods True margins

Inventory Overview So much happening on the back end Journal Entries with almost every inventory transaction Look at Journal Entries Don’t forget to “Preview” first!

Agenda: Overview of Inventory Item Costs Auditing Inventory Production Variance Labor and Overhead Q&A

Purchasing Items Make sure prices are correct on GRPO and A/P Invoice Price List = Last Purchase Price

Valuation Methods Moving Average Standard FIFO Serial/Batch Costing

Freight Rolls up into cost of inventory items on Invoice Distribution method Landed Cost for third party charges

Agenda: Overview of Inventory Item Costs Auditing Inventory Production Variance Labor and Overhead Q&A

Auditing Your Inventory Inventory Audit Report Inventory in Warehouse Report Inventory Analysis Tool Get Data Out class this afternoon! Inventory Revaluation Inventory Counting/Posting Bonus/Side Note: Item Master Utility – run at least quarterly!

Inventory Counting Separate counts by: Save as Drafts Item Group Warehouse Counter Save as Drafts Count date determines “In-Whse Qty” Pro Tip: Choose batches from Count sheet Plug: Warehouse Management Class

Inventory Still Causing Troubles? Get the whole team on board Utilitize Our Support Pages! A Quick Glance at the Health of Your Inventory (Webinar) Attend “Health Check” class Thursday afternoon for more detailed help

Production Variance is next – Questions?

Agenda: Overview of Inventory Item Costs Auditing Inventory Production Variance Labor and Overhead Q&A

Production Variance – Planned vs Actual Scenario: Recipe calls for 30 BBLs of Wort. Batch #XYZ only yields 28 BBLs with the same amount of raw materials. 30 BBLs cost $2000 ($66.67 per BBL). Should the 28 BBLs still be $66.67/BBL or higher? It should be $71.43 per BBL now. But the system assumes the batch of beer has a lesser value ($1,866.67). Close the Production Order while the Wort is still in stock to adjust the cost.

Production Variance – Planned vs Actual Scenario: Recipe calls for 30 BBL batch. Batch #XYZ only yields 28 BBLs with the same amount of raw materials. Here we close the production order while Wort is still in stock.

Production Variance – Planned vs Actual Scenario: Recipe calls for 30 BBL batch. Batch #XYZ only yields 28 BBLs with the same amount of raw materials. Here we close the production order at a later time.

CLOSE YOUR PRODUCTION ORDERS! Production Variance – Planned vs Actual CLOSE YOUR PRODUCTION ORDERS!

Production Variance – Accounting for Loss Scenario: There is a 10% loss built in at the Bright Beer step. Plan to go from 30 BBLs of Green Beer to 27 BBLs of Bright Beer.

Production Variance – Accounting for Loss Scenario: There is a 10% loss built in at the Bright Beer step. Plan to go from 30 BBLs of Green Beer to 27 BBLs of Bright Beer. That is exactly what happens here.

Production Variance – Accounting for Loss Scenario: There is a 10% loss built in at the Bright Beer step. Plan to go from 30 BBLs of Green Beer to 27 BBLs of Bright Beer. Here we actually yield 29 BBLs of Bright Beer.

Production Variance – Accounting for Loss Scenario: There is a 10% loss built in at the Bright Beer step. Plan to go from 30 BBLs of Green Beer to 27 BBLs of Bright Beer. Here we actually yield 29 BBLs of Bright Beer. What if we forget the close the production order before packaging?

HAVE I SAID CLOSE YOUR PRODUCTION ORDERS YET? Production Variance – Planned vs Actual HAVE I SAID CLOSE YOUR PRODUCTION ORDERS YET?

Fixing a Mistake/Large Variance Where did the variance occur? Where is the batch now? Inventory Audit Report From Inventory Reports From Item Master Data Batch Transaction Report From Issue/Receipt WIP Variance G/L Analysis Financials > Financial Reports > Orchestrated Reports > WIP Variance G/L Analysis

Fixing a Mistake/Large Variance Avoid allowing the batch to go too far Alert for Variances over 25%

Fixing a Mistake/Large Variance Where did the variance occur? Where is that batch now? Sold (Invoice)? Finished Good? Wort? Green Beer? Bright Beer? Sold (Invoice)? Wort? Finished Good? Disassemble (only the Wort PdO w/ Variance) Disassemble Disassemble Sold (Invoice)? Disassemble (both) Recreate PdO and correct variance (express correctly) Cancel (all) Recreate and redo everything undone

Alternative Route What if this is found 2 months late and posting period is locked? What if the batch was sold on hundreds of orders? You Can: Revalue the inventory Journal Entry to correct outstanding balances These options are explained on our support site. THESE SHOULD BE USED AS A LAST RESORT.

Labor & Overhead is next – Take 5! When we get back: Non-inventory costs Creating the items Adding to BoMs Invoicing Labor & Overhead Processing production w/ Labor & Overhead

Agenda: Overview of Inventory Item Costs Auditing Inventory Production Variance Labor and Overhead Q&A

Labor & Overhead – Common Costs Utilities Labor Yeast Mobile Canning Fee Bottle printing service Others?

Finding Out Costs Find the per unit cost (BBLs, gallons, cases, etc) Example: 1,000 BBLs brewed last month; $10,000 on production labor. $10,000/1,000 BBL = $10/BBL This will be your standard cost for the non-inventory Labor item.

Finding Out Costs with Orchestrated Reports Monthly Production Volume TTB Report

Finding Out Costs with Orchestrated Reports P&L Journal Transactions Report

Creating the Items - Practice Example Item Code: EX5000 Example Item Name: Overhead Expense: General Item Group: OH General Non-Inventory Non-Sales Non-Purchase Item Level - G/L Determination Assign a Warehouse Form Settings > check off “Expense Account” and “Purchase Credit Account” Choose a clearing account – typically Liability Standard Cost (assign a cost)

Creating the Items - Practice

Book the Expense A/P Service Invoice Journal Entry **This is the same G/L account assigned to the General Overhead item.

Add Item to BOM Recommendation is Bright Beer If splitting the cost over multiple BOMs, make sure to not go over 1 Ex: Wort - .25 Green Beer - .5 Bright Beer - .25

Process Production

Process Production After Expressing production, value is added to bright beer from general overhead item

Reassess the Item Cost View variance in clearing G/L Account Adjust cost of Non-inventory item if necessary

Agenda: Overview of Inventory Item Costs Auditing Inventory Production Variance Labor and Overhead Q&A

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