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

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

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

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

5. 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!

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

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

8. Valuation Methods
Moving Average
Standard
FIFO
Serial/Batch Costing

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

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

11. 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!

12. 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

13. 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

14. Production Variance is next – Questions?

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

16. 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.

17. 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.

18. 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.

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

20. 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.

21. 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.

22. 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.

23. 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?

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

25. 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

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

27. 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

28. 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.

29. 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

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

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

32. 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.

33. Finding Out Costs with Orchestrated Reports
Monthly Production Volume
TTB Report

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

35. 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)

36. Creating the Items - Practice

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

38. 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

39. Process Production

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

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

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

43. Thank You! Orchestra Software 1400 NW Compton Dr. Suite 210
Beaverton, OR 97006 P:
Web: support.orchestrated.com