Reply To: Production Material Variances

  • Tracy Hanson

    March 22, 2023 at 3:57 pm

    @amandamayer the components we are looking at in this scenario are not finished goods. these are mostly subassembly level items that are standard costed. However, we use BOM versions to track changes to the BOM (i.e. we removed a component because it was no longer needed or we changed a component because the original was obsoleted). What we are finding is that our material variances are not true consumption variances, they are now a case of standard cost vs bom version cost – so a cost variance.

    The system is not looking at the BOM that we set the standard based on. If you look at our stats window on a prod order, the standard cost = the cost of the bom version that we set the cost at (lets say 1,000). but the expected cost = the cost of the current bom (lets say 1,200). when there are truly no consumption variances (based on the current bom version, not what we set the standard on), the material variance that is being recorded is equal to the standard cost – the expected cost (in the example, it would post 200 unfavorable). In the event that there is a true consumption variance (lets say the cost of that component was 9.00 and it was not used), the system will then post a material variance of 191. Without manually digging into the each production order, there seems to be no visible way to determine if that material variance is a true consumption variance or if it is a cost variance.

    what is best practice when using bom versions like this? our policy is to only set our standard costing once a year. but it seems the only way to truly see our consumption variance would be to reset the standard every time. Unless there is a way to tell the system to post cost variances different than consumption variances?

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