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DavidB

If I understand it correctly, when a (manufactured, standard costed) item includes labour, the raw material component costs are moved to WIP and the FG (standard) costs are moved out of WIP, so the difference is the labour/overhead that I need to adjust periodically.

But, I want to periodically perform a standard cost variance analysis - to determine if my standard costs are accurate.  And where they aren't, I need to adjust them. (my RM can fluctuate in cost, so the analysis is important).

If I periodically create a journal entry to clear the WIP credit balance as absorbed labour, then I'm making my standard cost variance equal zero.

Does this mean that I cannot validate my standard costs, except en-mass at the end of a period, when comparing them to factory and labour costs as a whole?

e.g., Labour/OH costs for the month are $10k, and I have a Cr in WIP for $9k, therefore the total of the std costs for the items that I produced on MOs during the month have a $1k shortfall in their Std Costs.

This algebra isn't difficult until you know that we produce varying items with costs that vary from $10 to $1000.

Ugh.

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Jodie Standish
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Hi David,

Just curious if you found a fix to this issue?  We are currently setting up Odoo in our food manufacturing business and I want to use Standard costing but it doesn't seem to work in the same way it does in other ERP programs I have used.

Thanks


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DavidB
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Hi Jodie-

We have defined a process that is included in the accounting monthend process that looks at the manufacturing workcenter operations (how many were performed) and their respective costs to get a standard labour and overhead absorbance for the month. We adjust that number for the balance of the WIP account and make an entry to an absorbance account to clear the WIP and start each month fresh. For accounting it's a couple of minutes, so no biggie.

I'm surprised that there isn't an option to have this posted automagically, or even to have it processed similar to the sales tax closing entry, because the math is easy.

It does mean that we have to use our knowledge of our operations to give us confidence that the relative costs of our cost centers is accurate, but after that, the WIP adjustment trend tells if the overall costs / plant efficiency is over or under , depending on the delta between the anticipated adjustment and the balance of the WIP account each month.