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Re: Production Costing

El Aleman, David Arnold
- 01/09/2014 12:25:34
Hi Hardianto

    - Cost price of manufactured product to be set-up with stimated cost (material, & process). So every time this product is manufactured, there will be stock journal decreasing the raw material inventory at the cost price of RM, and stock journal increasing the Finished Good at the cost price of stimated cost.
Look, I don't understand why analytical fraction doesn't aknowledge, that actual costing on raw material is already a fact. Including actual ammounts consumed. So for raw material we need no extra development at all. (If we are not talking of RFID measurments)

    - Bulid an analytic account for each product to know if  there is any deviation between real cost and stmated cost (this is what Ana trying to say, isn't it?)
​It is still not clear to me, which cost concepts shoulg go on those analytics (overhead, direct, raw material)​. I think analytics are there so you can set up a more detailed or different structure (of anything) than you have on your CoA. Those are not even competing concepts!!!!!!!!!!!!! :) If you have everything set on your CoA, you can think about how to set it differently on one or more analytical charts in order to get different kind of information/detail.

    - Now, if there is any deviation, how we proceed? As David says, direct cost is accounted to P&L, how we can bring these cost back to inventory? I'm also wondering, while we take into account process cost in finished-good stimated cost, isn't we take this direct cost twice? (first in stock journal FG, secondly in expense journal direct cost). 
​Thanks a lot for having understood my concern :) The only thing that is missing - and it is very, very simple - ​is a more accurate allocation of direct costs. Let's make a small glossary (Odoo VERSION EIGHT):
  • Raw Material Costs : 
    • Costs of products consumed in the BOM
    • are actual, when you set your costing and valuation method to automated/realtime AND do register the actually consumed materials during production (there is a popup which you asks, how much material you actually want to consume) 
    • this concept is ready to be replayed on analytical accounts, if you need another scope of information
  • Direct costs (labor and deprecitaion)
    • These costs can be set on an operation/work center (see my remarks about inconsistency of this existing concepts further up in this discussion)
    • These costs do not have any real connection to the P&L account, you just set them out of nothing, and the tendency is towards analytical
    • What is missing is a connectioin which redistributes the costs we have on the P&L onto the work order (not the work center! - as it is right now) - see my detailed suggestion
    • If this basic CoA set up is done, we can think about replaying it onto analytical accounts, if we need a mored detailed or different scope of information
  • Overhead Costs (Workshop supervisor wage)
    • Can have different levels L1-L9 or any arbitrary segmentation. Such as: Workshop supervisor wages (lover level), CEO wages (highest level) (read: highest level of indirectness)
    • These costs can never be accurtal attributed to a product, it is always based on some kind of arbitrary distributino, as Ana also aknowledged. There are mabye some 10-20 different management costing methids arround there to allocate those costs (among those ABC costing). But somtimes you do target costing to determine costs, so you inverse the source-effect logic. What I want to say: there is no sane way of automating this or supporting this programmatically. If you do that you would have a method lock-in. The best way so far in this discussion is the handling that Ray suggested: Distribute those costs - based on experience and approximation - on a spreadsheet outside of odo onto some "phantom products", as he called it and attribute thos phantom products unites to your production (for example following ABC costing logic)
    • This concept can be easly replayed on analytical accounts to set a different view, as it behaves like raw material costs.
​@ Ana, maybe we can really have a chat, or you read about this glossary over and over again, untill you understand it fully. And if you have questions, please ask them. If you don't have questions please generate them, until you fully understand, what it is written above.

Saludos Cordiales
David Arnold