Accounting and Localization mailing list archives

accounting@mail.odoo.com

Avatar

RE: FW: Manufacturing accounting

by
Solnet Solutions Limited, Kevin McMenamin
- 2017年07月19日 15時03分45秒

You could do and we are doing something similar for another customer around finished goods purchases. You need to think about the rules for what happens when the manufactured product has been sold (full/partially) by the end of the period. Also, the monthly under/overrecovery could just be timing – e.g. a seasonal business – what I would do is if I thought any under-recovery was timing only I would hold in an account on the balance sheet, but if it had to be written off against profit then that meant standard costs needed reviewing. I think this is a more controlled approach that trying to dynamically update average costs from manufacturing

 

From: Agustín Cruz [mailto:atin81@gmail.com]
Sent: Thursday, July 20, 2017 4:26 AM
To: Community: Accounting and Finance <expert-finance@mail.odoo.com>
Subject: Re: FW: Manufacturing accounting

 

What about distributing manufacturing cost (labour, electricity, etc) at the end of the period between total manufactured products on period and recompute average cost for each product, I mean do a similar process than purchase landing cost but applied for manufactured products.

From an accountant point of view, do you think it is a viable process for keep up to date the product cost?

I'm asking because the development for a module that implement the feature that describe above very briefly was requested from two different manufacturing customers recently.

 

El 18/07/17 a las 15:05, Kevin McMenamin escribió:

Also variations are a gross manufacturing level (versus individual job) cannot be managed through average cost. Typically manufacturing organisations set a recovery rate on labour or equipment for overheads. But this recovery is then dependent on the volumes being produced so you end up with an over/under recovery situation. This is why you need a manufacturing chart that rolls up to a cost of sale line. I am surprised that V10 Odoo manufacturing module does not have this, fully integrated with financial reporting – seems a basic requirement to me

 

From: Graeme Gellatly [mailto:gdgellatly@gmail.com]
Sent: Wednesday, July 19, 2017 7:11 AM
To: Community: Accounting and Finance <expert-finance@mail.odoo.com>
Subject: Re: FW: Manufacturing accounting

 

Because by the time you know the actual costs its too late - is a case of timeliness vs accuracy.   Its in a way analogous to why we need FX gain/loss accounts.  However, my gut feel is one day you will be right.
Well thats the main reason, there is another half dozen or so for why manufactures account for variance like this.  Pays to remember that we are not talking abount GPFRs under a standard here exclusively but also managment accounting systems that have often instant reporting requirements.

 

On Wed, Jul 19, 2017 at 3:25 AM, Agustín Cruz <atin81@gmail.com> wrote:

I don't know if this question is out of scope but, could you mind explain me why do you manage cost variations are also managed in the manufacturing ledger rather than directly changing average cost? I'm an engineer not an accountant, I have learned by myself about accounting in order to be able to help my customers, but for me is more intuitive to update average cost with any cost variation.

By the way, you can use this module from akertion: https://www.odoo.com/apps/modules/7.0/mrp_average_cost/ to update average cost for product on manufacturing orders. It's v7.0 but migration to v10.0 will be easy as module is very simple.

 

El 18/07/17 a las 02:05, Kevin McMenamin escribió:

Thanks for this. This covers cost variations but there are also volume variations – using standard cost (usual for manufacturing) then if the volume is below budget/expected you end up with an under-recovery. In  my experience, manufacturing firms want to see that in a manufacturing account that then affects the P&L. Also, assuming standard costs, cost variations are also managed in the manufacturing ledger rather than directly changing average cost (and I don’t think average cost updates from manufacturing is supported in Odoo?)

 

I’ll keep thinking

 

From: Jordi Ballester Alomar [mailto:jordi.ballester@eficent.com]
Sent: Tuesday, July 18, 2017 9:46 AM
To: Community: Accounting and Finance <expert-finance@mail.odoo.com>
Subject: Re: FW: Manufacturing accounting

 

Kevin,

 

The best practices in manufacturing accounting suggest that costs for direct labor, outside services and overhead portion allocated to production orders should be accrued at the time of manufacturing, and the accrual should be removed once the true labor costs (from pay slips), or actual applied overhead have been identified.

 

Assuming the following cost breakdown for a finished product:

- Components: $10

- Labor: $10

- Outside Services: $10

The cost of the finished product is considered to be $30

 

When a manufacturing order is completed the following would occur

 

Consume components:

Dr. Work In Progress: $10 

Cr. Inventory Raw Materials: $10

 

Complete work order (internal):

Dr. Work In Progress: $10

Cr. Production Labor: $10

 

Complete work order (external):

Dr. Work In Progress: $10

Cr. Outside Services: $10

 

Produce finished product

Dr. Inventory Raw Materials: $30

Cr. Work In Progress: $30 

 

Inline
                              image 1\

When the employee payslips are entered at end of month:

Dr. Production Labor: $12

Cr. Direct Labor Wages Payable: $12

 

In order to bring an overall balance to Production Labor, a Production Labor Variances account would be required, generating the need to create the following write-off journal entry at the end of the period:

Dr.  Direct Labor Variances $2

Cr.  Production Labor: $2

 

Inline
                              image 2

 

When the supplier invoice for outside services is entered:

Dr. Outside Services for Production: $11

Cr. Accounts Payable: $11

 

In order to bring an overall balance to Outside Services for Production, an Outside Services for Production Variance account would be required, generating the need to create the following write-off journal entry at the end of the period:

Dr.  Outside Services for Production Variances $1

Cr.  Outside Services for Production: $1

 

Inline
                              image 3

 

 

Under this  schema, if average/real price is to be used for components, the manufacture order should determine the total costs of manufacturing (including average/real price for products, standard labor cost, standard outside services, and standard overhead applied to production) and update the average/real cost of the finished product once the manufacturing order has been completed. 

 

 

 

On Mon, Jul 17, 2017 at 10:15 PM, Kevin McMenamin <Kevin.McMenamin@solnet.co.nz> wrote:

I have a new client who will be using manufacturing accounting iv V9e and I am interested in any feedback/comments the community may have around set up.

 

Many (many) years ago when I was a CFO for a manufacturing business our P&L structure looked like

 

Sales                                                                                                      xxx

Cost of Sales

Purchases                                                                                           xxx

Freight                                                                                                  xxx

Manufacturing Under/Over-recovery                                      xxx

 

Gross Profit                                                                                        xxx

 

Then the chart of accounts had a full structure for the manufacturing operations where the top level was the under/over-recovery, so something like

 

Output at standard cost                                                                xxx

Direct Costs

Labour                                                                                                  xxx

Materials                                                                                             xxx

Freight                                                                                                  xxx

 

Indirect Costs

Rent                                                                                                      xxx

Rates                                                                                                     xxx

Salaries                                                                                                 xxx

 

Etc

 

 

I am struggling to see how this would be set up in V9 as there are no longer view accounts to create a structure – do I need to add the extra categories in myself and extend the standard financial reports to cater for this? If so, has anyone done as I can’t see any obvious modules that do this

 

Thanks

 

 

Kevin McMenamin

ERP Capability Manager

 

Mobile  +64 22 651 3753

Phone  +64 9 977 5805

Email   kevin.mcmenamin@solnet.co.nz

 

Solnet Solutions Limited
Level 19, Crombie Lockwood

191 Queen Street, Auckland 1010
PO Box 6619, Auckland 1141

 

www.solnet.co.nz 

 

Attention: This email may contain information intended for the sole use of the original recipient. Please respect this when sharing or disclosing this email's contents with any third party. If you believe you have received this email in error, please delete it and notify the sender or postmaster@solnetsolutions.co.nz as soon as possible. The content of this email does not necessarily reflect the views of Solnet Solutions Ltd.

Attention: This email may contain information intended for the sole use of the original recipient. Please respect this when sharing or disclosing this email's contents with any third party. If you believe you have received this email in error, please delete it and notify the sender or postmaster@solnetsolutions.co.nz as soon as possible. The content of this email does not necessarily reflect the views of Solnet Solutions Ltd.

_______________________________________________
Mailing-List: https://www.odoo.com/groups/community-accounting-and-finance-61
Post to: mailto:expert-finance@mail.odoo.com
Unsubscribe: https://www.odoo.com/groups?unsubscribe



 

--

Attention: This email may contain information intended for the sole use of the original recipient. Please respect this when sharing or disclosing this email's contents with any third party. If you believe you have received this email in error, please delete it and notify the sender or postmaster@solnetsolutions.co.nz as soon as possible. The content of this email does not necessarily reflect the views of Solnet Solutions Ltd.

 

_______________________________________________
Mailing-List: https://www.odoo.com/groups/community-accounting-and-finance-61
Post to: mailto:expert-finance@mail.odoo.com
Unsubscribe: https://www.odoo.com/groups?unsubscribe

 

Attention: This email may contain information intended for the sole use of the original recipient. Please respect this when sharing or disclosing this email's contents with any third party. If you believe you have received this email in error, please delete it and notify the sender or postmaster@solnetsolutions.co.nz as soon as possible. The content of this email does not necessarily reflect the views of Solnet Solutions Ltd.

 

Attention: This email may contain information intended for the sole use of the original recipient. Please respect this when sharing or disclosing this email's contents with any third party. If you believe you have received this email in error, please delete it and notify the sender or postmaster@solnetsolutions.co.nz as soon as possible. The content of this email does not necessarily reflect the views of Solnet Solutions Ltd.

Reference