BaanERP 5.

0c Manufacturing

Production Order Costing

Module Procedure

UP127A US

Document information
Document Document code Document group Document title Application/Package Edition Date : UP127A US : User Documentation : Production Order Costing : BaanERP 5.0c Manufacturing :A : December 1999

Copyright 1999 Baan Development B.V. All rights reserved The information in this document is subject to change without notice. No part of this document may be reproduced, stored or transmitted in any form or by any means, electronic or mechanical, for any purpose, without the express written permission of Baan Development B.V. Baan Development B.V. assumes no liability for any damages incurred, directly or indirectly, from any errors, omissions or discrepancies between the software and the information contained in this document.

Production Order Costing

Table of contents
1. 1.1 1.2 1.3 1.4 2. 2.1 2.2 2.3 2.4 3. 4. 5. 5.1 5.2 5.3 5.4 6. The Production Order Costing (CST) module in BaanERP The CST concept as applied in BaanERP CSTs functional procedures The modules related to CST The functionality of CSTs business objects The procedure to close a production order How to close a production order Financial Results Calculating estimated end-item unit-costs Comparing actual and estimated costs The subprocedure to manually issue material The procedure to archive production orders and production costs Parameters that affect CST Production results by work center The moment of freezing estimated production costs Inventory valuation method Multiple currencies Production Order Statuses 1-1 1-1 1-2 1-2 1-3 2-1 2-1 2-3 2-4 2-5 3-1 4-1 5-1 5-1 5-1 5-2 5-2 6-1

Production Order Costing i

Production Order Costing ii

About this document

Read this document to get an overview of the Production Order Costing modules functionality and to learn more about the functional procedures that are related to CST. You need no detailed knowledge of the BaanERP software to read this document. However, you are more likely to understand the contents if you are familiar with:
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The overall structure of packages, modules, and sessions within the BaanERP software. The Shop Floor Control (SFC) module procedure (UP133A US). The general business procedures used in everyday business practice. The basic concepts of enterprise resource planning.

For detailed descriptions of the modules sessions, refer to BaanERPs comprehensive online Help.
Note:

If you start BaanERP sessions with the Menu Browser, you will find the sessions in the Production Order Costing (CST) section under the Shop Floor Control (SFC) module. To use this document Read Chapter 1, The Production Order Costing (CST) module in BaanERP, if you want to know more about:
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The modules functionality. The relationship of the module with other modules. The functionality of the modules business objects.

Read: Chapter 2, The procedure to close a production order. Chapter 3, The sub procedure to manually issue material. Chapter 4, The procedure to archive production orders and production costs if you want to know more about:
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The sessions in the procedures. The results of the procedures. The sessions that are related to the procedures. The optional procedures that are related to the procedures.

Production Order Costing 1

Acronyms used in this document

Acronym ACP ACR BOM CAT CF COM CP CPR CST FBS FIN FST GLD HRA IBD IPD PCS PUR QM ROU RPT SCS SFC SLS TI TRP WH WIP Meaning Accounts Payable Accounts Receivable Bills of Material Cost Accounting BaanERP Configurator Common Data BaanERP Enterprise Planning Cost Accounting Production Order Costing Financial Budget System Finance (in Common Data) Financial Statements General Ledger Hours Accounting Item Base Data Item Production Data Project Control System Purchase BaanERP Quality Management Routing Repetitive Manufacturing Supply Chain Solution Shop Floor Control Sales BaanERP Manufacturing Tools Requirement Planning BaanERP Warehousing Work in Process

Legend
ticst0201m000
Close Production Orders

Mandatory session Optional session Package Module The module that is described in this module procedure

ticst0520m000 WIP transfers TI SFC

CST

Production Order Costing 2

1.

The Production Order Costing (CST) module in BaanERP

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The CST concept as applied in BaanERP. CSTs functional procedures. The modules related to CST. The functionality of CSTs business objects.

1.1

The CST concept as applied in BaanERP

In order to control costs, you must know:
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What your costs are for each process that you carry out. How those actual costs compare with estimated (planned) costs.

CST is used to calculate the production results for each closed production order, and to carry out calculations and produce reports that compare the production results with planned costs of production orders. Figure 1 shows how the module is positioned in BaanERP. The diagram shows the packages and modules that are closely functionally-related to CST. For a diagram that shows the information flow between modules, see Figure 2.

Coordination and planning CF CP QM HRA RPT PCS CST CPR FBS ACR IPD IBD BOM ROU FIN Basic data SLS Sales and Purchase PUR ACP SFC GLD FST CAT Finance WH TRP Baan SCS

Production

Figure 1 Position of CST in BaanERP

Production Order Costing 1-1

The Production Order Costing (CST) module in BaanERP

1.2

CSTs functional procedures

Production Order Costing (CST) is a part of Shop Floor Control (SFC), and so the procedures in CST can really be seen as sub procedures of the production order procedure, which is described in the SFC module procedure (UP133A US). However, the following procedures are described more fully in this module procedure:
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The procedure to close a production order. Closing a production order results in the calculation of the production results and the posting of the financial results to the General Ledger (GLD). You can also calculate end item unit costs. The subprocedure to issue material. The procedure to archive production orders and production costs.

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1.3

The modules related to CST

Figure 2 shows the modules that are related to CST. The arrows represent information flows.

WH PUR SFC CST FIN HRA ROU IPD CPR BOM GLD

Figure 2 Modules related to CST

The main links with CST are to the General Ledger (GLD) in BaanERP Finance, data that relates to Finance (FIN) in the BaanERP Common Data package, and in Shop Floor Control (SFC). When production orders (from SFC) are closed in CST, the financial results are calculated and posted to GLD. Before orders are closed, CST checks that a number of conditions are met, including that:
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Hours are posted (HRA). Subcontracting orders are processed (PUR). Materials are issued and warehouse orders are completed (WH). Backflushing is carried out (SFC, HRA, WH).

Production Order Costing 1-2

The Production Order Costing (CST) module in BaanERP

Furthermore, a close relationship exists between CST and the BaanERP Warehousing (WH) package. The following issues are handled:
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The material to issue. The WIP transfers (intra company). The financial postings related to the issue and the receipt of materials. The update of the Moving Average Unit Cost (MAUC) history in case of Fixed Transfer Pricing (FTP). The update of the inventory value in case of actual costing.

When CST is used to compare estimated hour costs and material costs with actual costs, the other modules shown in Figure 2 are used:
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Bill of Material (BOM). Routing (ROU). Item Production Data (IPD). Cost Price Calculation (CPR).

1.4

The functionality of CSTs business objects

CST contains the following business objects:
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Production Order Costs. WIP Transactions and Production-Order Closure. Production Order History.

Production Order Costs You can use this business object to produce reports about the following topics:
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Estimated and actual hours costs. Estimated and actual material costs. Estimated and actual end-item unit-costs. Work in Process (WIP) WIP transactions by project, order, and so on Actual production costs. Operation-time deviations from norm values.

WIP Transactions and Production Order Closure Use this mandatory business object to:
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Close production orders, that is to: Calculate and post the financial result (or just simulate the calculation). Update the history of the actual costing and hours accounting. Change the production-order status from Completed to Closed. Reset the status from Closed to Completed. Print the posted production results by work center.

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Production Order Costing 1-3

The Production Order Costing (CST) module in BaanERP

Production Order History This optional business object can be used to:
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Archive production orders and costing history. Print various reports about costing history.

Production Order Costing 1-4

2.

The procedure to close a production order

This chapter describes:

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How to close a production order. The results of closing a production order.

2.1
The procedures results

How to close a production order

When the status of a production order changes from Completed to Closed:
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The financial results are calculated. The results are posted to the general ledger (GLD) in BaanERP Finance and to the Finance (FIN) module in the BaanERP Common Data package. The actual costing and hours accounting history is updated.

You can alter the calculation of financial results with several parameters, including (see Section 2.3):
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Whether the WIP is calculated by work center. The moment of freezing estimated production costs. Inventory valuation method. Multiple currencies.

Production Order Costing 2-1

The procedure to close a production order

Figure 3 shows the steps in the procedure.

Production-Order Procedure in SFC

Report Operations Completed (tisfc0530m000)

1a

Cancel Production Orders (tisfc0203m000)

3 5

Reset Production Order Status (ticst0203m000)

4

Report Orders Completed (tisfc0520m000)

Close Production Orders (ticst0201m000)

Archive Production Orders (ticst0250m000)

Archive Costing History (ticst2250m000)

Figure 3 To close a production order

The procedure consists of the following steps: Step 1 Production-Order Procedure in SFC The procedure to close a production order in CST can be seen as part of the production-order procedure. For more information about the entire procedure, see the SFC module procedure (UP133A US). Step 1a Cancel Production Orders (tisfc0203m000) You can cancel the production order at this point. Step 2 Report Operations Completed (tisfc0530m000) In this optional step, you can report some of the operations completed, rather than the whole order.

Production Order Costing 2-2

The procedure to close a production order

Step 3

Report Orders Completed (tisfc0520m000) You must carry out this step before you can close the production order. The following conditions must also be met before you can carry out step 4:
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Allocated materials are issued. Warehousing orders are completed. Inspection orders are processed. Hours entered are posted. Subcontracting orders are processed. Purchase invoices for subcontracting are approved. Backflushing is performed.

Step 4

Close Production Orders (ticst0201m000) Use this step to set the production-order status to Closed (see Chapter 5). When you close the order, BaanERP:
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Calculates the actual end-item unit-cost. Calculates the financial results of the production order (see Section 2.2 for more information). Updates the history of the actual costing and hours accounting. Corrects surcharges based on actual costs. Deletes the production-order planning of the order.

You must enter a closing date (which may be in the past) for the production order. You can also use this step to simulate the results, that is to calculate the financial results, but not to post the calculated results to the general ledger or close the order. You can also post the results without closing the order. Step 5 Reset Production Order Status (ticst0203m000) When a production order is closed, you cannot issue materials or account hours for that order. If you need to assign additional materials or hours to a production order, you must use this step. The status is reset from Closed to Completed (see Chapter 3).

2.2

Financial Results
BaanERP calculates the following results:
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Price variance*: the difference between estimated and actual price of a production order for materials or hours. Price variance = (estimated price actual price) actual quantity.

A variance is a measure of the difference between the estimated (planned or budgeted) costs and the actual costs. You do not have to calculate both price and efficiency variances.

Production Order Costing 2-3

The procedure to close a production order

Efficiency variance: the difference between actual and planned production order quantities for materials or hours. Efficiency variance = (estimated quantity actual quantity) estimated price. Calculation variance: the variance in production results that is not accounted for by price variance and efficiency variance. It can be caused by actions such as altering the fixed transfer price (FTP) of end items, or differences between estimated and actual surcharges. It is used to clear the WIP. Calculation variance = production results - price variance - efficiency variance.

2.3

Calculating estimated end-item unit-costs

The end-item unit-cost is also known as the order cost-price. There are three circumstances under which BaanERP estimates the end-item unit costs:
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When you change the order status (depending on the value of the Moment of Freezing Estimated Unit Costs field in the Production Orders (tisfc0101s000) session. When you use the Calculate Estimated End Item Unit Costs (ticst0210m000) session. When you use the Print Differences between Frozen and Current Estimated Costs (ticst0411m000) session. When you use this session, the costs are not stored.

When BaanERP estimates the end-item unit costs, it calculates the following costs:
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Operations (that is, hours). Baan uses all estimated data about production times, and man and machine hours to calculate the cost per end-item unit for operations based on total costs of employees, machines and overheads. Materials costs. Baan uses the standard costs price to calculate the material costs for each component. End-item surcharges. You define which surcharges you will use for materials and operations in the Cost Price Calculation (CPR) module. WIP transfer prices. This is only calculated if the Production Results per Work Center check box is selected and the Transfer WIP Method is other than Not Implemented (both in the SFC Parameters (tisfc0100s000) session).

Production Order Costing 2-4

The procedure to close a production order

When you have calculated the end-item costs, you can display the results in the following sessions:
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End Item Unit Costs (ticst0510m000) session. Print Estimated versus Actual End Item Unit Costs (ticst0410m000) session. Print Differences between Frozen and Current Estimated Costs (ticst0411m000) session.

2.4

Comparing actual and estimated costs

A number of sessions are available to enable you to compare actual and estimated costs for materials and for hours. These sessions include:
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Print Estimated versus Actual Material Costs (ticst0401m000). Print Estimated versus Actual Hours Costs (ticst0402m000). Print Actual Production Costs (ticst0415m000). Print WIP Transfers (ticst0420m000). Print Posted Production Results by Work Center (ticst1401m000). Print Operation Times Deviation against Norm (ticst1402m000). Print Work-in-Process (ticst0450m000). Print Estimated versus Actual End Item Unit Costs (ticst0410m000).

Of course, the correct parameters (see Section 2.3) must be selected to produce reports at a particular level. For example, if you are not using WIP transfers, you cannot print the related reports. More details of the exact contents of the reports are given in the online Help. There are also display sessions provided to show the same data.

Production Order Costing 2-5

The procedure to close a production order

Production Order Costing 2-6

3.

The subprocedure to manually issue material

A part of the production-order procedure involves issuing material for production orders. The production-order procedure is more fully described in the Shop Floor Control (SFC) module procedure (UP133A US). The steps involved to release material manually (without backflushing) are as follows:
1

Shop Floor Control Procedure

Material to Issue for Production Orders (ticst1501m000)

Initiate Inventory Issue (tisfc0207m000)

Report Operations Completed (tisfc0530m000)

Report Orders Completed (tisfc0520m000)

Close Production Orders (ticst0201m000)

Figure 4 The procedure to issue materials

Step 1

The production-order Procedure This procedure is an integral part of the production-order procedure in shop floor control. The production order status must be Released before you can issue material.

Step 2

Material to Issue for Production Orders (ticst1501m000) Use this step to adjust your plans for the material you require for the production order. This step is mandatory if:
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The Manual Issuing check box is selected in the SFC Parameters (tisfc0100s000) session. The material concerned is not backflushed.

Production Order Costing 3-1

The subprocedure to manually issue material

Step 3

Initiate Inventory Issue (tisfc0207m000) Use this Step to issue the components from the warehouse. When you do this (or when you book hours) the production order status becomes Active.

Steps 4-6 Continue with production-order procedure The other steps in the production-order procedure must now be carried out, at least until the production order is Closed.

Production Order Costing 3-2

4.

The procedure to archive production orders and production costs

When you have finished using the costing data, you can move the data to an archive company. In BaanERP, separate companies are separate data sets. The archiving procedure has the following steps:

Close Production Orders (ticst0201m000)

2 Archive Production Orders

(ticst0250m000)

Archive Costing History (tisfc0530m000)

Figure 5 The archiving procedure

Step 1

Close Production Orders (ticst0201m000) Before you can archive production data, the orders must have the status Closed. Subcontracted operations must also have been completed.

Step 2

Archive Production Orders (ticst0250m000) Use this step to move the actual costing data and production-order data of closed production orders into a separate archive company. The data from your logistic company is then deleted.

Step 3

Archive Costing History (ticst2250m000) This optional step can be used to move historical data of closed production orders to an archive file. The historical data are:
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Material usage. Hours spent. Operations time spent by item.

Production Order Costing 4-1

The procedure to archive production orders and production costs

Production Order Costing 4-2

5.

Parameters that affect CST

You can alter the way that CST calculates production results with several parameters. More details are given in the online Help, but four of the more important ones are outlined here:

5.1

Production results by work center

You can select the Production Results per Work Center check box in the SFC Parameters (tisfc0100s000) session to define whether the production results are calculated by work center. If so, WIP transfers are possible, if the Transfer WIP Method is other than Not Implemented. You can also check whether price and efficiency variances are posted to each work center, or to the production orders calculation office. A WIP transfer is the transfer of the value of the work in process from one work center to the next, in accordance with the physical transfer of a subassembly to the work center where the next operation must be performed. You can use WIP transfers to make sure that the work in process is recorded in the work center that is actually working on the order. This is useful if:
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The WIP is a high value. There is a long production time. Or the different work centers use different currencies. The different work centers belong to different enterprise units.

5.2

The moment of freezing estimated production costs

You can use the Production Orders (tisfc0501m000) details session to determine when the cost estimates are frozen (that is, when they cannot be altered anymore):
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At production-order creation. At order release. Before the first WIP transaction.

A WIP transaction is any action that affects the work in process of a production order or work center such as the issue of material, or the booking of hours. The moment of freezing can affect the value of the estimated cost, and so affect the comparison between estimated and actual costs.

Production Order Costing 5-1

Parameters that affect CST

5.3

Inventory valuation method

You can use the Inventory Valuation Methods (whina1100m000) session to select an inventory valuation method. The method you choose will affect the value of your materials, and so the actual costs.
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First In, First Out (FIFO) assumes for calculation purposes that the oldest inventory (first in) is the first to be used (first out). Last In, First Out (LIFO) assumes for calculation purposes that the most recently received (last in) item is the first to be sold (first out). Moving Average Unit Cost (MAUC) uses the arithmetic mean value of a defined amount of the most recent inventory. Lot Costing is a method in which the valuation price or cost price is calculated separately for each lot. Fixed Transfer Pricing (FTP) is not an actual valuation method; a calculated value is used to value the inventory. If you use FTP valuation you can choose where to post price variances and efficiency variances: On the production order. On the work center (if applicable). Included in the calculation variance.

If one of the first four methods is used (that is, an actual valuation method), the production results are posted to BaanERP Warehousing (that is, the end items warehouse) rather than to a work center.

5.4

Multiple currencies
When you install BaanERP, you select one of the following modes:
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Single currency system. All costing data is entered in the same currency for each logistic company. Independent currency system. All transactions are done in up to three currencies, which entered independently. Actual and estimated costs are calculated in the three currencies. Dependent currency system. Each work center can have its own currency, and exchange rates are used to process transactions between work centers that operate under different currencies.

Production Order Costing 5-2

6.

Production Order Statuses

When you are working with production orders, they pass through a number of different statuses. These statuses are summarized in the following table and figure.
The status changes of production orders From status Planned To status/CST action Session Planned Scheduled Production Orders (tisfc0501m000) The Scheduled status only appears when the production order is scheduled by BaanSCS Scheduler. Generate Line Sequences (tisfc7230m000) The Sequence Phase status is only valid for FAS item production orders. Planned, Scheduled or Sequence Phase Planned, Scheduled or Order Documents Printed Released Released Order Documents Printed Released Print Production Order Documents (tisfc0408m000) Release Production Orders (tisfc0204m000)

Planned

Sequence Phase

Active Initiate Inventory Issue (Material costs posted) (tisfc0207m000) Active (Actual operation costs posted) Canceled Completed Closed Completed Archived Process Hours Accounting (tihra1210m000) Cancel Production Orders (tisfc0203m000) Report Orders Completed (tisfc0520m000) Close Production Orders (ticst0201m000) Reset production-order status (ticst0203m000) Archive Production Orders (ticst0250m000)

Released Released, or Active Completed Closed Closed

Production Order Costing 6-1

Production Order Statuses

Production orders scheduled by BaanSCS Schedulder

Planned

FAS Items only

Scheduled Order documents printed

Sequence Phase

Released

Active Canceled Completed

Closed

CST
Archived

Figure 6 The statuses of a production order

Production Order Costing 6-2