March, 2012 Product Costing - Best Practices
by Heering Ligthart
On Manufacturing Accounting
Editor's Note: There's so much to think about with product costing: the amount of detail you'll need, maintaining master data, variances… the list can go on. This article by Heering Ligthart discusses some key topics for managing Product Costing efficiently. He'll cover best practices in costing security, using "Last In" calculation, working with multiple branches, and finally recording and finding historical costs.
I have implemented JD Edwards Manufacturing and Distribution modules at several companies and have found that there are always questions surrounding product ...view middle of the document...
The screenshots used are from JD Edwards EnterpriseOne 8.12.
Copyright © 2012 by Klee Associates, Inc. www.JDEtips.com
Product Costing - Best Practices
Companies that use the Manufacturing module get an extra dimension in Product Costing: the cost components. The Cost Revision or Cost Ledger represents a value of an item, where the Cost Components are elements of that value, like material, labor, or overhead costs. The sum of the cost components should be equal to the cost ledger of that item, which is visible in the standard Cost Components. See Figure 1.
Figure 1: Cost Components When there is a difference between the cost revision and the sum of the cost components, financial variances occur between the manufacturing journal entries and the stock value. These are different from the variances generated by the WO Variance Journal Entries (R31804), which are common and a result of the manufacturing process. Differences between the F30026 and the F4105 will result in different stock value bookings from the Manufacturing module using the cost components and the logistic stock transaction using the cost revisions. In plain text, completion of item A will be done at value X and the same product is shipped out for value X+1. As a result, the stock value for "1" is lost somewhere. Within manufacturing branches, it is most important that the cost revisions and cost components are kept in sync. Using the standard cost rollup and cost freeze in a process is not enough if the cost revisions can be changed by users. A standard processing option in P4105 will prevent the sales/inventory cost method from being changed. See Figure 2.
Figure 2: Processing Option to Prevent Standard Cost Changes However, even if all defined versions of the P4105 are set as "secured" through the above processing option, undefined versions can be called. For example, the Item Master (P4101) and Item Branch/Plant (P41026) have row exits to the cost revisions, but no processing options to define the version; thus the defined version of the P4101 is used to check the P4105. If that version is not defined for the P4105, all processing options are blank, and the sales/inventory cost method can be changed. This back door is easily closed by using column security for two fields in the P4105: 1. CSMT - the defined cost method that the system uses to calculate the cost of goods sold for the item 2. UNCS - the unit cost of an item in the P4105 for a specific cost method
Copyright © 2012 by Klee Associates, Inc.
Product Costing - Best Practices
By securing these fields on a public level for all versions, the cost price is always secured. See Figure 3.
Figure 3: Column Security for CSMT and UNCS Fields Due to the fact that cost revisions can be used in Advanced Pricing and Procurement or that cost methods are manually adjusted, specific roles or users should be able to edit the Unit Cost field. As shown in Figure 3, the...