Hello,
we have a situation.
we have a work order. Job is closed and invoice is posted. but now, they found they need add more time for the job. so, they will use time and expense entry to add the labor transaction. now, finance questions after the labor transaction done, the cost will be updated in the posted invoice? or they only can see it in the GL level.
thanks,
Eddy
Adding anything after the finished goods are received will directly hit manufacturing variance. It will not go to cost of sales, but to the variance account.
Hello Doug,
so, it doesn’t matter Make to Order or Make to Stock. as long as the Job is closed and need add more transactions, it will go to variant. is it correct.
thanks,
Eddy
I’m no cost expert, but I think the following happens:
If you’re adding labor/material to any job after it’s been received into stock (Make to Stock), shipped (Make to Order), or issued to another job (Make to Job), then you are going to be moving those costs straight to variance.
If any more finished goods are generated from the job after you add the labor/material, then the costs will flow into those transactions.
When you add labor/material to a job, those costs move into WIP and will sit in WIP until you either receive finished goods from the job to inventory or to a shipment (make to order). If you add labor/material to a job after receiving/shipping your finished parts, that cost will stay in WIP until you either close the job or receive/ship more parts.
For a make-to-stock job, any costs left in WIP when you close the job will go directly to variance. As far as I’m aware, there is no instance where the cost would automatically go into stock and adjust the average cost of the parts previously received – and therefore the shipment will have used the old (lower) cost of the parts from stock.
For a make-to-order job, I’m fairly sure (but haven’t rigorously tested it yet) that excess WIP at the time of job closing will update the COS on the shipment if no invoice has been posted yet. Once the invoice is posted, any additional WIP will be cleared to variance.
Of course, this all assumes average cost. Standard cost will use the standard no matter what, and any labor/material overages will always go to variance.
thanks so much.