Using the Production Detail Report for Jobs that have not produced full qty- as planned

Epicor ERP 10
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Hello All,

The title is paradoxical, but bear with me for a second. What I am trying to do is understand manufacturing variances that get posted to the general ledger by using the job production detail report. I am most concerned with material variances. Most of the time we are dealing with material usage variances when it comes to material variances AND material cost makes up the bulk of our cost of goods sold. The hard part is trying to make a concise report that breaks down what happened on each of the jobs that contributed to the variance and whether the variance was a usage variance or caused by something else (as mentioned below).

It is easy to see why a material usage variance exists by comparing what was required for the job v.s. what was used- as long as what is required matches the required amount that was used when the standard cost was established for the manufactured part. I understand there may be other factors like an increase in raw material/component standard costs, but generally we are rolling parent parts when subcomponent standard costs are rolled.

I would love to use the production detail report since it already breaks out estimated v.s. actual, but what I am finding is that we typically produce less than the job quantity due to our manufacturing process and the way we consume raw materials (we don’t open a brand new lot of raw materials if the quantity remaining on the job is less than X amount- we just end the job where it’s at as long as it covers the demand).

When you run the production detail report, it uses the estimates for the full job quantity, but that isn’t what we produced to. For example, our job calls for 90,000 LF of material, but we produce 87,000 LF due to the process outlined above.

87,000 is the final amount and that is what I would like the production detail report to use when it is calculating the estimated costs, but I am having trouble understanding when you need to change this quantity in order for the estimated costs to come in correctly.

In short, when do you need to change the job production quantity so that the production detail report calculates estimated costs correctly? Is it before the job is released? Before the job is started?

Am I coming at this all wrong and does some report already exist that would help point out what type of variance it was?

If I can clarify at all let me know.

On the other hand, if anyone has already written a BAQ or report to deal with this, we would be more than thankful for a copy of it!

@Nancy_Hoyt @MikeGross @Mark_Wonsil @timshuwy @skhan

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This can all get very confusing, and so I understand your confusion. Example… the STANDARD is based on the last cost roll… but your actual charges to the job will be based on the consumption qty * current standard of the materials.
Assume you have a PART like this:
ASSY-X= STD Mtl rolled up Cost of $100 each
MTL-Y = a Material that costs $1 each
Assy-X needs 100 of MTL-Y
All is good, and the birds are tweeting, the butterflies are flying in formation… If the job is created for 10 of ASSY-X right now, and nothing changes, and you issue 1000 MTL-Y parts, and receive one 10 finished assemblies, then there would be no variance… but what can cause variance?

  1. the cost changes for MTL-Y but you don’t roll it up to Assy-X
  2. the cost changes for both parts AFTER you create the job (the job will still have old values)
  3. The BOM changes but you have not done a cost roll
  4. JOB Variance:
  • You over/under-issue the material
  • you over/under receive the finished assembly after issuing all the material
  • you issue a different part number than the job calls out for

Some of these are hard to trace down by simply looking at the reports. You need to know the sequence of events. AND it gets 10000s of times tougher if you have variances amongst many different materials on a single job, and you have labor variances… OH… did I Mention Backflushing? Somethings backflushing will issue parts, or charge materials that were not actually consumed, causing inventory variances (found later during Cycle Counting).

5 Likes
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Tim, thanks for putting it so clearly. I had all the variance cases in my head, I just couldn’t get them out straight on a piece of paper like you did so effortlessly!

We would like to make people aware of the variances in a clear and concise report so that they can take action on them- it is proving very difficult because like you said, “Some of these are hard to trace down by simply looking at the reports. You need to know the sequence of events. AND it gets 10000s of times tougher if you have variances amongst many different materials on a single job.”

Thanks for taking the time to respond. I appreciate it.

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Are your jobs requiring alot of labor that varies, or is it just a machine producing a part?
It you are just adding mtl and the machine is doing all the work, you could look at doing these as a Kanban job. Then you wouldnt have to worry about the job being 90,000 and you made 87,000.
The Kanban job would only work if the inputs (Labor and Mtl ) are consistent when you produce that part.

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The labor and material are not consistent- scrap plays a big part in the variances.

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One issue we’ve run into with doing this sort of analysis is you have non-linear costs associated with some materials and labor. For example, if your job is for 90,000 but you ran 85,000, your estimated production labor should be 85,000 / 90,000 = 89% of the original estimate, but your estimated setup cost should be the same (since setup is a one-time cost, usually). The same goes for material minimum charges or vendor price breaks. If 90,000 units of material got us into a higher price break but 85,000 is in a lower one, could/should the estimated unit cost be higher on the lower quantity run?

IF these factors are assumed to be negligible, you could modify the Production Detail report to multiply all of the estimated costs and quantities by the fraction (QtyCompleted / ProductionQty). This would give you a pro-rated estimated cost based on how many parts you actually made vs what Epicor’s estimated cost fields use.

You could do the same in a BAQ - Erp.JobAsmbl has estimated cost fields for the current assembly level and lower levels. You can divide these estimated costs by JobAsmbl.RequiredQty to get estimated unit costs and then multiply by the job/assembly completed quantity to get your same pro-rated estimated costs.

Example:
Job production qty = 100
Completed Qty = 50
Estimated Mtl Cost = $10,000
$10,000 * (50 / 100) = $5,000 estimated material cost for making 50 pieces

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Thanks Tyler, the CFO ended up doing that logic. We aren’t super concerned with getting the labor or burden to come out yet, just focused on materials at this point.

What we are running into now are cases where they are substituting materials.

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Tim, what do you mean old values? Like old bills of material?

I thought that standard cost variances are calculated using actual v.s. standard cost- not some cost stored on a job?