Dynamics GP - Manufacturing - Understanding how Manufacturing Calculates FG Costs - Why costing errors occur - Costing is higher than expected

• From a Recipe Level - Direct Costs Come From
• Machine Setup
• Labor Setup
• Routing Setup
• Component Costs on Manufacturing Bill of Materials
• From a Production Level - Costs are affected by
• Final Costs are calculated when the MO is closed
• Using Item Cost at the time it was issued to the MO
• Machine Costs Issued /backflushed to the MO
• Labor Costs issued/backflushed to the MO
• Minus Cost of all Reverse Issued raw materials
• If Backflushing
• Raw Material is not issued, and costs are not reflected in pick tickets or in WIP
• Raw Material is adjusted out of stock when the Finished Good Receipt is posted
• Causes of Costing errors
• Rounding errors due to UofM factors that may go beyond 5 decimal places
• When setting up a BOM, notice that quantities may automatically adjust themselves on the BOM when first entered due to rounding limitations of the UofM selected
• Changing Default Qty to Backflush
• If your raw materials are set to backflush, changing the quantity of raw materials used "consumes" from the total quantity of raw materials GP thinks you should be using for that entire MO, even though it will cost that receipt correctly
• Example - Bom that uses 1 unit of rm to produce 1 unit of fg
• I do an MO for 2 units of FG
• I do a receipt for 1 unit of FG, but change the RM from 1 unit of RM to 2 units of rm
• GP will cost that 1 fg at the cost of the 2 units of rm consumed to produce it
• However, if i try to receive 1 more fg, GP suggests 0 rm because it assumes you have already consumed all the rm required for this MO
• At this point, i have to manually enter the additional RM i am using
• This is a problem if calculating the RM is complicated
• Receiving additional Finished Goods against a Backflush MO that is "Completed"
• GP will not automatically backflush more Raw materials to the fully received MO
• If you do not manually add more raw materials to the MO, your costing will come out incorrect
• If using Average Costing for Inventory, Finished Goods and Raw Material Costs can fluctuate with each issue and receipt depending on what other transactions may have occurred between the Manufacturing transactions
• Guidelines to prevent Costing errors
• Ensure that the Base UofM of the Raw Material is in the smallest quantities being used
• Instead of using 0.00001 kgs, your base unit should be in grams
• Do not receive against "Completed"  MO's