Introduction on FTP and actual costing

After items are produced in Manufacturing, the items are transferred to inventory, where receipt posting takes place. You can use the following costing methods to determine the price against which the end item is received in the warehouse:

  • FTP.
  • Actual costing.
FTP

If you want to use a Fixed Transfer Price (FTP) for receipt postings, the item's inventory valuation method defined in the Warehouse - Item (whwmd2510m000) details session must be FTP. For more information on FTP for receipt posting, refer to FTP for receipt postings in manufacturing.

Actual costing

If you want to use the actual costs to determine the price for receipt postings in LN, the item's inventory valuation method must be LIFO, FIFO, MAUC, or Lot Control. In that case, the actual amounts for materials, hours, and subcontracting are used to determine the price of the end item. That is, the amounts during the receipt postings are used to calculate the value of the end item in inventory, according to the chosen valuation method.

In Manufacturing, actual costing is used for a production order if the following conditions are met:

  • The Use Actual Cost Price for Receipt Posting check box in the Shop Floor Control Parameters (tisfc0500m000) session is selected.
  • The valuation method defined for the production order's end item in the Warehouse - Item (whwmd2510m000) details session is LIFO, FIFO, MAUC, or Lot Control.

Otherwise, FTP is used to determine the receipt price.

If the two conditions mentioned previously are met for a production order, actual costing applies to the production order. In that case, the Use Actual Cost Price for Receipt Posting check box in the Production Orders (tisfc0501m000) details session is selected. The items are received in inventory at their actual costs, and valued according to the defined actual valuation method. In principle no variances are applicable, because you used the actual costs. In other words:

 Variance = Receipt Value - Costs = 0.00

However, additional calculation office variances can occur, for example, if costs are booked after the receipt of the end item in inventory. These variances are copied to Warehousing, to the Inventory Variances (whina1516m000) session. The variances can be used to correct the value of the items in inventory by means of the Process Inventory Variances (whina1200m000) session.

The main assumption when you are using actual costing is that costs are booked accurately and in time. So, if a certain item quantity is received in the warehouse all production costs must be booked. However, in practice, actual costing is somewhat more complicated. For more information on actual costing, refer to Actual costing for receipt postings in manufacturing.

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