Production order receipt handling using actual valuation

The receipt price calculation functionality for production order actual costing allocates the actual production cost to the receipt amounts. The results of the calculations can be analyzed and inspected to understand actual cost allocation to receipts in financial accounting.

The materials and operations are specified in the Production Order (tisfc0101m100) session. You can view the material issue bookings, operation cost bookings and the corresponding receipt postings in the Job Shop Financial Transactions (ticst3500m000) session. Details of the receipt value calculation algorithms depend on the type of actual cost:

  • Material cost: The actual material cost is allocated to the produced item based on the material requirements as specified in the Material lines in the Production Order.
  • Operation Cost: The actual operation cost is allocated to the produced item based on the assumption that all booked cost is required for the production quantity.

Based on the options specified in the Production Settings by Site (timfc0180m000) session, the actual cost in the production order is used to calculate the receipt values.

During the lifetime of the production order, receipt values for several logistic events are calculated, and each time, the complete set of financial transactions and earlier allocations are considered in the calculation.

Different type of receipt transactions exists. These are:

  • End Item Receipt – The end item receipt relates to delivery to a warehouse, of completed products at order level. For relevant operations in the network, actual cost is allocated and registered. The total of allocated cost is assigned to the end item receipt value. Item Receipt Surcharges are also calculated and booked. Item Receipt Surcharge amounts are included in the end item receipt amounts and are registered as actual cost.

    When the End Item is returned to the order from inventory, the actual cost on the order increases accordingly. The receipt value of the returned End Item is determined by warehousing.

  • Quarantine Receipt – The quarantine receipt relates to delivery to a warehouse for quarantine, of a rejected product, normally at production order operation level. Independent of production order settings, quarantine receipt postings are always determined using Actual Valuation.

    For operations preceding the quarantine operation, actual cost is allocated and registered. The total of allocated cost is assigned to the quarantine receipt value.

  • Subcontracting WIP – The subassembly receipt relates to a completed subassembly being delivered to a warehouse, normally at production order operation level, produced by operations that precede a subcontracted operation.

    The subcontracting WIP transaction is also created when the incoming subassembly is received (Subcontracting purchase order receipt).

    When the subassembly is returned to the order, the actual cost on the order increases accordingly. Subsequent subcontracting WIP receipt must include returned value.

You can use these sessions to analyze and track how the receipt event amounts are distributed and calculated. The receipt event amounts are calculated considering the previous actual cost receipts to guarantee more accuracy during financial accounting.

  • Allocated Costs to Receipt (ticst4510m000)
  • Allocated Material Cost to Receipt (ticst4511m000)
  • Allocated Operation Cost to Receipt (ticst4512m000)
  • Item Surcharges Allocated to Receipt (ticst4513m000)

Material cost allocation :

Each material on the order has various quantities. Such a quantity is the number of units that are estimated to be issued. For each material this number of units relates to the produced quantity on an operation and/or on the order.

Example: order for 5 units with one operation, with material line with estimate of 10 units. Expected cost for 1 end item is 2 * cost of one material item. In case, the actual issue financial transactions is for 6 material items, 1/3 (one third) is allocated.

Operation cost allocation:

For each operation on the order, operation specific quantities are administered. For production of the production order’s planned quantity, an operation must produce its planned output.

Example: for production of 10 units on a production order, 12 units must be produced on a specific operation. Here, production of 1 end item on production order level requires allocation of 1.2 units on the specific operation. Some operation cost (20 EURO) is booked on the operation, while 6 units are completed on the operation, then the assumption is that 20 EURO is required to produce these 6 units (applying the principle). Allocation for 1.2 units is (1.2/6.0)*20: 4 EURO.

Data setup for receipt value allocations

You must ensure that these check boxes are selected in the Use Actual Valuation for section in the Production Settings by Site (timfc0180m000) session:

  • End Item Receipt Posting
  • Subassembly Receipt Posting