Material Variances

The purpose of this model is to analyze the variances between the actual and standard costs incurred in manufacturing orders as well as manual stock issues. All amounts are expressed in the division's local currency while quantities are in the item's basic unit of measure.

This model provides insights into these topics:

  • Materials, cost centers, and finished products with high cost variances
  • Trend of the cost variances

The facts in this model can be analyzed by transaction date.

Source information

The model is a combination of two main sources:

  • Order Costing Material Lines (CPOMAT)

    This has the standard and actual material consumption reported with a manufacturing order.

  • Internal Account Entry (CINACC)

    This contains the manual stock issues reported without connection to a manufacturing order. It is filtered by specific accounting events and accounting types for Materials Management.

When reporting actual material consumption with an MO, material variances are recorded directly. However, some materials cannot be reported per MO but will be back-flushed based on the standard rate. For the latter case, no variances will appear on the MO. For these back-flushed materials, variances are captured by performing a daily or weekly production stock take to establish the real stock level. Any stock deviation reported in such a production stock take will be captured in this model.

For the production stock take, you must define rules and processes around which stock-transactions to capture. Defining these rules is important to avoid recording normal stock takes or deviations that occur for other reasons than production.

You can also attach cost centers to the transactions, so that you can allocate them to the correct part of the production. The aim of these rules is to differentiate variances in stock due to production from variances that occur in the normal storage area of the warehouse.