System Dynamics Corporation

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PRODUCTION CONTROL GENERAL LEDGER POSTING, EXAMPLE JOB WALK-THROUGH


When goods are being manufactured the inventories of raw materials and sub components are being reduced. The G/L must reflect this as well as reflecting the final finished goods or components inventories when they are completed.

The following is the General Ledger (G/L) postings that occurs throughout the manufacturing process for an actual job entered into Dynamic3i.

For this example the following is the data that will be used to trace a job and it’s posting through to completion within Dynamic3i.

Finished Product – f01 (made up of p01 and r01)
Purchased Item – p01 (cost of 5.25 per 1)
Raw material – r01 (cost of 2.25 per 1)

The structure file for f01 is defined to Dynamic3i as a 1 to 1 requirement.
eg. for 1 f01 the requirement is 1 p01 and 1 r01

The costs of p01 and r01 are defined (in1110) and updated (in1130) to the stock file (in0200)

A cost roll-up (cc0300) has been done on f01 to get a cost of 13.1905 (in1110)

This then has also been updated (in1130) to the stock file for f01

A job was created for 50 units of f01 and carried through with 1 to 1 complete usage of material components and job confirmation.
xx


When entering any type of material usage entry:
 
Job Material Usage Entry – PC3100
Automatic Material Usage Confirmation – PC3200
Material Usage Correction – PC3600
 
The corresponding G/L transactions are as follows:
 
Debit  - Work in Progress (WIP) material control account based upon the reason code, warehouse combination
            with the cost of the item. 
 
(WIP material control account is found in the Reason Code Master Maintenance – GB4300 under ‘Clearing’)
 
Credit - Inventory control account based upon the reason code, warehouse combination with the cost of the item. 
 
(Inventory control account is found in the Reason Code Master Maintenance – GB4300 under ‘Inventory’)
 
Reason Code is defined to the product group that the product belongs to
See Product Group Master Maintenance (IN1000),
Reason Code Master Maintenance (GB4300)
 
Detail breakdown of how the cost of the item is determined:

The legend below shows the maintenance application where the
Information in the cost of item calculation comes from.
 
Legend  a = Stock File Maintenance (IN0200)
          b = Job Material Usage Entry (PC3100) or Automatic Material Confirmation (PC3200) or Material Usage Correction (PC3600)
 
Cost of Item =   a.standard cost * b.calculated or entered quantity issued in the application /a.cost price per
 


For the material usage of job  (in G/L document above), the above postings were done to the G/L accounts defined per the reason codes of the product group that the product belongs to. 

Product p01 had confirmed usage of 50 @ 5.25 per 1 = 262.50
Product r01 had confirmed usage of 50 @ 2.25 per 1 = 112.50

When entering labour:
 
Labour Usage Entry – PC4100
 
The corresponding G/L transactions are as follows:
 
Debit  - Work in Progress (WIP) labour control account on the Work Center Maintenance – SR0300  with the labour cost.
 
Credit - Labour Recovery control account on the Work Center Maintenance – SR0300 with the labour cost.
 
(Both accounts above are found in the Work Center Master Maintenance – SR0300 under the ‘Account Information’)
 
 
Detail breakdown of how the labour cost of the item is determined:
Legend below shows the maintenance application where the
Information in the labour cost calculation comes from.
 
Legend: a = Labour Usage Entry  (PC4100)
            b = Employee Maintenance (GB0090)
            c = Work Centre  Maintenance (SR0300) or Global File Maintenance (GB0100)
 
Labour Cost  = a.time * (b.employees rate +  c.variable overhead rate) +
                        a.time * b.employees rate * c.fixed overhead percent / 100
 
Employee Rates are found in the Employee Master Maintenance – GB0090 under ‘Rates Information’.  Rate is regular rate, overtime rate 1 or overtime rate 2 depending on rate code entered in pc4100.  Also if a shift code of 1 or 2 is used shift differential rate 2 or 3 is added to the rate retrieved from the rate code.

 

Based upon the work center (W/C - stored in vendor column above) the labour posting to G/L for the job were posted by labour entry – pc4100. 

Using W/C 1 a posting for Employee ‘458’ was done.  The rate as defined to the employee (gb0090) is 3.80 per hr.   On W/C 1 there is a variable overhead defined of 2.00. Per the formula above, this increases the rate from 3.80 to 5.80 per hr.  Also on the W/C there is a 5% Fixed overhead.
 
Using these values and the formula the postings for W/C 1 are:
 
a.time * (b.employees rate +  c.variable overhead rate) +
a.time * b.employees rate * c.fixed overhead percent / 100
 
12.5 * (3.80 + 2.00) + 12.5 * 3.80 * 5 / 100 = 74.875 or 74.88 
 
Similar debit/credit postings are made for all other labour entries.

When doing any type of Job confirmation:
 
Manual Job Confirmation – PC5100
Automatic Job Confirmation – PC5200
 
The corresponding G/L transactions consist of a debit transaction with multiple corresponding and offsetting credit transactions as follows:
 
Debit  - Inventory control account based upon the reason code, warehouse combination
            with the cost of the manufactured item.
 
(Inventory control account is found in the Reason Code Master Maintenance – GB4300
under ‘Inventory’)
 
For every active component in the structure of the manufactured item:
           
Credit  - Work in progress (WIP) material control account based upon the reason code, warehouse combination
              with the cost of the component based upon required component quantities.
 
Reason Code is defined to the product group that the product belongs to
See Product Group Master Maintenance (IN1000),
Reason Code Master Maintenance (GB4300)
 
(WIP material control account is found in the Reason Code Master Maintenance – GB4300 under ‘Clearing’)
 
For every operation (based upon the Routing File Maintenance – SR1200) involved in producing the manufactured item:
 
Credit - Work in progress (WIP) Labour control account on the work center maintenance – SR0300
             with the labour cost amount
 
Note: If the amount debited to the inventory control account is not equal to the total amount credited to the work in progress inventory and labour accounts.  (Either because of rounding issues involving variable overhead and/or fixed overhead percentages on the work center or because the standard cost of manufactured item has not been updated with the latest changes to the structure and routing files).  The difference is posted to the "Material Variance Account" based upon the reason code for the product group that the manufactured item belongs to.

Using Automatic Job Confirmation – PC5200 and confirming the full amount on the job the postings to the G/L are as follows:  

 

Debit with Multiple Credits:

Debit Control inventory control account for 50 – f01’s @ 13.191 (cost of f01) = 659.55
 
Credits for W/C 1,2,3 (In Vendor column above) with labour amounts and the two wip material usage offset postings.  Notice the .01 material variance debit posting.  Total of credits are 659.54 - See note above.
Detail Breakdown of item and component cost calculations used in the Job Confirmation postings above:
 
Detail breakdown of how the cost of the manufactured item is determined:
The legend below shows the maintenance application where the
Information in the cost of manufactured item calculation comes from.
 
Legend: a = Stock File Maintenance (IN0200)
            b = Manual Job  Confirmation (PC5100) or Automatic Job Confirmation (PC5200)
 
Cost of manufactured Item =     a.standard cost of item *
                                                b.calculated or entered quantity issued in the application / a.cost price per
 
Detail breakdown of how the cost of the component is determined:
Legend below shows the maintenance application where the
Information in the calculation comes from.
 
Legend: a = structure file maintenance (SR0500)
            e = stock file maintenance (IN0200)
                g = automatic job confirmation (PC5200)
 
Cost = (a.component quantity * (1 + a.scrap percent / 100)) *
           (a.structure quantity / g.confirmed quantity) *
           (e.standard cost / e.cost price per)
 
           
 
Detail breakdown of how the labour cost is determined:
Legend below shows the maintenance application where the
Information in the calculation comes from.
 
Legend: b = work centre maintenance (SR0300)
            a = routing file maintenance (SR1200)
                c = work centre maintenance or if value is blank global file maintenance (SR0300 or GB0100)
            e = automatic job confirmation (PC5200)
 
Cost = ((b.labour rate  * a.number of men  * a.labour time / a.labour quantity +
            b.set up rate  * a.number of men  * a.set up time / a.set up quantity +
            b.variable overhead rate * a.number of men *
           (a.labour time / a.labour quantity + a.set up time / a.set up quantity) +
            c.fix overhead percent / 100 * a.number of men *
           (b.labour rate  * a.labour time/ a.labour quantity + b.set up rate *
            a.set up time/a.set up quantity)) * e.confirmed quantity


Job Variance G/L Posting - PC5600
 
The Job Variance G/L Posting update program is used for posting material and labour variances to the G/L variance accounts.  The Job and all of its sub jobs must be done and confirmed.  If any dollar amount still exists in the work in progress (WIP) labour and work in progress (WIP) material accounts for this job the corresponding G/L postings will be as follows:
 
Debit  - Either material variance account based upon the reason code or
             labour variance account  from the work centre – SR0300 with the variance amount.

Credit - Work in progress (WIP) material control account based upon the reason code for the variance amount
 
(Material variance control account is found in the Reason Code Master Maintenance – GB4300 under ‘Variances’)
(WIP material control account is found in the Reason Code Master Maintenance – GB4300 under ‘Clearing’)
 
The job example above completed for the full 50 units would not produce any variances to post.
To show a variance posting, a similar Job for 50 units was confirmed and finalized for only 45 units. 

 

Since only 45 units were confirmed and the full labour (pc4100) and material (pc3100) were posted for the full 50 units this left dollar values in the WIP accounts.

The Labour component for 1 unit of f01 can be calculated by adding the cost elements from the costing record (in1110).

3.61 + 1.9 + .181 = 5.691


 
The dollar values left in wip are for a total of 5 units of f01.   5 @ 13.191 = 65.955

The labour component still in WIP is:

5 f01 is 5 * 5.691 = 28.455

This is posted to the labour variance account.
Material still in WIP is:
5 r01 @ 5.25 = 26.25
5 p01 @ 2.25 = 11.25 

These are posted to the material variance account.
Material + labour for 5 units = 28.455 + 26.25 + 11.25 = 65.955
For this job when pc5600 is run the following postings occur to the variance accounts:

 

The extra .015 variance  (28.47 - 28.455) being posted to the variance is due to rounding on the multiple debits made to the labour postings.  If there were similar rounding on the materials then the postings to the material variance would also include them.