Variance Allocation
The Advanced Cost Allocations functionality allows you to allocate variances between the standard cost valuation for work centers that is included in production order valuation and the actual costs of production departments in a specified period.
The functionality is based on the primary assumption that actual costs generated by production departments are registered on one side on a specified account whereas work center costs that are calculated with the standard production functionality and assigned to production orders are registered on the other side of the same account. The balance calculated for this account is the variance of the production costs that must be allocated.
Depending on the settings you select, the functionality of variance allocation allows you to allocate production cost variances:
- to open production orders or
- receipts from finished production orders for a selected period.
Variance Allocation Setup
To define the variance allocation setup:
Choose the icon, enter Prod. Variance Allocation Setup, and then select a related link.
On the Prod. Variance Allocation Setup page, select New, and then, in the first blank line, fill in the following fields:
- Code – Specify a unique code that identifies the parallel posting setup.
- Prod. Cost Settlement Accounts - Specify the account number on which work center costs and actual costs generated by production departments are posted and balance is an allocation variance.
- Gen. Bus. Posting Group - Specify the code of the general business posting group to be used for the variance allocation journal lines that will be created.
- Work Center No. - Specifies the number of the work center that will be used in the created variance allocation journal line if, while generating the journal, the value in the Prod. Variance Allocation Type is set to Open Production Orders.
- Allocation Qty. Base - Specify whether the variance allocation key base is the quantity or output quantity entered from the Capacity Ledger Entries.
- Status - Specify the parallel posting setup status for a selected line. Only settings with the Certified status are included in parallel posting.
Source Records Dimension Filter
In order to properly define variance allocation setup, it is necessary to correctly define the dimension filter for the general ledger source entries, based on which the system calculates variance amounts, allocated according to a given definition. This filter is used to calculate the variance allocation key base.
To define a dimension filter:
Choose the icon, enter Prod. Variance Allocation Setup, and then select a related link.
On the Prod. Variance Allocation Setup page, select a relevant line and choose the Dimension Filter action.
On the Edit Dimension Filter Set Entries page, choose New and then, in the first blank line fill in the Dimension Code and Dimension Value Filter fields as usual.
Important
Defining filters is necessary to use variance allocation setup certification.
Working with Variance Allocations
Working with variance allocations is a multi-step process. First, choose the Generate Prod. Variance Allocation Journal action to generate the journal, which, depending on the selected option, is similar to a production journal or a revaluation journal. In the next step, verify the generated journal and posts its lines.
If you choose to allocate variances into open production orders, you must close the production orders to finish the process.
To perform the first step of the process and generate the allocation variance journal:
Choose the icon, enter Generate Prod. Variance Allocation Journal, and then select a related link.
On the Generate Prod. Variance Allocation Journal page that opens fill in the following fields:
On the Options FastTab:
- Prod. Variance Allocation Type - Specify if the variance should be allocated to open production orders after selecting the Open Production Orders option or to finished production orders after selecting the Finished Production Orders option.
- Journal Template Name - Specify the journal template to which the generated lines should be sent. The script generates a separate journal batch for each variance allocation definition.
- Document No. - Specify the document number. The document number will be copied to ledger entries created as a result of the allocation.
- Starting Date - Specify the starting date of the allocated period. The system will automatically calculate the ending date based on entries in the Accounting Periods window and the specified starting date. The calculated ending date will be also a posting date for the generated journal lines.
On the Filter FastTab: Prod. Variance Allocation Setup (nonmandatory fields):
- Code - Specify the filter for variance allocation definition to be processed by the batch job if needed.
Select OK.
The following journal lines are created based on the variance allocation definition:
- Prod. Variance Allocation Journal - Output - If you choose the Open Production Orders option in the Prod. Variance Allocation Type field.
- Prod. Variance Allocation Journal - Revaluation - If you choose the Finished Production Orders in the Prod. Variance Allocation Type field.
For each variance allocation definition, a separate journal batch is created and journal lines linked to the definition are preserved.
The Prod. Variance Allocation Journal - Output page works the same as the Output Journals page and the Prod. Variance Allocation Journal - Revaluation page works the same as the Item Revaluation Journals page. However, several fields specific to the variance allocation process were added:
- Prod. Variance Alloc. Definition No. - Specify the definition code of the variance for which lines were created in the journal batch.
- Total Amount to Allocate - Specify production settlement account balance amount to be allocated as defined in the setup of variance allocation for which lines were created in the journal batch.
- Total Allocated Amount - Specify the total number of lines in the journal batch.
If a variance allocation journal was created correctly, the amounts in the Total Amount to Allocate and Total Allocated Amount fields should be equal.
After you verify that the allocation journal lines have been created, you can post them. If you choose the Open Production Orders option in the Prod. Variance Allocation Type field and, consequently the Prod. Variance Allocation Journal - Output option, it is necessary to close linked production orders.