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Manufacturing - how to scrap Raw Material during Production

  • 16 September 2021
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Userlevel 1

Hello

I was wondering how I could scrap some Raw Materials from materials already released to Production Order.

I know that for Finish Goods it is done in Labor or Move screens via Scrap Qty.

But how to proceed scrapping for Raw Materials in order to have actual data and not to make it by BOM - scrap factor?

The use case is that our Customer from plastic industry applies for each Production Order some more quantity of raw material than in BOM and at the end of production some of that raw material can turn into waste.

I would be grateful for any tipps. Thank you in advance. 

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Best answer by dgodsill97 6 October 2021, 17:10

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You can add an inventory item as a byproduct in the bill or production details (a negative qty required is a byproduct).  Or you can add it on the fly when doing a material transaction.  That will do an inventory issue of the return type.  Once in inventory you can dispose of it using an Issue with a reason code to expense it out.  If the waste has a value (byproducts do not absorb any of the production costs) you can use standard cost and assign it a value and that will credit the production order costs for that value.

Userlevel 1

 @dgodsill97  - thanks for your recommendation on managing by-products. This process will work for one of my MFG client too. 

I am trying to understand the costing implications of a negative material (by-product) transaction. 

I did the following steps:

  • I did a negative material transaction to receive the by-product in stock. I let the system use the average cost for this item to receive into the WH. This posted Debit IN Asset, Credit MFG WIP Transaction
  • Then, created a move transaction through the labor screen (OH and materials all backflushed)
  • The credit transaction that was generated from the negative material transaction (by-product) effectively reduces the total materials cost of the finished goods.

The client is using Actual costing method for the production orders.

Trying to understand the impact of a credit WIP entry for the by-product material transaction. This reduces the cost of production for the finished good by the WIP Credit balance crated due to by-product receipt. I am trying to rationalize in my head, why is it okay to reduce the cost of production of the FG? Please share your thoughts as it'll be helpful in understanding the concepts. 

Here’s a quick layout of the transactions, which shows the FG is undervalued by $10 due to by-product material transaction (excel attached too)

 

Userlevel 4
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The byproduct would reduce the inventory in the production order, but will increase the inventory in warehouse that it is put into.  

You could capture these costs in a separate scrap account or location that they allocated to, or you could determine where you think these costs should best go.

Say you use 100g of plastic to make a production order, but you only need 95 to go into the product. That 5g is scrap. is it useable? can you combine the leftovers and put them somewhere to be used again, or do they get thrown out?

That will be the determining factor with what happens with the “scrap”. Acumatica looks at scrap as non-useable product, and byproduct as an item that can be used again. This is pretty common with a lot of manufacturing environments where you may have bar ends, or extra material scraps that can be used, but not for every product.  It is a fine line between inventory control and accounting when it comes to these things most often.

 

Userlevel 1

@jeremyd45  - Thanks for your response! 

Would you please clarify how would I capture the costs for a by-product, per your note “You could capture these costs in a separate scrap account or location that they allocated to, or you could determine where you think these costs should best go.”

Is this a manual transaction…? IN Adjustment…? Or am I missing something?

Note that I what I am trying to do is consume the raw material for the by product. When I do a negative material transaction, in that case we receive a by-product without consuming any material against it. 

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