Production Variance

Hi Erin,

A Production Variance is simply a measurement on performance comparing Actual Costs vs Planned Costs.  Planned Costs are calculated based on the costs of materials and labor as found in your Bill of Materils. These costs are updated by running your Cost Roll process, which looks at your current inventory costs and rolls these costs in your BOM. 

Production Variances have no financial impact to you GL, nor is reflected in an Inventory Adjustment. It’s merely a indicator that your Actual costs are different than the expected costs of your disassembly order. 
 

i hope this helps. 

Hello Erin

When a kit disassembly is being released, the kit item is issues according to its valuation method, while *multiple* component items are being received. Since you cannot spread 1 cost to multiple receipt cost, the system posts components receipts at their “default cost” (determined as either last or average cost according to the warehouse setup).

(updated)
The difference between the component issue cost and the sum of receipt cost is a production variance which you observe. This variance is actually posted to the account specified in the disassembly reason code. In the Sales  Demo , the inventory account is specified there (https://uploads-us-west-2.insided.com/acumatica-en/attachment/d2200d67-e7e8-49a2-8de9-8d63cca3ab3a.png) , but I believe some i/e account should be specified instead

Hi Plmainard

Thank you very much for the reply.

By the way , the reason code for the production variance should book under COST or Inventory Assets?

I am abit confusion about this

Hi Erin,

Thanks for responding to my post.  I realized later that indeed it looked like you were disassembling a kit and not a production order.  Sorry about that.

The production variance is likely occuring not from your set-up of your reason codes, which is simply a mapping of the costs to a different account, as Mark pointed out (Hi Mark), but because Acumatica detected a difference in the costs of the inventory inventory items being disassembled vs the cost of bringing the kit components back into inventory.

These cost “variances” can occur for a number of different reasons.  In order to know more, we would need to know the costing methods being used for the components in your kit, as well as the kit itself.  For example, if you’re using standard cost, if could simply be a difference between the standard costs of the components and that of your kit.  

Another possibility is based on the set-up of the warehouse in which the disassembly took place, along with the inventory levels of the kit components being placed back into inventory.  

The above screenshot is from the Warehouse set-up screen and the highlighted field tells Acumatica what cost to use when placing “returned” product back into inventory.  The system can either used the last received cost or the average cost of the product.  This can be a little complicated and requires a little digging into the costing method set-up of your items as well as an understanding of the cost layers and inventory levels of your items to know the truth.  

Irrespective of the actual inventory adjustment amount and the calculation used to determine that amount, the simple answer is that Acumatica found a difference in the costs of the disassembled kit and the sum of the costs of the components being placed back into inventory.

Hopefully this will provide you with the guidance necessary to troubleshoot the information further.

Good luck.