We are a manufacture business
We are using AVG COST
Job is created for qty15 material is issued. However, if we have an issue and reduce the qty to 10 the returned material comes back at STANDARD COST when it was issued at AVG COST so it then creates a variance.
At this time we want to turn Variances off from automatically creating “Periodic Posting” journal entries to each GL due to Labor, Sub Contract, Material variances from production.
Is there a way to work around it?.
Has anyone else stopped using Manufacturing Variances? It appears there is a selection to turn it off however it is a grayed out box that cannot be selected by us.
it is causing so much headaches for our financials.
I may not be using all the correct terms so I will apologize in advance. Can you elaborate a bit on your process and exactly what your goal is?
To see if we can stop the software from making automatic journal entry Variance’s. is it just to stop the manufacturing variance?
Yes I guess ultimately that is what we are trying to do. I believe the variance accounting has over complicated our process when trying to get Epicor to create a financial statement. Our current option is to extract the data from the software and manual input it into a separate financial statement outside of Epicor. Do you manufacture to stock or make direct?
We manufacture to stock. What costing method are you using? We are using avg cost.
It just seems we have to spend a lot of time to fix the variance when in reality we have not used it for the last 27 years and have been fine why must we do it now year 28 starting with Epicor.
It’s the most common practice out there in manufacturing and most shouldn’t struggle doing this with the appropriate resources. Not acknowledging variances by turning off WIP is a horrible idea in my opinion. You should fix your finance processes or people if they aren’t capable of working in a standard environment such as this.
When you say “Variance accounting”, what actual journal entries do you mean? Manufacturing variance entries are usually due to standard cost… but purchase price variance can happen if you change prices on purchase orders after receiving the goods.
Labor $ rate variances: Resource Group or Resource labor rates are used as estimates. Employee labor rates are used as actuals. If these two rates are not aligned this will create a labor cost variance. It is easy to forget to add the labor rate to the employee when new ones are setup.
Labor time variances: The method operation time per piece versus the actual job operation time entered will also cause a variance. One way to eliminate this variance to change the method from time and quantity to quantity only and then run the backflush labor process. This will put the labor time into the job for the pieces ran at the standard time per piece. You loose the actual versus standard costing, but eliminate this type of variance.
If it has worked for 20+ years I would suggest trying figure out what has changed to cause the current issues.
hmm… Average Costing Manufacturing Variances.
Are you completing the work orders for the amount scheduled i.e. plan job for 100 and receive 100?
I believe there is some uber-logic applied for partial completions under average/actual costing.
Yeah I believe i understand what you are saying. I changed my post im sorry i do not want to turn off WIP however would like to turn off the Variance function.
Job created/material issued however if we decide we don’t need the job we return the material and it creates a variance due to it issued at average cost and it comes back returned at standard cost therefore creating a variance in a job not produced
Maybe you can share a few T-Accounts on how accounting worked for the first 27 years and maybe we can configure Epicor to work that way? What happens (accounting wise) when you:
Receive Parts to Stock from a PO
Issue Materials to a Job
Report Labor
Move Finished Goods to Stock
Ship Goods to customers
Were you doing a Periodic Inventory previously and now having trouble moving to a Perpetual system?
Each variance is creating a “periodic posting” to the attached GL. Such as labor, material, etc… We are having to correct all variances and the ones we cannot fix due to items shipping already we must create journal entries.
example job is created for qty15 material is issued at avg cost. however, if we have an issue and reduce the job to qty10 the returned material comes back at standard cost when it was issued for avg and then creates a variance
yes we are doing that unless they are scrapped on the job it would be less. Job created/material issued however if we decide we don’t need the job we return the material and it creates a variance due to it issued at average cost and it comes back returned at standard cost therefore creating a variance in a job not produced
Check to see if the “Inventory” box is checked under Company Configuration > Modules > Finance > General Ledger. We attempted to go live with inventory, and checked this box. This created many variances for Finance, so we shut it back off by clearing, until we better understand what reporting disciplines need to take place.
Also, if you are running the Capture COS/WIP Activity, there are settings to Post to General Ledger and/or Post Cost of Sales / MFG Variance, test these settings to see if it turns off all of your noise you are experiencing in Accounting. I am not a finance person, but we are currently not comfortable with our labor reporting discipline, and do not have the Inventory box checked or Capture COS/WIP. I spoke with our Accounting manager, and she said that she does not experience any labor variances that she has to correct.
I don’t know for sure if this will help your problems, just some ideas to test.
If you are 100% Average, then “normally” you should not see any variance IF all the transactions happen in the correct order:
Job created
Mtl Issued/Labor Reported
Job received to stock at cost of all Mtl issued/labor reported in step two
Job Closed - no balance in wip, no variance
BUT… where you can get into trouble is if you dont complete things in the correct order
Job created for 100 pieces
$100 materials issued, $200 labor charged ($300 in wip)
Receive 80 to stock - this moves $240 from WIP to STOCK… leaving $60 in wip
close the job short… Hmm… where does the $60 go? to variance
or:
Job created for 100 pieces
$100 materials issued, $200 labor charged ($300 in wip)
Receive 100 to stock - this moves $300 from WIP to STOCK… leaving $0 in wip
Issue $50 in material (after WIP was received)… WIP is now $50.
Close the job… Where does the $50 go? To variance.
Variance simply tells you that in order to balance out wip, the dollars had to go “somewhere”… you cannot simply leave the balance in WIP. Also, you cannot simply move it to stock because the stock may have been consumed (into other WIP, or shipped to a customer). Many companies in an Average cost environment simply post the variance to a COGS MFG Variance account (Late arriving costs, unknown variance,etc).
Thank you very much! i just checked and the inventory box is clicked.
Are your guys starting production and ending production activity at the correct quantities? do they ever have variances in the quantities they report? what costing method are you using.
Yes we Capture COS?WIP and thats causing a lot of noise and it looks like those two are checked.
This is what it shows below. We just aren’t sure what all is it going to affect and what other settings we have to change/ GL etc.
Post to General Ledger = YES
Post Cost of Sales / MFG Variance = YES
