We are new to Epicor(10.2.600.2) using AVG cost and are having WIP headaches. We mostly make to stock but do some Make to order. Our Make to Order jobs are not clearing WIP.
1- The part is set to Manufacture, Avg costing method, Non-Stock Item and Quantity bearing
2- The sales order is ticked for Make Direct
3- The Job demand summary shows in the Make to Order tab with the link to the Sales order
4- Job is complete with correct quantity and costs
5- Customer shipment is created from manufacturing with a job ship qty and showing the job number
Work in process report is showing the Job Value in COS-MFG-VAR, I feel like we are missing something in our setup or in our understanding of how it is supposed to work. The flow chart in the course notes has the final box in the flow chart as Ship from Wip which I thought No.5 did.
One of the biggest misunderstandings in Epicor costing is the meaning of AVG cost. More correctly, this is the average cost of inventory and not of manufacturing. ONLY RECEIPTS TO INVENTORY ARE USED TO CALCULATE AVG COSTS. When you make to order, that job is NOT used when calculating the AVG cost. The same is true for purchase direct to a job. That cost is not used to calculate the avg cost either because it never goes into inventory.
I assume “COS-MFG-VAR” is the name of a GL account, and not a transaction type.
What tran types are hitting that GL acct?
The “Epicor ERP Inventory Transactions Technical Reference Guide” explains what accounts each tran type should hit.
Some examples for the various contexts of a MFG-CUS part tran:
Post Material Cost to WIP and AR Clearing Accounts
Executed for MFG-CUS transaction when AR Clearing Account is used. Posts Material Cost amount to WIP and AR Clearing accounts. Debit and Credit accounts depend on sign of the Material Cost amount.
Post Material Cost to WIP and COS Accounts
Executed for MFG-CUS transaction when AR Clearing Account is not used. Posts Material Cost amount to WIP and COS accounts. Debit and Credit accounts depend on sign of the Material Cost amount.
And there’s 10 more of these … You get the picture.
The “Epicor ERP Inventory Transaction Hierarchy” document shows you the order in how the GL accts are determined for the tran type
The part is set up as average as are all parts in our system however my understanding for “make direct” is that the cost logged on the job are the ones used and not the average. The estimates are coming from the method and are mainly labour plus some raw materials(steel) which is being pulled from inventory. Actual’s logged both material and labour are within a few cents of the Estimate
COS-MFG-VAR is the heading on the standard Epicor Work in Process Report.
We do not use AR clearing
I will examine the WIP Account Reconciliation report and see if I can follow the ledgers.
But for the Work in Process Report it starts off on the WIP line then once shipped hits the “COS/MFG-VAR” line but if it was working correctly I would expect it to start on the WIP line and then once completed and shipped move to the “To Inventory/To Job” line
The cost for the job is carried through for the margin/profit of the sales related to that job. Since the job itself is tied to the Sales order, it never hits inventory, so the cost for the order is actually the cost of the job. As @Mark_Wonsil stated, only receipts into inventory will affect your average cost.
Acct’s 1127-00-01 (AR Clearing) and 1152-00-01 (WIP), both net to zero. And the original cost from 1151-00-01 (Raw Mtl Inv) exactly matches the amount in 6379-00-01. This is exactly how I expect the material costs of a Build to Order job to flow.
So why does the WIP report show a value in the “COS/MFG-VAR” line?
Does it not mean that there is $138.72 of cost that needs to create a variance transaction?