Import Material Cost Variance

SUGGESTED

Hello,

We are on Sage X3 2019 R4 (12.0.19).

We are importing raw materials and when the stocks are arrived, we need to issue those into production as we are in a tight planning schedule. Received materials will be issued to production with the average cost at that time.

Once the additional invoices such as shipping line charges, custom tax duties, clearing agent handling charges are available (probably after one or two weeks) we create them as additional invoices to the main supplier invoice. These additional costs cannot be predefined to exact amount.

At that time per unit cost gets changed to a higher/lower amount.

As we already issued those materials into production, there is a variance (under/over value) cost which we believe should be absorbed by cost of production account.

Sample scenario:

PO - net unit price                                : $ 10

With landed cost stock unit cost           : $ 12 (Landed cost coefficient = 1.2)

Purchase receipting                             : 10000 units

Stock unit cost                                     : $ 12

Qty issued to production                      : 2000 units (by material tracking)

With actual landing cost stock unit cost : $ 15 (with additional costs)

Variance cost of the issued material     : 2000 * $(15-12) = $ 6000

We need the above variance to be absorbed by our cost of production account.

Hope someone can help us on this.

  • 0
    SUGGESTED

    If your valuation method is Cumulative AUC, FIFO or LIFO for your products, you can use the Cost Adjustment function(FUNSTKADJ) to absorb these costs. On the valuation method, set  "Adjustment of Issue Prices" = Yes and "Adjust receipt prices" = checked. Ideally, a recurring task for FUNSTKADJ should be set up, with short intervals, to avoid lengthy processing times. DO NOT use FUNSTKADJ if negative stock is authorised and receipt transactions are later than issue transactions.

  • 0

    >>these additional costs cannot be predefined to exact amount.

    Having read that, If your landed cost are somewhat predictable you may want to use the estimated method instead of the actual method.   Then you charge the actual cost against the estimated accruals.   At the end of the year, or periodically,  you adjust your estimates to match them  as close to the actual as possible.

    This is a lot less work.  

    Some might argue is it less accurate but others might argue that because you are passing through the estimated cost to the work order as you said "As we already issued those materials into production, there is a variance (under/over value)" the actual cost of that work order is more accurate with SOMETHING absorbed than nothing absorbed and the amount ending in a variance account or just pushed into cost of production.

    It looks like you just under costed you work order by $ 6,000 above.

    This method was further enhanced in version 9.0

    Advanced Purchasing Costs Management

    A new feature on the management of APC (Advanced Purchasing Costs) enables users to foresee the purchase costs for international imports using international standards (incoterm) or inland purchases.
    This feature allows two methods to manage calculation of purchase costs:
    • Landed cost coefficient (coefficient + cost per unit)
    • Cost structure
    The objective is to estimate the purchase cost of goods, along with the logistic operations included in the supply chain. 
    The logistic operations can span a range of different steps: from packing, loading operation, export customs, to post routing.
    The landed cost coefficient has been added to unitary and fixed costs to calculate the product purchase cost. The product purchase cost is composed of a cost structure including different added costs. The purchase cost can be defined per site. The costs can
    be updated by purchase invoices.
    Benefit: Ease the tracking of purchase costs to ensure profitability with more flexibility of
    costs setup

  • 0 in reply to Qeqesha

    Thank you for your response. It worked. Stock unit costs of the issued materials were adjusted. But it also changes unit cost of the materials of WO's which were closed and costed. Will this affect the actual costing of previous work orders?

  • 0 in reply to Chathuranga Ramanayake

    That is the idea, to calculate the correct cost of goods, by including all manufacturing input costs such as for raw materials after receipt of all actual costs. If you do not wish this, those additional costs can be posted to a designated cost/Loss account.

  • 0 in reply to Stephen

    Thank you very much Stephen for your elaboration on calculating of the landed cost. This is very helpful for us to get an idea on estimating the unit cost.

  • 0 in reply to Chathuranga Ramanayake

    Great.   And thank you for letting Sage City know that it helped.