## Monday, December 10, 2018

### Standard Costing > Calculation of Production Price and Production Quantity Variance on Assembly Build GL Impact

Brief Background:

One of the items on the assembly is has been replaced on the inventory cost revaluation however components on item record and on assembly build are the same

On Item Record - the components with Cost and Quantity (the information is available at Purchasing/Inventory tab>Components subtab)

Components ----  Costs ----  Quantity

Item A = 40,000
Item B = 100,000
Item C = 43,765.70
Item D = 66,000
Item E = 40,000

* Note:  The Item Components A, B, C, D, E are also the same item components on the Assembly Build = 48 items were built

GL Impact of Assembly Build

Finished Goods -------------- 1,821,725.28
Production Quantity Variance ------------------------- 209,808
Production Price Variance --- 11,750.41
Raw Materials ---------------------------------------- 2,937
Raw Materials ---------------------------------------- 3,552
Raw Materials ---------------------------------------- 21,427.69
Raw Materials ---------------------------------------- 1,584,000
Raw Materials ---------------------------------------- 11,750.40

On Inventory Cost Revaluation

Item A
Item B
Item C
Item D
Item F (Item E has been replaced by Item F)

Details:

Component Items ----- Cost ------ Quantity

Item A -------------- 61.20 ----- .00153
Item B -------------- 74.00 ----- .00074
Item C -------------- 446.41 ---- .0102
Item D -------------- 36,300 ---- .55
Item F -------------- 1,071 ----- .014

A = Production Price Variance = Actual Quantity Used * (Actual Cost - Standard Cost)

1. Open the Assembly Item Record>Go to Related Records>Transactions tab and check the Inventory Cost Revaluation used for the assembly item
2. Open the Inventory Cost Revaluation to compute for Standard Cost

Standard Cost = Cost of item components divided by Quantity

Item A = 61.20 divided by .00153 = 40,000
Item B = 74.00 divided by .00074 = 100,000
Item C = 446.41 divided by .0102 = 43,765.69
Item D = 36,300 divided by .55 = 66,000
Item F = 1,071 divided by .014 = 76,500

3. Get the Average Cost of the item from the item record

Components = Costs

Item A = 40,000
Item B = 100,000
Item C = 43,765.70
Item D = 66,000
Item E = 40,000

4. Subtract Actual Cost to Standard Cost, the Difference will then be multiplied to the Actual Quantity Used from the Assembly Item Record.

Components - Actual Cost - Standard Cost - Difference - Actual Quantity Built - Variance

Item A ----- 40,000 ------ 40,000 -------- 0 ---------- .07344 ---------------- 0
Item B ----- 100,000 ----- 100,000 ------- 0 ---------- .03552 ---------------- 0
Item C ----- 43,765.70 --- 43,765.69 ----- .01 -------- .4896 ----------------- .01
Item D ----- 66,000 ------ 66,000 -------- 0 ---------- 24 -------------------- 0
Item E ----- 40,000 ------ 0 ------------- 40,000 ----- .29376 ---------------- 11,750.40
Item F ----- 0 ----------- 76,500 -------- (76,500) --- 0 --------------------- 0

Total Production Price Variance ------ 11,750.41

B = Production Quantity Variance = Standard Cost * (Actual Quantity - Standard Quantity)

1. Open the Assembly Item Record>Go to Related Records>Transactions tab and check the Inventory Cost Revaluation used for the assembly item
2. Open the Inventory Cost Revaluation to compute for Standard Quantity

Standard Quantity = Quantity multiplied by the number of items built

Item A = .00153 * 48 = .0734
Item B = .00074 * 48 = .0355
Item C = .0102 * 48 = .4896
Item D = .55 8 48 = 26.40
Item F = .014 * 48 = .6720

3. Get the actual quantity built from Assembly Build page

Components = Costs

Item A = .0734
Item B = .0355
Item C = .4896
Item D = 24.00
Item E = 14.1005

4. Subtract Actual Cost to Standard Cost, the Difference will then be multiplied to the Actual Quantity Used from the Assembly Item Record.

Components - Actual Qty - Standard Qty - Difference - Standard Cost - Variance

Item A ----- .0734 ------ .0734 ----------- 0 ---------- 40,000 -------- 0
Item B ----- .0355 ------ .0355 ----------- 0 ---------- 100,000 ------- 0
Item C ----- .4896 ------ .4896 ----------- 0 ---------- 43,765.69 ----- 0
Item D ----- 24.00 ------ 26.40 --------- (2.40)  ------ 66,000 -------- (158,400)
Item E ----- 14.1005 ------ 0 ----------- 14.10 -------- 0 ------------- 0
Item F ----- 0 ----------- .6720 -------- (.67) -------- 76,500 -------- (51,408)

Total Production Quantity Variance ------ (209,808)