6/26/2014. Manufacturing to Finance Costing The Bridge Foundation Finance Abutment. Finance Profit. Manufacturing. Sales Revenue. Who Am I?

Transcription

1 Manufacturing to Finance Costing The Bridge Foundation Finance Abutment Standard Cost in the Non Standard World Gary Creasy, Director of Cost Accounting Lang-Mekra NA, LLC 1 Manufacturing /Industrial Engineering, Materials Planning, Purchasing/ Procurement Manufacturing Sales Revenue Final Assembly: Cost Accounting Crossing the Bridge is Inventory Valuation, Variances, and all the records that cost the product and inventory Controller, General Accounting, AP, AR. Financial Analysis Finance Profit Who Am I? BS-IEOR (Industrial Engineering and Operation Research) and MS-IEOR (both from Va Tech) 40 Years In Manufacturing at OEM levels, Mack Trucks, Volvo, and Komatsu Equipment (Construction and Fork Lifts) 2 Years at Lang-Mekra (Tier1 Supplier) 35 Years starting as an Industrial Engineer and thru more than we want to talk about in IE/ME Management and Project Management to Manager. Started the Cost Control Department at Komatsu Newberry, merged into Accounting and did a mix of Cost Accounting, General Accounting, and Asset Management. SAP and other ERP systems all the way back to Keypunch data entry days Became a QAD user in 2012; arriving at Lang-Mekra in September for the late November GoLive; 2012EE On Demand. Want to know more? > Go to 1

2 Focus Key Setup Issues Understanding GL / Item Site Master Relationship Establishing Coding Primary Focus this Presentation Product Line and Item Master Sub Contracting Vs Material Purchase DRP and Costing and Income Statements Routings Just Like Bridge Construction Start at the same point A Disclaimer All examples have a reality basis but created in a Test Environment and are strictly to that slide 4 Item Master /Item Planning Data Master Plan Item Master is the REAL START FOR EVERYTHING Failure is not an option Item Number, Description, Site Using it, Purchasing Site, etc.. Unit of Measure for use in the Inventory and Costing Product Line assignment A key in Costing Choices & Analysis Item Type Freight Codes for regional based costing possible Group Enter such grouping as Raw, Supplies, Subcon, etc.. Purchase/Manufacture D, L, M, or P P Purchased Material L Manufactured Using Advanced Repetitive M Manufactured Material Using Discrete Work Orders D Indicates received from another company plant Site, Network Code structure DRP Used for planning and shipping 5 + Receiving Site Supply Site (01-02 is Site 01 from Site 02) Item Master Item Master Setup Controls Cost per unit Unit of measure used in costing, inventory, MRP, not PO s Freight Costing using QAD vs entered manually Other Cost tied to Materials cost for such items as Handling and Storage or Scrap. DRP (Distributed Requirements Planning) Cost Routing Requirements Sub Contracting It Controls how QAD provides Item Details Item Cost Inventory and how it can be separated using the system It makes life easier for Costing 6 2

3 Bridge to GL Accounts (Transactions) Report, run PO Price Variance, Sub-Account 0100 (Site 01 only), Summary Sub Accounts Yes, Summary of Cost Center No. This gives the separations to indicate ties to products with Prod Line meaningful references. Primary is Actual 7 Matrix Product Lines This is the Tie to GL s and Critical Item Type and Group Control many other elements are common controlled by Planning, etc. How they are setup controls nearly all of the analysis that can be done on inventory valuation and how costing can be more efficiently done Product Line Report 9 3

4 Bridge to GL Accounts (Transactions) Reclass used the Product Line AR00 is called a Raw for this example Common is the ZZZZ entry which is Basically a Dummy Code for Generic Item Master Inquiry 11 Summary Item Master Relations Prod Line is related to Inventory PO Costs PPV Freight GL Item Type is related to Inventory PO Costs Freight Group is related to Inventory PO Many Reports and Browses can be controlled for Valuation of Inventory down to the Customer, Supplier, etc 12 4

5 Freight by Customer or Supplier ######## #### CODE entering the four alpha numeric code assigned to suppliers or customers and using is coding freight invoices gives quick analysis of freight costs. Manufacturing will be expecting this as they know you can do it if all the codes are set. Every Supplier and Customer needs their UNIQUE code for the Work Center/Prod Line ending of the account entry. Sales and Purchasing will be great sources of creation of these codes. 13 Bridge to Inventory Valuation (or use and pick sorts) Inventory Valuation as of by Location AA00 Z000 Prod Line: Use to determine Inventory On hand related to a specific Customer? Or??? Supplier: By Supplier Code ######## s Group: Use determine specific types of parts, more important PUT ALL NON INVENTORIED ITEMS IN A Z--- or back it back to U---- to cover the VMI-C Group; if used. Item Type: Use Freight Code and Site to determine value of items received from specific regions. 14 Bringing It All Together PO Purchase Materials Subcontract Processes Cost Elements Detail Cost Components Calculating and Mapping Costs Standard GL vs Current costs, elements of PPV 15 5

6 PO Material Units not Matching PO and Inventory in same units is not normally an issue for accounting, but Unit Cost: 1.65 PURCHASE PRICE Per PURCHASE ORDER UNIT OF MEASURE Unit of Measure: LB PURCHASE ORDER Currency: USD PURCHASE ORDER Pur Acct: GL# Purchases Sub Account: 0200 Site 02 Material Prod Line: AR00 From Material Master $1.65/lb is divided in QAD to the $ /oz in Standard Cost and Inventory Valuation Unit of Measure: LB UM Conversion: Purchase Order LB to Material Master OZ Is a 1 for 16. PO could be in KG (Kilograms) KG to OZ is UM Conversion: Sub Contracting Not Totally a Material It is a Manufacturing Process It has a Routing, must have cost on Routing or MAKE SURE ROUTING NEVER ROLLS Commonly it s BOM has the Child Levels Overhead is treated the same as Material Freight commonly out and back has Item Types 17 Sub Contractor Routing Processing Routing Cost Roll-Up Normal is Yes Uncheck and Roll Sub Contract Cost Can be Entered MANUALLY to Standard Entered On Routing Roll-Up will Cost CURRENT or STANDARD COST Roll at Year End Properly when Maintained to Price Costing is entering the Cost on the Routing Purchasing Supplies the Pricing or Invoice 18 6

7 Set up of the Example in Item Master Group is SUBCON Item Type is PSC1 (freight location, two directions one ship to and one return for the percentage Purchase/Manufacturing is L which requires a Routing and drives all the Supplier Costs to Routing control. Manual Entry of Sub Contracting Cost using Item (Site) Cost Maintenance ( ) CIM loads to upload to COST will be Changed if Routing Rolls. Yes, you can load Overhead Elements manually. Putting it on the Routing is the BEST approach. 19 DRP A Special, special case, BOM Bill of Material Purch/Manu is L Receiving Site - Shipping Site Material Labor Burden Overhead Subcon Total Other options are Sales with use of PO s with or without Mark-Up Additional Overhead (Freight) is necessary on a distance site; however this will hit Transfer Variance on Price and must be a Reclass 20 Entering DRP Costs A DRP Order is not Material but is a Material Easy method is to enter as a Material Cost as shown If you want additional Overhead add as a fixed item The Overhead will be a Transfer Variance to Reclass If you want to use Current Cost and Receive Variances to Receiving Site there is a manual or batch file sequence to roll it, but WHY. Receiving at Standard and letting all Manu Site Variance fall to PPV in a consolidated P&L if you are treating Site as a Cost Center not Profit 21 7

8 Cost Elements are critical Bridge Component Cost Element Browse ( ) and the Simulation Cost Element Browse ( ) Merged Hist2013 (SIM of Standard GL 2013 prior to Roll); SIM2014, Current, Standard GL Additional Elements have been added for improved detail and analysis of costs. The added cost elements are created using Cost Element Maintenance ( ) Each Cost Set has to have them created. 22 Create the New Elements Cost Element Maintenance Add an Element to the Box, The drop down will show all standard and previously created new ones. Enter Freight and NEXT Category Drop Down Lists the Categories. Freight is assigned to Overhead Assigning it to Material would generate PPV Standard Material against PO Price Enter a Description NEXT and Done 23 Freight Element is added and is in the Category of Overhead If you are creating a SIM Cost Set and want to use the Elements from Standard or Current or even another Sim Set use Cost Element Copy to copy all the Elements. 24 8

9 Full Compliment of Elements All the new carry Overhead and roll to Overhead Cost This Group will use Material as Base This Group will use Sub Contract as Base 25 Behind the Elements of Overhead Percentage Based Freight Ranging from 0% thru variations for regions based on actual costs from the regions from GL Freight H&S Handling and Storage, commonly defined as a percentage of purchased items (based on purchased materials/sub contracting being they re the largest cost vs value added). Costs should be GL Actual or Planned Budget Indirect labor cost (including Procurement/Purchasing) Lease of equipment or depreciation on equipment Cost of floor space All elements that make up material purchase to end user in Production should be covered 26 Behind the Elements of Overhead (cont.) Percentage Base on types of Material ResWas Classic scrap and the percentage based back to Material/Sub Contract PO costing (an allocation method based on the larger percentage that these items are to total cost of goods as any point in the process); but this is only one method, others are possible such as Machining OH RawRes Unique to RAW classed materials, Raw Materials that have an inherit loss such as cutting lengths of tubes or wood; resins, paints, steel plate, etc.. that must be purged between types, etc.. Sub Contract items have SC----- Overhead codes and can have totally different percentages 27 9

10 Item-Site Cost Inquiry (Purchased Item) The elements of Freight, H&S, and ResWas are not Primary items and will roll up as Overhead in Cost of Good Sold. (.22019) They are extremely useful in the analysis of costing for budgets and variance of actual current to standards. 28 Use of , Keys to Success Primary Key Unique Coding in One of Three Fields Pur/Mfg P/L but Sub Contract fails unique Prod Line This is a good one for RAW and Purchased, but most likely will fail on Sub Contract in all cases; and non Raw Purchased will have to be set to such that no Prod Line is actually as WIP or FG but purchased Components only Item Type The codes here can be set to be unique for Freight, and used for everything. Must Have a 0% for items that are Freight paid in PO price VMI-C for Vendor Managed inventory acceptable to charge H&S and No Freight Using something like PUR for New Items pending Source is good How to Setup Rates The Cost Elements in the RED Boxes are the ones to set up for the resultant percentage while Material or Subcontr (Sub Contractor) is the base Element to use to calculate the percentage. To create separate Elements SC is added for the Sub Contract based Elements

11 Sites with Different Factors Not Item Master Issue Product Line, Item Type are all at Item (Part) Level How to handle different Rates Same Item Type (PDSE, etc...) are Site defined Calculate independent rates (PDSE for Site 01 has 5% while PDSE for Site 99 is 3%) Enter at Site Level in Unique Rates for Sites with same Item Type name as this is controlled at Item Master Level 31 Preferred Cost Method to Enter Use Item-Element Cost Calculation and let QAD calculate based on the unique setups Product Line either individual or range Item Number individually or a range (no skipping in range and check QAD order before using this method) Item Type individually or a range that is inclusive of only desired codes Purchase/Manufacturing Code such as P (this will not work with Subcon items as they fall in to L will all the manufactured items Freight is normally individual Region Based Items with Code PDSE Freight (a component of Overhead) will be calculated as % of Material 33 11

12 Full Range Possible with CAREFUL Setup of Item Codes in Material Master Set Cost Element to ResWas and Scrap Reserve percent. Does not cover WASTE (specific to RAW) Waste Smaller Group of Items with two ties Prod Line for the Waste Assumption here is AR00 is a RAW material Waste Entry for Scrap Reserve Smaller Group of Items with two ties Item Type for the ResScrap Two Independent Cost Elements will not overwrite ResScrap 36 12

13 Benefits This is one assembly run out of Product Structure Cost Report (Element) All the details show 37 Closing Summary How it s setup controls the accuracy and detail analysis QAD will provide for not only Financial Reporting but Manufacturing Performance. QAD is an extremely powerful tool when setup Precisely as Needed, Fine Tuned, and allowed to Grow. Any Questions? 38 13