First release work orders to manufacturing. Because you selected corresponding IDs of manufacturing document types for each semi-finished product or product in the specification in Items register, it will automatically issue three work orders when opening it for PRODUCT-K. In our case this means:

• using document type 600 for 1 PRODUCT - K and through it multi-level specification and corresponding selected document types (see also manufacturing using multi-level specification).
  • in document type 6P0 for one piece of SEMIPROD01
  • in document type 6K0 for one piece of SEMIPROD02

Process work orders from bottom up (at least in case when there semi-finished products stock is insufficient).

To view images of specifications see Specifications. For images of movements see Movements topic. For images of posts see Posts and Reports topic.

 

1. Producing SEMIPROD01

Manufacturing 1 piece of SEMIPROD01 consumes

• a piece of ASSEMBLY1 priced at 50€ and
• 1 hour of OPERATION01 at the price of 10 €.

Cost price of semi-finished product comes to 60€.

We used pre-defined document type 6P0 used in simple manufacturing and material issues as well as services required in manufacturing will be collected in document 650. Recieving of semi-finished product will be collected using document type 720. Both receiving as as well as issue are recorded at the WO warehouse.

Automatically posting material consumption for internal receiving and internal issues: 

4000D/3100C	50 €	material consumed
6301D/6300C	60 €	price of semi-finished product SEMIPROD01

The difference between debit transactions in account 4000 and credit transactions on account 6000 is equivalent to the value of own service that is not posted automatically from material consumption.

 2. Producing SEMIPROD02

Manufacturing 1 piece of SEMIPROD02 consumes

• 1 pcs of SEMIPROD01 and
• 1 piece (1 hour, that is) of subcontractor's service SUBCON.

Use document type from simple manufacturing 6K0 in subcontracting. Here all semi-finished products and services required in production will be issued using document type K3. Semi.finished product will be received using document type K1.

Since you issue a data request on semi-finished products in stock with subcontractor, you have to first transfer required semi-finished products to the subcontractor.

2.a. Transfer semi-finished product to subcontractor's warehouse

Here you transfer 1 piece of SEMIPRODI to subcontractor for further processing.

Automatically posting material consumption for transfer:

635D/6301C

60 €

a valuation price of transferred semi-finished product to subcontractor

2.b. Work order processing - internal receiving, internal issue (plus subcontractor's invoice)

Having received a subcontractor's packing slip for 1 piece of adequately processed SEMIPROD02, proceed by creating a work order for the following transactions:

2.b.1. Internal issue slip (document type K3)

Because of transferring semi-finished products inventory to subcontractor's warehouse, the issue (document type K3) will be defined so that inventory will be relieved from it.

The following can be found in issue slip:

• 1 piece of SEMIPRODI - that is, a semi-finished products used in production or which was used in assembling SEMIPRODII. Its worth is 60€.
• 1 piece, or better, 1 hour of subcontractor's service. It can have a fixed nominal price - in this case service valuation price is entered in issue slip already when processing work order, or better, when creating issue slip. Or you can subsequently enter price of subcontractor's service rendered (see next item dealing with subcontractor's invoice). Its worth is 25€.

	This document is only required in calculating price of item delivered from subcontractor (value of materials used and subcontractor's service provided) as well as in relieving "inventory" of materials transferred to subcontractor.
	Set different document types: Transfer to subcontractor's warehouse (as in item 2.a above) returning materials back to warehouse for use in production and then the issue slip from the warehouse used in production In this case you must post all three transactions mentioned above!

 

In this case DO NOT POST material issue slip used in subcontractor manufacturing. Product stock in finishing stage will be unburdened indirectly by internal subcontractor delivery (see item 3, document type K1). For this purpose you needn't set accounts for automatic posting in the document type.

(In addition, should you check For the Record it won't even appear in automatic posting. But in this case you cannot include it in the material movements report nor in invocies issued reports, etc.)

 

2.b.2. Subcontractor's invoice

Customer from work order is entered in internal issue slip when using Simple manufacturing module (see example of movement in Movements). It is wise to select own company as customer (make-to-stock manufacturing). Having created collective invoice you can change the subject by entering subject's ID (subcontractor's) in invoice header.

 To create a collective invoice of subcontractor setvices use lines of internal issue slips (see Receiving Collective Subcontractor's Invoice). Here you can then enter or change price of services provided by the subcontractor. Then proceed by confirming calculation thus acquiring price of the product delivered by subcontractor (see Calculation Using Collective Subcontractor's Invoice).

You will burden the same account for recording materials/products/not yet completed production in finishing stages for the amount of services provided by subcontractor as you burdened by transferring to subcontractor's warehouse (see step 2.a). In this case we transfer products to subcontractor for finishing stage and that is why the entire procedure is carried out via the Products in process of completion and modification account - 635.

Thus, it would be wise if you enter item ID for each subcontracting services separately as well as enter account to be burdened in the Cost Account field (see Items | General | Accounts box). The account is offered by default as the account for debit posting when having entered subcontractor's invoice.

Automatically posting subcontractor's invoices received:

635D/2200C	25 €	service price (excluding VAT)
1600D/2200C	5 €	VAT on service rendered by subcontractor

 

2.b.1. Internal receiving (document type K1)

You received SEMIPRODII from subcontractor, for which the following was used:

+ 60 € for SEMIPRODI semi-finished products

+25 € for service rendered by subcontractor

= in the end making up cost price of 85€ for SEMIPRODII

 

Automatically posting internal receiving of SEMIPRODII;

6301D/635C

85 €

cost price of semi-finished product SEMIPRODII

3. Manufacturing PRODUCTK

Having obtained all the required semi-finished products and materials proceed with manufacturing the product.

Manufacturing 1 piece of PRODUCTK consumes

• 1 piece of SEMIPROD02 (cost price of 85€)
• 1 piece (1 hour, that is) of own production service OPERATION02 priced at 20€

Automatically posting internal issue and receiving at retail warehouse:

6000D/6301C	85€	transferring to work-in-progress stock
6330D/6000C	105€	transferring work-in-progress inventory to stock of own product

The difference between debit transactions in account 4000 and credit transactions on account 6000 is equivalent to the value of own service that is not posted automatically from material consumption.

4. Transfer Material Costs to Work in Progress

To wrap up the example we still have to transfer material costs to the account for production in process of completion by the end of accounting period. To do this in a most easy and straight-forward way use the automatic posting template (see Transfer Costs to Stock):

 

Journal entry used in transferring material costs to work-in-progress inventory:

6000D/4900C

100€

transfer costs to work-in-progress inventory

 

5. Overview of general ledger balance after performing all posts

As can be observed from all of the above-mentioned posts you can view the following after entering all posts:

		Account	Debit Transactions promet	Credit Transactions promet	Balance
1	Payables	2200		6000€	6000€ C
2	Receivables for input tax	1600	1000€		1,000 € D
3	Inventories of materials	3100		100€
4	Material costs	4000	100€
5	Transfer cost to stock	4900		100€

6

Transfer cost to stock

6000

5300€

5500€

200 € D

7	Product stock for production	6301	5400€	5400€	balanced
8	Work in process of completion	635	5200€	5200€	balanced
9	Products in own retail store	6330	5300€		5300€ D

6. Value of Quantity of Service Consumed

The difference between debit transactions in account and credit transactions on account 6000 is equivalent to the value of own service that is not posted automatically from material consumption.

The value of quantity of own services consumed contained in the product value can be found in the material movements report (default settings) by:

• restricting report by item type 700
• selecting internal issue movements where you record own manufacturing services (by default 62, 66 and 69)
• specifying dates for packing slips (e.g month for which you already posted material consumption and for which end date of material movements was entered)

Template settings for material movements with such criteria is already pre-defined and having the following title "Own Services Rendered for Product Stock" (see also relieving inventory of material consumption).

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