Cost price included in work orders is calculated according to the following formula:

Let us take a look at how the cost price is calculated:

Let us say we produced 420 pieces of product A. Below are listed components required in production:

Having confirmed work order the currently valid valuation price is used in evaluating material consumption.

Clicking Refresh Stock recalculates cost price in two possible ways regardless of which setting you set for work orders in program parameters:

1. Cost Price Is Equal for all Receipts of Completed Product

• It finds all processings of the individual WO;
• The cost price is calculated in the following way: First it sums up all posted amounts of material from document of issue for the entire work order, this is followed by dividing with the total number of manufactured products.
• Next, cost price is multiplied by the number of products on all documents of receiving, in this way getting the value in individual document used for posting receipts.

Consequently, documents used for posting material issues as well as those used for posting product receiving of the same production are not equal (except if only one production/processing has been confirmed for a WO).

2. Cost Price Varies According to Sum of Materials for Each Reception

• It finds all processings of the individual WO;
• The cost price is calculated in the following way: First it sums up all posted amounts of material from document of issue for individual confirmed WO, this is followed by dividing with the number of products manufactured at that time.
• Next, cost price is multiplied by the number of products on document of receiving, in this way getting the value in individual document used for posting receipts.

Consequently, documents for posting material issues as well as those used for posting product receiving of the same production are equal.

By default the 1st method is set (Cost Price is Equal for All Receipts of Completed Product)

Sample WO including Processing (4):

Report of WO cost analysis which is equal regardless of the type of method used:

Ad 1. The default setting is set in the Administration Panel | Program Parameters | Manufacturing | General | Cost Price Calculation:

Cost Price Is Equal for all Receipts of Completed Product Cost price is thus calculated on the basis of the total use of materials on the work order.

Refreshing stock in this way gives different values in relieving inventory and posting products should the work order be open at the same time when posting material consumption (status D). That is, because values of posted products will be changed also for the period the material consumption was already posted.

CONCLUSION:

• If you do not close months, cost price gets calculated as the sum of individual materials used, that is, according to the work order (in the way as mentioned in the table above, more precisely, in the column "Method 1").

Below you can see an example of warehouse card after refreshing stock completes:

• Having been closing months (that is, you entered Goods Period End in the settings) and there is document 006400100 in February, 006400112 in March and the remaining two in April, then prices of products delivered with 006100100 will be 240.00 €, 006100112 will be 250.00 €, 006100125 and 006100138, respectively, 255,00 €.

Sample of the same WO using both methods (method 1 and 2), followed by the posting period of material consumption:

After refreshing stock following the 4th processing and posting used material (for 3rd and 4th processing, since the used material was already relieved from inventor for the 1st and 2nd processing), the posted value for products is by 100 € too low. This happens because values were modified for the period when material consumption was already posted.

It should be noted that establishing of cost price of one work order where value of posts changes is important only by the close of financial period (that is, on an annual, quarterly or monthly basis). That is because of the fact work orders which you are trying to close within financial period you do not monitor work in progress. Due to all this you calculate total (average) value of materials used as well as total (plus, average which follows from this) value of issues for one work order.

If such solution were not used, mistakes happening by entering work orders would not be tolerated and any subsequent debiting of purchase price for input materials. Thus, the solution provides an acceptable compromise between a flexible system and correct functioning of the application.

Ad 2. The default setting is set in the Administration Panel | Program Parameters | Manufacturing | General | Cost Price Calculation: 2. Cost Price Varies According to Sum of Materials for Each Reception

Refreshing stock in this way gives equivalent values in relieving inventory and posting products should the work order be open at the same time when posting material consumption (status D). That is, because cost price of deliverables is established for each individual delieverable received.

CONCLUSION:

• Regardles of whether or not you closed months (that is, having entered Goods Period End in settings), cost price of deliverables will depend solely on used materials pertaining to the deliverables in question (that is, as entered in the "Method 2" column).

It should be noted that establishing of cost price of one work order where value of posts changes is important only by the close of financial period (that is, on an annual, quarterly or monthly basis). That is because of the fact work orders which you are trying to close within financial period you do not monitor work in progress. Due to all this you calculate total (average) value of materials used as well as total (plus, average which follows from this) value of issues for one work order.

If such solution were not used, mistakes happening by entering work orders would not be tolerated and any subsequent debiting of purchase price for input materials. Thus, the solution provides an acceptable compromise between a flexible system and correct functioning of the application.

Below you can see an example of warehouse card after refreshing stock completes: