First release work orders to manufacturing. Having checked Into Spec Sublevels when releasing work orders and having already checked Doc Type for WO Created from Items Register in Administration Panel | Program Parameters | Manufacturing | General | Additional Parameters box, three work orders will automatically be released for PRODUCTK. In our case this means:

• a work order document type 600 created for 1 piece of PRODUCTK and subsequently through it due to multi-level specification settings as well as selected document types,
  • in document type 6P0 for one piece of SEMIPRODI
  • in document type 6K0 for one piece of SEMIPRODII

You will proceed with work order processing from bottom level up.

For images of specification and resources see Specification and Resource - MF topic. For images of movements see Movements topic. For images of posts see Posts and Reports topic.

 1. Manufacturing SEMIPRODI

Manufacturing 1 piece of SEMIPRODI consumes

• a piece of MAT1 priced at 100€ and
• 1 hour of PRODSER for the price of 100.

Total price of semi-finished product comes to 200€.

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

Automatically posting material consumption for internal receiving and internal issues: 

4000D/3100K	100€	material consumed
6301D/6000K	200€	price of semi-finished product SEMIPRODI

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. Manufacturing SEMIPRODII

Manufacturing 1 piece of SEMIPRODII consumes

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

Use document type from simple manufacturing 6K 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/6301K

200€

a valuation price of transferred semi-finished product to subcontractor

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

When at least one document type for subcontractor's collective invoice is entered in the Document Types settings you can create a work documentation report from specification displaying the following data:

• Subcontracting requisitions - Shows a planned consumption of semi-finished products, materials, etc. (in our case: 1 piece of SEMIPRODI)
• Subcontracting work slips - Shows a planned amount of services provided by subcontractor (in our case: 1 piece of SUBCON) as well as a planned quantity of processed items (in our case: 1 piece of SEMIPRODII)

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

2.b.1. Internal issue slip (document type K30)

 

Because you stocked semi-finished products at subcontractor's warehouse, subcontractor specified in External Resources register will be used when creating internal issue slip (document type K30)..

The following can be found in material 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 200€. Mark issue in Issue panel when processing work order as usual.

The issue slip for subcontractor's service holds the following:

• 1 piece, or better, 1 hour of subcontractor's service. Confirming the operation the price of service equals 0. Later you can set the price for it using the subcontractor's invoice (see next item - Subcontractor's Invoice). In our case its value is 5000€. Mark issue in Subcontracting panel when processing work order. The Sub-contracting panel is active only if you set at least one document type in Document Types settings for use in subcontractor's collective invoice.

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 K10). 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 invoices issued reports, etc.)

	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!

 2.b.2. Subcontractor's invoice

 To create a collective invoice of subcontractor services 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/2,200K	5000€	service price (excluding VAT)
1600D/2200C	1000€	VAT on service provided by subcontractor

2.b.1. Internal receiving (document type K10)

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

a semi-finished product SEMIPRODI worth 200€

subcontractor service worth 5000€

in the end making up price of 5200€ for SEMIPRODII

 

Automatically posting internal receiving of SEMIPRODII;

6301D/635C

5200€

price of semi-finished product SEMIPRODII

3. Manufacturing PRODUCTK

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

Manufacturing 1 piece of PRODUCTK consumes

• 1 piece of SEMIPRODII (priced at 5200€)
• 1 piece (1 hour, that is) of own production service SERPRO priced at 100€

Automatically posting internal issue and receiving at retail warehouse:

6000D/6301C	5200€	transfer consumption to costs
6330D/6000C	5300€	transfer own product price to own retail stock

The difference between debit transactions in account 4000 and credit transactions on account 4000 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	Credit Transactions	Balance
1	Payables	2200		6000€	6000 € C
2	Receivables for input tax	1600	1000€		1000 € D
3	Inventories of materials	3100		100€
4	Material costs	4000	100€
5	Transfer 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

 

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

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 consumed that is not posted automatically from material consumption.

The value of quantity of own services consumed contained in the product and work-in-progress 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 620, 660 and 690)
• 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)

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