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What it does

  • Captures actual raw material consumption, operation (labor/machine) usage, and any scrap or process losses recorded during production
  • Rolls up these actual costs and compares them to the original BOM estimates
  • Provides detailed breakdowns at the Work Order and batch level (e.g., cost per unit, cost variance)
  • Helps identify cost overruns, inefficiencies, and areas for process improvement
Prerequisites
  • You have one or more Work Orders that have been fully Submitted and Completed under Manufacturing > Work Order > Work Order List.
    • Actual raw material usage has been recorded via Stock Entries (Material Issue) or Delivery Notes for finished goods.
    • Operation times (labor or machine hours) have been tracked on Work Orders or via time‐capture entries.
  • Any fixed or variable overhead (utilities, facility rent, packaging) has been defined either:
    • In a custom field on the BOM/Work Order, or
    • Via an overhead rate in the Cost Center settings under Accounts > Cost Center.

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1.0 Record Actual Material and Labor Consumption

  1. Material Issues
    • When you complete a production run, create a Stock Entry > New Stock Entry with Purpose = Material Issue (or use Delivery Note if you are directly shipping finished goods).
    • In the Items grid, for each raw material:
      • Item Code: scan or type the component.
      • Qty: enter the actual quantity consumed (e.g., 52 kg of Flour vs. 50 kg estimated).
      • Source Warehouse / Bin: confirm location.
      • If batch/serial tracked, assign Batch No. or Serial No..
    • Click Save, then Submit to post the ledger entry, deducting inventory and capturing actual cost at the purchase‐rate.
  2. Operation Times / Labor Capture
    • On a Work Order > Work Order List, open the completed Work Order record.
    • In the Operations section, ensure each step has logged:
      • Actual Time Spent (minutes or hours logged by operators or supervisors).
      • Workstation (machine or labor station) used.
      • If you track hourly rates per workstation, these rates should be set under Manufacturing > Workstation > Workstation List.
    • If your organization uses a separate time‐capture tool, import or manually enter actual operation times into these fields, then click Save, Submit (if not already).

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1.1 Run the Production Costing Report

  1. Navigate to Manufacturing > Reports > Production Costing Report.
  2. In the filter panel, set:
    • Work Order: select the completed Work Order you want to analyze.
    • Company: choose your legal entity.
    • Include Estimates (toggle): if you want to compare estimated (BOM) vs. actual costs side‐by‐side.
    • Date Range (optional): to group multiple work orders into a single report.
  3. Click Refresh (or Run). The report displays:
    • Raw Material Estimated Cost (from BOM) vs. Actual Material Cost (from issued stock at purchase rates).
    • Operation Estimated Cost (BOM operation rates × planned time) vs. Actual Operation Cost (actual time × workstation rate).
    • Overhead Cost (if defined) and whether actual overhead matches what was allocated.
    • Total Estimated Cost, Total Actual Cost, and Cost Variance (difference).
    • Cost per Unit Estimated vs. Cost per Unit Actual.
  4. Review each component to see where variances occurred (e.g., raw material overconsumption, extra labor hours, scrap).

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1.2 Investigate and Adjust BOMs or Processes

  1. In the Production Costing Report, click on any row (e.g., a raw material line with variance) to drill into detailed transactions:
    • For raw materials, it opens the Stock Ledger filtered to that Work Order’s material issues, showing purchase rates and batch details.
    • For operations, it opens the Work Order’s Operation Log, displaying actual start/end times.
  2. Identify root causes for variances:
    • Material Overuse: check if wastage or scrap was higher than expected—inspect Scrap & Process Loss in that BOM.
    • Labor Overrun: verify if machine downtime, rework, or operator skill impacted actual time.
    • Rate Discrepancies: ensure purchase rates used match negotiated supplier prices; update item master if rates have changed.
  3. If a BOM requires adjustment (e.g., refine quantity of raw material or operation time), update the BOM and create a new revision under Manufacturing > Bill of Materials > BOM List, then re‐estimate for future work orders.

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1.3 Aggregate Multiple Work Orders for Periodic Cost Analysis

  1. To view costs across multiple orders, set filters in the Production Costing Report:
    • From Date / To Date: e.g., last month or last quarter.
    • Production Item: filter by a specific product or product family.
    • Workstation: compare costs across machines.
  2. Click Refresh. The report aggregates:
    • Total Estimated Material Cost vs. Actual Material Cost for all selected orders.
    • Total Estimated Operation Cost vs. Actual Operation Cost.
    • Combined Cost Variance and Overall Batch/Unit Cost.
  3. Export the summary to CSV or PDF for use in budgeting, variance analysis, and management review.