Why we get Variances during production Process - SAP business One

 Why does production variance (total variance) occur? What happens to the total variance when you close the production order?


If there is a difference between the value of the issued components and the received products, this results in production variance, which is referred as total variance in the application.

Production variance often occurs because of the following:

1. Component overconsumption: The quantity of components consumed in production was greater than planned, which causes a negative variance.

2. Component savings: The quantity of components consumed in production was less than planned, which causes positive variance.

3. "Receipt before issue" scenario: The receipt from production is added before the issue for

production. In this scenario, the product cost is based on the product cost estimation, which is derived from:


a) The current production order structure (in other words, the list of production order components along with their planned quantities).

b) The current component cost.

Note:

If the production order structure or component cost changes in between adding of the Receipt from Production and the Issue for Production, this results in production variance.

For products with valuation method other than standard, the following applies:

When closing the production order, the following calculations are made:

- Firstly, the system sums the values of the received products and by-products from all receipts from production.

- Secondly, the system sums the values of the issued components from all issues for production and receipts of returned components. If there is a difference between the two summed amounts, the difference is referred to as total variance in the application and is shown on the Summary tab of the production order.

During closure of the production order, the product is revaluated according to the actual cost of the issued components. This way, all product cost estimations are replaced with actual costs from the issues for production, and the production variance is usually cleared.

To determine the contribution of each component to the final production variance, you can run the variance report (available as of SAP Business One 9.3 PL02 and above). To run the report, in the Production Order window, on the Summary tab, click the link arrow to open the Variance Report.


Note:

If you need to perform a manual analysis of the product cost and production order variance, be sure to use the document’s creation date rather than the posting date; this allows you to sort the transactions according to the order in which they were added.

These are my experiences with production variances feel free to share more 

Comments

Post a Comment

Popular posts from this blog

Transaction Notifications - SAP business one

  What are Transaction notification in SAP business one Transaction notifications in SAP Business One are alerts or warnings that can be set up within the system to notify users or trigger specific actions when certain transactions or events occur. These notifications help businesses enforce internal controls, prevent errors, and ensure data accuracy. Here are some key points about transaction notifications in SAP Business One: Purpose: Transaction notifications are used to monitor and control critical business processes. They can be configured to enforce specific rules, validate data, and notify relevant users about events that require attention. Types of Notifications: There are various types of transaction notifications, including: Warning Messages: These notifications display a warning message to the user but allow the transaction to proceed. 1.Error Messages: These notifications prevent a transaction from being processed until the issue is resolved. 2.Approval Requests: Notificati
Read more

Top 3 Questions on Printing Checks for Payment in SAP Business One

Image
  SAP Business One provides some special functions for Check for Payment, ranging from the definition of a House Bank Account to printing a batch of Checks for Payment. These are the Top 3 Questions we see in SAP Business One Support about printing Checks for Payment. Question 1: How do you print Checks for Payment if the checking account is locked? SAP Business One will not allow you to print a check when another user is accessing the checking account. The Check Printing will be locked at that time. Sometimes the lock is not released, and if you try to print the Check for Payment, you will see the message ‘You cannot print checks while another user is accessing this checking account’. To release the lock, complete the following step: Under   Administration   →   Setup   →   Banking   →   House Bank Accounts , deselect   Lock Checks Printing   for the relevant bank accounts. Question 2: How can you set default print layout for your Checks for Payment? When you open the Check for Paymen
Read more

How to Import Fixed Assets Legacy Data into SAP Business One from Excel

  If you are implementing SAP Business One Fixed Assets solution and you are confused how to import the legacy data, this article will help you. A simple example will show you how to import opening balance from Excel. Business Scenario: Your company owns a car. It was acquired in September 2016 with price 600000 EUR and it is expected to be used for 10 years. This car started depreciation since September 2016 and 20000 EUR has been depreciated in year 2016. Now you would like to implement the Fixed Assets solution since year 2017 and import the value of this car into SAP Business One. What need to be done? Steps: Enable Fixed Assets solution Go to Administration -> System Initialization -> Company Details -> Basic Initialization, tick the checkbox ‘Enable Fixed Assets 2.  Define the basic parameters for Fixed Assets management Account Determination: Administration -> Setup ->Financials ->Fixed Assets -> Account Determination        Example: FA Motors (Motor Ve
Read more