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Evo-ERP and DBA Classic >> Problem Reports - Repeatable >> Final WO receipt - Negitive AVG Cost!!
http://www.istechforum.com/YaBB.pl?num=1170194568

Message started by kevind on 01/30/07 at 14:02:48

Title: Final WO receipt - Negitive AVG Cost!!
Post by kevind on 01/30/07 at 14:02:48

Periodically, we get negative Average cost figures in Inventory on Manufactured
items. I always wondered how this was happening, now I think I know.

It seems to happen when we have a work order with multiple partial receipts.

We use standard cost for the partial receipts, then answer yes to 'Does this complete the WO' on the last one.

Sometimes, it calculates a negative $ amount for the final receipt. It seems to do that
if the Standard cost is lower than the actual. When it does that, the last cost gets
set to the negative figure that it comes up with and the average ends up negative.

I don't think it is suppose to work that way.

Title: Re: Final WO receipt - Negitive AVG Cost!!
Post by David Waldmann on 01/31/07 at 04:18:31

kevind wrote:

I don't think it is suppose to work that way.

Well, it has to or you will have overstated your costs.

If you don't want it to, you can manually enter a cost on the last receipt and then you will get an entry posted to your WIP Variance.

When we do partial receipts we manually calculate the costs (usually we can take the current total actual costs divided by units made so it's pretty easy), and then the last one comes out right.

Title: Re: Final WO receipt - Negitive AVG Cost!!
Post by kevind on 01/31/07 at 08:58:30

Ok, Here is what I did in 'The Manufacturing Answer'

1. Started out with 0 A-200 Wheel Assemblies in stock
2. Last, Avg, and Std costs = 3.2195
3. Created WO for 20 A-200's
4. Issued All materials
5. Entered labor of .5 hours
6. Turned in production of 10 assemblies at STD cost
(Note: Routing says 1 minute per assy, I am posting in 3 min per assy.)
7. Entered Labor of .25 hours
8. Turned in production of 5 assemblies
9. Entered labor of .25 hours, answered Y to sequence complete
10. Turned in production of 5 assemblies, answered Y to re-calculate and to this completes the WO.

Now my A-200 item has 20 on hand,
-6.1505 for Average cost and
-34.2628 for Last Cost.

Now my Auditable inventory value of this item (Avg x ONH) is -123.01.

Here is the Job cost report:

01/31/07 JOB COST REPORT Page: 1
10:35:21 The Manufacturing Answer
Detail Report

Work Order : 17- 1 Customer: STOCK
Part Number : A-200 Name : Make-to-Stock
WHEEL ASSEMBLY Purchase Order:
Qty to Make : 20.00 Selling Price : 0.0000
Qty Complete : 20.00 Actual Start : 01/31/07
Status : C Actual Finish : 01/31/07
Job Number :
Estimated Actual Estimated Actual %
Per Part Per Part Total Total Var
=================================== LABOR ======================================
Seq: 10 Work Center: 10 Qty Comp: 20.00
Labor 0.091655 0.275500 1.8331 5.5100 200.58
Setup 0.237500 0.000000 4.7500 0.0000 -100.00
Fixed Ovhd 0.458315 0.550000 9.1663 11.0000 20.00
Variable Ovhd 0.208325 0.250000 4.1665 5.0000 20.00
Miscellaneous 0.000000 0.000000 0.00 0.00 0.00

============================= OUTSIDE PROCESSING ===============================

================================== MATERIALS ===================================
Component %Iss
A-210 100 1.150000 1.150000 23.00 23.00 0.00
15" AXLE
A-220 100 1.500000 1.500000 30.00 30.00 0.00
WHEEL
R-100 100 0.147500 0.123500 2.95 2.47 -16.27
STEEL, SHEET, 22 GA

================================ JOB SUMMARY ===================================
Qty Complete: 20.00
Labor 0.091500 0.275500 1.83 5.51 201.09
Setup 0.237500 0.000000 4.75 0.00 -100.00
Outside Proc 0.000000 0.000000 0.00 0.00 0.00
Fixed Ovhd 0.458500 0.550000 9.17 11.00 19.96
Variable Ovhd 0.208500 0.250000 4.17 5.00 19.90
Materials 2.797500 2.773500 55.95 55.47 -0.86
Misc 0.000000 0.000000 0.00 0.00 0.00
Extra 0.000000 0.000000 0.00 0.00 0.00

Totals 3.793500 3.849000 75.87 76.98 1.46

Profit -3.793500 -3.849000 -75.87 -76.98 101.46
Profit % 0.00 0.00 0.00 0.00

It would seem to me that since I started out with zero in stock, my average cost should have come out
to around 3.849.

If this is correct, would someone Please explain the Logic to me??

Title: Re: Final WO receipt - Negitive AVG Cost!!
Post by David Waldmann on 01/31/07 at 09:19:42

I don't have any explanation for that "logic". What do you see if you look at Transactions in IN-A, or print IN-E?

Title: Re: Final WO receipt - Negitive AVG Cost!!
Post by kevind on 01/31/07 at 09:29:21

Here are the Transactions in IN-E:

01/31/07 W WO RECPT 10.00 -1117.00 17-1 3.2196 Make-to-Stock
01/31/07 W WO RECPT 5.00 -1112.00 17-1 3.2196 Make-to-Stock
01/31/07 W WO RECPT 5.00 -1107.00 17-1 -34.2628 Make-to-Stock

Any insight would be appreciated. ???

Title: Re: Final WO receipt - Negitive AVG Cost!!
Post by lmk223a on 02/02/07 at 10:16:44

What type of Inventory Method do you employ - FIFO, LIFO or AVERAGE?

In the past, we employed FIFO, and used Standard costing for partial work order receipts. This resulted in numerous negative dollar work order receipts and or large postive dollar values because standard costs were not being reviewed for accuracy ( current routings, material costs, etc)

Also, when the last transfer to finished goods results in negative dollars, DBA does not have the ability to pass on the negative cost to cost of goods sold when using FIFO, creating an accountant's nightmare.

We switched to AVERAGE costing 2 years ago (using average cost for partial work order receipts) and rarely see negative dollar or huge positive dollar swings in the last transfer work order receipt to inventory.

Also, the LIFO/FIFO buckets do not always properly reflect all transactions incurred, resulting in unexpected inventory costing. Many times we had to manually edit the buckets so our costs came out properly.

Title: Re: Final WO receipt - Negitive AVG Cost!!
Post by kevind on 02/02/07 at 11:23:38

We use Average costing.

The Demo data in 'The manufacturing Answer' was used above were I
detail the sequence of operations. That Company is also set up with the
Average Costing method.

Title: Re: Final WO receipt - Negitive AVG Cost!!
Post by lmk223a on 02/05/07 at 06:48:39

kevind wrote:

Your actual cost is $76.98 for 20 units.
The 2 partial transfers put $48.294 ( 10 x $3.2196 and 5 x $3.2196) w/o cost into inventory,
Your last entry to FG for 5 units should have been at $5.7372 for a total of $28.686.
I suggest backing out the last transfer to finished goods, and re-enter it by overriding DBA/EVO's calculation with $5.7372. Assuming no other activity in this inventory account, the average cost should now be the actual average cost of $3.849 . (IF not, you can manually change it in IN-K to set the system straight).
Sorry, I am not sure why the system went astray.

Title: Re: Final WO receipt - Negitive AVG Cost!!
Post by kevind on 02/05/07 at 12:34:26

I am not trying to fix these transactions. :-/

I was illustrating, what I believe, is a possible calculation error.

I would like others to try the same sequence, detailed above, to see if
they get the same result.

Thanks for the advice though!! :)

Title: Re: Final WO receipt - Negitive AVG Cost!!
Post by kevind on 02/20/07 at 06:55:11

Has anyone been able to duplicate the negative cost result I had above in the 3rd post??

Is this by design, or did I do something wrong? ???

P.S. Data used is the origonal Demo Data from DBA, Company #99.

Title: Re: Final WO receipt - Negitive AVG Cost!!
Post by David Waldmann on 02/20/07 at 10:27:24

We don't have "The Manufacturing Answer" or I would give it a try.

Title: Re: Final WO receipt - Negitive AVG Cost!!
Post by kevind on 04/05/07 at 14:41:58

I have some more detailed info for this problem that may help someone find out what is happening.

I have a work order for 30 items.
10 were turned in on 1/24/07. The Item Transaction shows a cost of 65.2000 (this is good)
10 were turned in on 2/26/07. The Item Transaction shows a cost of 62.7370 (this also looks good)

Now we want to turn in the final 10. We answered Yes to this is the final receipt.

This is what the WO-I screen looks like:
http://spectronics.com/dba/woi.jpg

Why is it calculating an actual Unit Cost of -4.7903 ? :o

I calculate:
(10 * $65.2000) + (10 * $62.7370) = $1279.37 - - Turned in before
$1884.50 - $1279.37 = $605.13 - - Dollars yet to turn in
$605.13 / 10 = $60.5130 - - Actual cost per item

Someone please correct me so that I can understand were this Unit Cost comes from. :-?

Title: Re: Final WO receipt - Negitive AVG Cost!!
Post by Lynn_Pantic on 04/08/07 at 17:12:31

Let me try to duplicate. Your thinking is valid assuming the prior receipts are correct.

Title: Re: Final WO receipt - Negitive AVG Cost!!
Post by kevind on 04/08/07 at 18:52:25

Thank You.

HERE (http://www.istechforum.com/cgi-bin/YaBB.pl?num=1170194568/12#2)is how to duplicate it.

BTW: Here (http://spectronics.com/dba/transactions.jpg)are the previous 2 receipts

Title: Re: Final WO receipt - Negitive AVG Cost!!
Post by Lynn_Pantic on 04/11/07 at 09:37:32

OK, I did the same thing as you (at least as far as I could tell) in the Manufacturing Answer company and I got the expected results. I took the first 10 parts at standard cost ($3.1295) and then I let the program calculate a cost for the next 5 - it came up with $3.87 or thereabouts which I accepted. For the last 5, I replied Y to the last receipt and it calculated $5.1798 which would be expected since the labor reported was above standard. Job Cost Report (JC-A) looks pretty similar to yours, Kevin.

04/11/07 JOB COST REPORT Page: 1
09:34:10 Evolution Enterprises
Detail Report

Work Order : 2065- 1 Customer: STOCK
Part Number : A-200 Name : MAKE-TO-STOCK
WHEEL ASSEMBLY Purchase Order:
Qty to Make : 20.00 Selling Price : 0.0000
Qty Complete : 20.00 Actual Start : 04/11/07
Status : R Actual Finish : 00/00/00
Job Number :
Estimated Actual Estimated Actual %
Per Part Per Part Total Total Var
=================================== LABOR ======================================
Seq: 10 Work Center: 10 Qty Comp: 20.00
Labor 0.091655 0.275500 1.8331 5.5100 200.58
Setup 0.237500 0.000000 4.7500 0.0000 -100.00
Fixed Ovhd 0.458315 0.550000 9.1663 11.0000 20.00
Variable Ovhd 0.208325 0.250000 4.1665 5.0000 20.00
Miscellaneous 0.000000 0.000000 0.00 0.00 0.00

============================= OUTSIDE PROCESSING ===============================

================================== MATERIALS ===================================
Component %Iss
A-210 100 1.150000 1.150000 23.00 23.00 0.00
15" AXLE
A-220 100 1.500000 1.500000 30.00 30.00 0.00
WHEEL
R-100 100 0.147500 0.147500 2.95 2.95 0.00
STEEL, SHEET, 22 GA

================================ JOB SUMMARY ===================================
Qty Complete: 20.00
Labor 0.091500 0.275500 1.83 5.51 201.09
Setup 0.237500 0.000000 4.75 0.00 -100.00
Outside Proc 0.000000 0.000000 0.00 0.00 0.00
Fixed Ovhd 0.458500 0.550000 9.17 11.00 19.96
Variable Ovhd 0.208500 0.250000 4.17 5.00 19.90
Materials 2.797500 2.797500 55.95 55.95 0.00
Misc 0.000000 0.000000 0.00 0.00 0.00
Extra 0.000000 0.000000 0.00 0.00 0.00

Totals 3.793500 3.873000 75.87 77.46 2.10

Profit -3.793500 -3.873000 -75.87 -77.46 102.10
Profit % 0.00 0.00 0.00 0.00
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Title: Re: Final WO receipt - Negitive AVG Cost!!
Post by kevind on 04/11/07 at 09:41:26

How does the Inventory item look now? Is the Average cost OK?

I had no complaint with the job cost report ... It looked good.

My complaint was the last cost and average cost were negitive numbers.
I can (remotely) understand last cost as a negative, but average should never be negative.

Given the purpose of the Last Cost field, and the fact that it is mostly informational, I don't think
it should be updated with any negative results.

Title: Re: Final WO receipt - Negitive AVG Cost!!
Post by Lynn_Pantic on 04/11/07 at 11:10:22

Mine ended up with the expected 3.87 average cost and 5.18 Last cost. No negatives at all.

Title: Re: Final WO receipt - Negitive AVG Cost!!
Post by kevind on 04/11/07 at 12:31:24

I must have a setting set differently than you.
I am going to review all my settings that have to do with WO's and see if one jumps out at me.

Can you think of any settings that I may have different that would affect this function?