Direct material and service costs

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All direct material and service costs are characterized in accounting as direct production expenses and recorded in departments within unfinished production. They are allocated by volume (quantity) in natural units of measure. These are cost items with the Goods or Work product type. Usage of natural units of measure allows you to keep track of receipt (occurrence) batch movements for direct material and service costs, which is required to organize separate cost accounting and "complex" VAT accounting. Main documents for generating direct material and service costs:

  • Material transfer to production.
  • Return from production.
  • Purchase of goods and services (product items with the Work product type for which the Write off as expenses check box is cleared in the document).
  • Goods handover between companies (product items with the Work product type for which the Write off as expenses check box is cleared in the document line).
  • Production stage.
  • Production without order.
  • Product release and work performance (the To department release direction, product items with the Work product type for which the Write off as expenses check box is cleared).

Unfinished production analysis

You can analyze allocation of direct material and service costs and control balance in unfinished production within the Allocation of materials and works workplace.

Location, appearance, and fields of the Allocation of materials and works workplace depend on the Production Management subsystem version used in the infobase.

If you use Production Management 2.1, the Allocation of materials and works workplace is located in Manufacturing – Manufacturing costs. For the selected accounting period, the following values are analyzed for each product item of unfinished production considering series and assignments:

  • Start balance – remaining materials in a department as of the beginning of the period.
  • Received – total materials received in a department within the accounting period.
  • Handed over – materials handed over to other departments with the help of the Material transfer in production document.
  • Manufacturing costs – Standard – volume of consumed resources recorded by production process documents:
    • Route sheet – a value in the Standard field on the Materials and works tab of documents with the Active or Completed status.
    • Write off release costs – costs of manufacturing products released without production orders.
  • Manufacturing costs – Variance – variances in resource consumption recorded in production process documents (values in the Variance field on the Materials and works tab of the Route sheet documents).
  • Allocate – quantity of materials for which a usage (consumption) option is not defined and which need to be allocated.
  • Allocated:
    • To production – materials allocated by the Allocation of materials and works document to production stages and releases without references.
    • To expenses – materials allocated by the Allocation of materials and works document to expense items.
  • Outgoing balance – unfinished production balance transferred to the next period:
    • In stock – actual availability of materials whose processing has not been started. Specified according to stocktaking results.
    • Processing – accounting balance of materials in unfinished production. Its value is calculated using the following rule: sum of the previous period balance transferred and all receipts within the current period minus all registered material write-offs and materials in stock. If this value is greater than the one in the Limit in processing field, the difference is to be allocated.
    • Limit in processing – quantity of materials specified in the Products and costs of unfinished production document. This quantity of materials is available in processing within the product release without a reference.

To get details of the values specified in the workplace fields by source documents, click Explanation.

If you use Production Management 2.2, the Allocation of materials and works workplace is located in Manufacturing – Intrashop accounting. For the selected accounting period, the following values are analyzed for each product item of unfinished production considering series and assignments:

  • Start balance – remaining materials in a shop storeroom (or works in a department) as of the end of the period.
  • Existence – by default, the value is equal to the start balance. But you can change this field value if shortage is detected during stocktaking. This field is not filled in for works.
  • Allocate – quantity of materials for which a usage (consumption) option is not defined and which need to be allocated to production or written off to expense or asset items.
  • Allocated – quantity of materials allocated to production or expense (asset) items by the Allocation of materials and works document.

To print material stocktaking report for unfinished production, click Stocktaking report.

To control movements of direct material and service costs in production, use the Material and work movement report. To open it, click More actions – Reports – Material and work movement.

Allocating direct material and service costs

Standard expenses considering variances recorded in production documents are included in the cost automatically.

Variances between accounting balance (in the application) and actual balance (received outside the application, for example, during stocktaking) as of the end of the accounting period are allocated additionally. Each product item is allocated using a separate Allocation of materials and works document.

Allocation options for direct material and service costs of the Allocation of materials and works documents (each option is used on the tab with the same name):

  • Acc. to rule – allocation parameters are defined by items of the Manufacturing – See also – Expense allocation rules list, on the Materials and works tab.
  • By order steps (when using Production Management 2.1) – allocation to production processes being fulfilled:
    • Stages related to route sheets completed in the current accounting period.
    • Stages that have route sheets being completed within the current accounting period (capability to allocate costs to long stages).
    • Orders for which no route sheets are generated.
    • Tolling orders.
  • By releases without orders (when using Production Management 2.1) – allocation to manufactured products released without production orders.
  • By production batches (when using Production Management 2.2) – allocation to production batches. The Production stage, Production without orders, and Toller report documents can serve as production batches.
  • To expenses – resource removal from unfinished production.

You can use several options at the same time. The main thing is to allocate all detected variances.

Rules of allocation of direct material and service costs

To allocate direct material and service costs, use rules with the Allocation of materials and works by production batches assignment. Costs allocated according to the rule are included in the self-cost based on the costing item specified in the allocation rule. You can use the following options for generating an allocation base:

  • Quantity of specified materials – the allocation base is represented by total quantity of materials (in basic units of measure) actually written off to the stage and release cost in the current accounting period, including materials allocated manually by the Allocation of materials and works document. Click Specify materials to define the list of product items included in the allocation base. This option is convenient for allocation scenarios by basic material consumption directions.
  • Weight of specified materials – the allocation base is represented by total weight of materials actually written off to the stage and release cost in the current accounting period, including materials allocated manually with the help of the Allocation of materials and works document. Click Specify materials to define the list of product items included in the allocation base. For selected products, specify the coefficient of converting quantity to weight (the Weight (net) field on the Accounting information tab of the Products list item form). This option is convenient for a material-intensive production in which records of billets are kept in pieces.
  • Volume of specified materials – the allocation base is represented by total volume of materials actually written off to the stage and release cost in the current accounting period, including materials allocated manually with the help of the Allocation of materials and works document. Click Specify materials to define the list of product items included in the allocation base. For selected products, specify the coefficient of converting quantity to volume (the Volume field on the Accounting information tab of the Products list item form). This option is convenient for a production whose capacity is defined by volume of processed materials.
  • Product quantity – the allocation base is represented by quantity of products: both actually released in the current accounting period and expected to be released in the future (if some release production processes were fulfilled in the department within the current accounting period).
  • Product volume – the allocation base is generated based on product quantity (see the previous option), but with estimating product release volume using the coefficient of converting quantity to volume (the Volume field on the Accounting information tab of the Products list item form).
  • Product weight – the allocation base is generated based on product quantity, but with estimating product release volume using the coefficient of converting quantity to weight (the Weight (net) field on the Accounting information tab of the Products list item form).
  • Target product cost – the allocation base is represented by a target product quantity cost (see the Product quantity allocation option). The cost is calculated based on values specified in the price type of the target cost.
  • Number of works of specified kinds – the allocation base is represented by quantity of labor costs for work kinds actually written off to the stage and release cost in the current accounting period. Click Specify work kinds to define the list of work kinds included in the allocation base.
  • Standard material consumption (works) – allocation is fulfilled only to released products and completed production stages with the set standard consumption quantity of the material for which this option is used. The standard material consumption is calculated based on data specified in bills of resources. This option is convenient for additional (for example, over the standard one) proportional allocation of a material whose consumption standards are specified in bills of resources for product manufacturing.

Using rule parameters, you can restrict product groups (kinds) to whose products materials can be allocated. Select the Allocate only by specified groups (kinds) of products check box and click Specify groups (kinds) of products.

You can specify allocation rule usage parameters directly in the Allocation of materials and works document. Click  to transfer the current allocation settings from the document to the selected rule and to save it with new parameters.

Costs of completed stages in unfinished production

Before products are actually released (works are fulfilled), some costs related to them (for completed stages) are in unfinished production. The actual fulfillment of stages is defined by the Route sheet document with the Completed status (when using Production Management 2.1) and by the Production stage document with the Completed status (when using Production Management 2.2). A stage result is not always represented by a product or work produced in the department where production process expenses are recorded. In that case, the costs are included in the self-cost of released products after they are actually released. It might happen in another department and within another accounting period. Until this moment, actual stage costing is stored in unfinished production of the department which incurs expenses. Costs related to a stage are allocated between finished products of this stage using cost share calculation method (the Finished products tab). Cost of recyclable waste recorded as received from the department in the warehouse at fixed cost are excluded from the cost amount when calculating the product cost.

Writing off costs for releases without production orders (Production Management 2.1)

If you use allocation rules, in some cases, you can automatically allocate direct material and service costs to the product cost, for example, when releasing products without production orders. With such allocation bases as Product quantity and Target product cost, you do not have to use the Write off release costs documents. In that case, materials for which an allocation rule is set are allocated to releases without orders according to a particular allocation base at the end of the month. Possible options of allocating direct material and service costs are displayed in the diagram:

The Route sheet and Write off release costs documents allow you to manage the cost of released product batches in production processes of any complexity. When you allocate material costs according to allocation rules, you can receive a reliable product cost only in quite simple cases, but it is the least labor-intensive option.

Configuring release registration options

You can configure a release registration option in items of the Manufacturing – Settings and catalogs – Production structure – Production departments list, in the Manufactures products parameter:

  • By production orders
  • Without production orders

For departments authorized to register product release without production orders, on the Production without orders tab, select an option for allocation of direct material and service costs:

  • By separate document "Write off release costs" – this option allows you to manage cost of release batches.
  • By material allocation rules – commingle cost generation option by material costs. This option has the following restrictions:
    • Write-off standards (write-off by bills of resources) are not used.
    • Labor costs are not included in release cost.

Generating the "Write off release costs" documents automatically

You can generate the Write off release costs documents within the Manufacturing – Manufacturing costs – Write off release costs workplace. Documents are generated automatically in the following cases:

  • When generating multiple documents by clicking Write off release costs – costs are written off for several lines (release batches) selected in the tabular section.
  • When completing a scheduled job to write off costs. Click the Write off costs by scheduled job check box in the lower part of the form. This setting is applied to the entire infobase, i.e. to all companies for which accounting is kept.
  • When creating them on the basis of the Product release and work performance documents.

To write of materials, a bill of resources is required. Click Fill in / replace BOR to specify a bill of resources for a registered product release. Use this option if a BOR is not specified when releasing products or if there is a more precise BOR at the moment of registering costs for a release without orders.

When generating the Write off release costs documents, the following rules are applied:

  • If you select a BOR describing release of several product items at the same time and if there is recyclable waste, costs will be written off only for quantity that match the exact proportion of finished products specified in the BOR. You need to fulfill additional material allocation for the remaining quantity of release items.
  • If products are pegged upon release for different assignments, the separate Write off release costs document is required for each assignment.
  • In one cost write-off document, both pegged and unpegged products can be specified.
  • When filling in materials in the document, pegged materials (within stock) are picked first, and the missing quantity is covered from unpegged materials.
  • Unpegged materials and works are filled in without considering stock in the department, in strict compliance with the selected BOR.
  • Work kinds are specified in strict compliance with the selected BOR.

If several Write off release costs documents are created based on the selected release batches, a confirmation form opens. You can view each of the created documents. Click Cancel and delete to delete documents. In that case, costs will not be written off. Click Accept and close to save documents in the infobase.

Generating the "Write off release costs" documents manually

When creating the Write off release costs documents manually, you can specify materials consumed within release separately:

  • By BOR (standard) – in the command bar or tabular section of the document, click Fill in – By standards.
  • By assignment – click Fill in – Select from pegged stock. For pegged materials within unfinished production of several departments, you can use a dedicated selection form.

Entering unfinished production start balance

You can enter start balance of materials and works in unfinished production within workplace Master data and settings – Initial filling – Documents of entering start balance.

Use the Materials transferred to production operation to enter data on product items with the Goods (Work) product type which are not fully or partially processed at the moment of entering balance according to accounting data. Enter data in separate documents by departments according to activity types with a certain taxation procedure (Subject to VAT, Not subject to VAT, and Subject to UTII). In the tabular section of the Enter start balance of materials transferred to production document, in addition to an accounting value, you can see a VAT amount for material batches transferred to production. When entering balance, you cannot specify it separately by production orders or separate accounting options, but for each line in the document tabular section, you can specify a product group or kind for whose production materials were transferred. A GL account of entered balance is defined by the GL account of direct production costs in a particular department (accounts 20, 23, and 29). (See chapter "Balance of unfinished production").

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