1. Cost Accounting Deep Dive
Lenora Randle, Algood Food Company | Rachel Profitt, RSM

2. Introductions
Lenora Randle Cost Accountant – Algood Food Company – Rachel Profitt Director, RSM Technology Academy RSM US
Demoing with AX 2012 R2 Contoso Data
Connect to Sonic Wall
Remote Desktop Connection
Contoso\administrator
Pa$$w0rd
Both introduce ourselves

3. Agenda
Discuss tips and tricks and things to watch out for when configuring BOMs, Routes, and Indirect costs.
Review the process for creating, estimating, and scheduling production.
Demonstrate how to review the BOM and Route for a production order.
Review the estimated and actual cost and consumption for a production order.
Use the variance analysis statement to review production variances.
Demonstrate how to adjust costs for ended production orders.
Review Objectives
Discuss tips and tricks and things to watch out for when configuring BOMs, Routes, and Indirect costs.
Review the process for creating, estimating, and scheduling production.
Demonstrate how to review the BOM and Route for a production order.
Review the estimated and actual cost and consumption for a production order.
Use the variance analysis statement to review production variances.
Demonstrate how to adjust costs for ended production orders.

4. Review Configuration

5. BOM Setup and Review Rachel will demo in AX
Item – Home Theater System
Check to ensure phantom BOMs that roll up to finished good items are marked as phantom. – Else the won’t explode
Go line by line on each item
Component type
Item type
Usage or quantity
Site and warehouse
Verify BOMs are activated and approved.

7. Route Setup and Review Lenora will demo in AX Verify naming standard
Pack size – Formula (Example: 12/18oz 423)
Verify the Site
Verify the operations in the Route
Quantity per hour
Run time
Resource groups
Verify activated and approved

9. Overhead Setup and Review
Rachel will demo in AX
Verify the costs for the indirect costs for each warehouse and item.
Activate new costs.

10. Calculate and Activating Costs
Best Practice:
Periodically running a mass calculation in a planned cost costing version to identify issues or missing costs.
Use the warnings to identify potential issues when running calculations.
Technique:
Planned costs
Standard costs
Techniques
Calculate one item
Calculate all items
Calculate items matching a criteria
Lenora
Best Practice: Periodically running a mass calculation in a planned cost costing version to identify issues or missing costs.
Best Practice: Use the warnings to identify potential issues when running calculations.
Rachel
Techniques – Planned costs versus standard costs
Techniques – Calculate one item versus all items or all items matching a criteria

11. Explosion Modes Lenora and Rachel
Select the method to apply for calculating the cost contributions. The options include the following:
Multilevel ─ The calculated cost reflects a complete recalculation of costs for all manufactured components in a multilevel bill.
Make to order ─ The calculated cost reflects a complete recalculation for all manufactured components, but the specified quantity will be used to amortize constant costs that are associated with manufactured components instead of each item's standard order quantity).
Single level ─ The calculated cost reflects the previously calculated costs of first-level manufactured components.
According to BOM line type ─ The calculated cost reflects a complete recalculation of costs for all manufactured components, but considers the formula line type of a manufactured component. For cost calculation purposes, a manufactured component will be treated as a purchased item when the formula line type is item. This option (according to the formula line type) replicates the cost calculations for production order estimates.
The explosion mode reflects the value specified for the costing version, which cannot be overridden if you selected a calculation restriction in the Costing versions form.
For an order-specific formula calculation, the explosion mode choices are limited to multilevel and make-to-order. The only difference between the two choices involves the quantity basis, which can affect the amortization of constant costs and the use of quantity-sensitive formula versions or route versions.

12. Warnings for Calculations
Lenora and Rachel
Override group setup: Select whether to override the warning conditions that are associated with the formula calculation group that is assigned to each item. The formula calculation generates an Infolog that contains warning messages that reflect applicable warning conditions. You must select this check box to enable the individual warning check boxes.
No BOM
No Route
No Resources
No Consumption
No Cost Price
Max age of cost price
Min. Contribution margin
Identify missing updates: Select whether the Infolog should identify items with an existing pending cost record. This prevents the outcome of updating missing costs. The policy should be used together with the formula calculation policy to update or insert calculated prices only for items with missing costs.
Display fallback data: Select whether the Infolog for the formula calculation should identify the items that required the use of a fallback when an item's costs did not exist. The policy does not apply to order-specific formula calculations.

14. Costs on Production Orders

15. Production Process Rachel to process Create Create manually
Estimate
Release
Start
Pick
Report Labor
RAF
End
Rachel to process
Create
Create manually
Create from master planning
Create from a sales order
Estimate
Runs a “mini BOM calc” for the production order
Can configure system to use estimated cost during the RAF
Release
Used to release to the shop floor if you use MES or 3rd party system
Start
Letting the system know that you are starting the work.
If you configure forward flushing items and labor will be consumed
You can configure the start to generate various documents
Pick
Picking lists
You can configure for back flushing during RAF
You can configure for forward flushing during the Start
If you post picking lists in ledger (parameters control this) the inventory is removed physically and in the ledger moved to WIP.
Report Labor –
Route Cards or Job Cars based on scheduling type.
If you post route cards to the ledger (parameters control this) the labor is posted to the WIP labor account.
RAF
This is the physical update of the production order. (Just like a packing slip for a SO or a product receipt for a PO)
The finished good is added to inventory physically.
If you post to the ledger the WIP is recorded as well.
If you backflush, this is when the materials or labor would be automatically consumed.
End
This is the financial update.
You cannot modify a production order after ending.
The costing information will be finalized.
If you post to the ledger, the physical updates are all reversed and the inventory accounts are posted to.

16. Review BOM/Route Details for Production
Lenora to demo in AX
Verify the correct BOM/Route version is used.
Review item usage
Review the operations and process quantity
Warehouse requests you to makes substitutions or additions.

17. Estimated Costs and Consumption for Production
Rachel to demo in AX
Demo the Estimate cost screen on the Production order
Demo the Price calculation screen on the Production order
Demo the Cost estimate to costing report – check if this is a custom report

18. Adjusting and reviewing Costs

19. Adjusting Costs for Ended Production
Lenora to demo in AX
Missing realized cost or consumption for an ended production order
Operator forgot to click a button
System glitch
Components are missing in the BOM
Found issues from a cycle counts
Demo – Inventory closing and adjustment screen

21. Variance Analysis Statement
Rachel to discuss
Inventory and warehouse management > Reports > Analysis > Variance analysis statement
Date interval or From and To Date – Requires Date intervals to be set up in General ledger
Sorting and grouping: Select the primary focus of the report by selecting from the following items:
Item- Identify variances by item, with subtotals by item and by item group.
Origin- Identify variances by variance type, with subtotals by item and type. The types include purchase price variance and the production variances for lot size, quantity, price, and substitution.
Cost group- Identify variances by cost group, with subtotals by cost group and by cost group type. The types include direct materials, direct manufacturing, indirect, and undefined.
Column headings: Select how the report columns should display variance information. Select from the following items:
Cost group type- Use four columns to display variances as direct materials, direct manufacturing, indirect, and undefined.
Fixed/Variable- Use two columns to display variances as fixed or variable (based on the behavior that is assigned to a cost group).
Position- Use four columns to indicate the impact of variances on the value of on-hand, work in process (WIP), deferred and cost of goods sold (COGS). For example, a purchase price variance would be displayed as affecting on-hand value, whereas production variances would be displayed as affecting WIP value.
Detail: Select the level of detail that you want in the report. Select from the following items:
Transaction- Display transaction detail.
No- Do not display transaction detail.
Decomposition- Display additional detail about cost groups when the primary focus concerns items or origin. A primary focus on cost groups means that decomposition details are already displayed.
Level: Level only applies to the detailed reporting of production variances, when the primary focus concerns items or origin. Select from the following items:
Single- Provide a detailed breakdown of variances by component, routing operation, and indirect cost.
Multi- Provide a detailed breakdown by cost group.
Total- Do not provide a detailed breakdown.

22. Variance Analysis Statement - Results
Rachel to discuss

23. Cost Estimates and Costing Report
Lenora to discuss
Production control > Reports > Analysis > Cost estimates and costing report

24. Reports For In Process Production
Raw materials in process
Work in process
Indirect costs in process
Finished items in process
Rachel to discuss
Reported production activities can be grouped into four types of transactions. Three types of transactions represent the reported consumption of material, routing operations and indirect costs, and one type of transaction represents the reported production activities as finished items. Separate reports provide information about each type of transaction. Use these reports to analyze costs for reported production activities. Information is only displayed for current production orders that have a status of started or reported as finished.
Materials in process report − the report lists the picking list transactions that are reported against the current production orders as of a specified transaction date. The report indicates the component’s quantity that is issued and the cost amount for each transaction. Use the selection criteria for a single component item, for example, to print information about the component’s issued quantity against applicable production orders. The quantity that was issued is not updated by the report-as-finished quantities for the parent item. Therefore, the actual quantity of raw materials in process may be overstated.
Work in process report − the report lists route (or job) transactions reported against the current production orders as of a specified transaction date. The report indicates the hours, amount and quantity (both good and error) reported for each transaction, and information such as the operation number, operation ID, and operations resource. The report also displays the total time and amount for all transactions against the production order, and the reported as finished quantity.
Indirect costs in process report − the report lists the indirect costs that have been incurred against production orders. This data is based on reported consumption of routing operations and components as of a specified transaction date. The report indicates the type of indirect cost (surcharge or rate), the costing sheet code for the indirect cost, and the cost amount for each transaction. The report does not provide information about the route card or pick list transaction that generated the indirect cost.
Finished items in process report − the report lists current production orders and the report-as-finished transactions as of a specified transaction date.

25. Questions and Answers

26. Final reminders
CPE Credit Code: 53C2 Complete Surveys

27. Speaker contact info
Rachel Profitt RSM US Lenora Randle Algood Food Company