Test Case for Perpetual Average Cost in Manufacturing

Create new Make Item

Assign AVG Cost Profile to it

This Make item made of 2 other AVG Cost items where their AVG cost already there

Create a new Work Definition Name

Create a Work Definition for the new created Make item

There are two Operations:

Op 1: has the 2 AVG cost items

And 2 resources
Op 2: has only one resource

Create new Cost Scenario

The main purpose of this Cost scenario in this case where all the input items are AVG Cost is to define
the resource rates that used in the Wok Definition.

In case the input items were STD cost, then it will be also required to define the STD Cost of the input
items.
So give resource rate for each participant resource
The following steps are not required but this help the planners to estimate the make item cost.

Therefore, you here give STD cost for the input items kind of estimation this will not be used in the
actual work order because these items are AVG cost already.

I will give different values here that are not equal to the current AVG cost just to show later which values
will be effective.
Now run roll up process
Then View rolled up costs, this will give you estimation based on the input items in Manage STD Cost UI
and the Resource Rates

End of non-required steps.

Now, you will need to run Update Standard Cost, which will publish the Cost scenario.

Again, remember the purpose here is only to have the Resource Rates in a published cost scenario.
Now create a new Work Order based for the make item based on the Work Definition

Change Order status to Released

Issue input materials to the Work Order

Complete the Work Order

Now, Review Completed Transaction in Inventory, you should see the Input and output Material
Transactions
Run Transfer Transaction From Production to Costing

Also, Run Transfer Transactions From Inventory To Costing

Then, Run Create Cost Accounting Distribution, and make sure the Cutoff date cover all of your
transactions dates

Go to Review Cost Accounting Distribution

For first input item, system issue to WIP using the Current AVG cost
For the second input item, also system issue to WIP using the Current AVG cost

Remember for the make item, the assigned cost profile setup to compete work order at Current Avg
Cost (Provisional Completions: Value at perp. Avg cost). However, this is the first receipt transaction for
that make item and no AVG cost yet exist in the system.
Therefore, system will not be able to cost the receipt of the make item during the work order
completion transaction.

Only after you close the Work Order, then system will have the final cost of the make item and then the
AVG cost of the completion transaction will consider the same value.

Note, next work order of the same make item will not face this issue because AVG cost of the first work
order will be already there.

Review the resource charging to WIP as per resource rates in the cost scenario
Now, go back to the Work Order and change Status to Closed

Again run the interface jobs

Run the Create Cost Accounting distribution
Now, you will see the make item completion transaction is costed using sum of all input Avg costs plus
Resources Rates
One additional transaction will appear called ‘Work in Process Job Close’

This mainly used to record any variance if AVG cost changed at any point after issue material to Work
Order, or if input items use STD cost method, then variance will be calculated between STD cost in the
cost scenario and the actual cost on the Work Order

Because no variance in our test case, so it will appear empty or zero

Review Item cost for the make item, it will show based on Avg cost method.

And this will keep update going forward the Avg cost after every Work Order Receipt for that make item.

So, if next work order close at higher cost, then Avg cost will go up and vice versa.
You can also review the work order cost

And this UI give detailed balance information.

End.