Exercise 5: Material Variances
In this exercise you will look at the sources of material variances and how they are calculated.
1 Create a work order for 1, 01020 Implantable Ultrasound, at site 10-100; set the status to R.
2 Change the GL standard cost of the 6009 Probe Housing from 30.00 to 25.00.
3 Issue the components. For item 90093, Shipping Carton issue 2 instead of 1.
4 Review the ISS-WO transactions for this order. Why is there no material usage variance for the 90093? Material usage variance is not calculated until work order accounting close.
5 Review the work order cost report. Are there any variances reported? Why? There is an accrued material rate variance of -5.00 for the 60009 because the standard was changed after the work order bill of material was created at work order release.
6 Receive the work order. Run work order accounting close, and review the work order cost report. Remember to check Close on your work order receipt. Accounting close will only run against Closed work orders. Can you explain the variances?
Rate Var. = (actual cost - std. cost) * qty issued (25.00 - 30.00) * 1 = -5.00
Usage Var. = [(act. qty.-.std qty + qty. reject) * qty. per.] * GL cost= (2-1) * 1.00 = 1.00
The rate variance was created at ISS-WO, the usage variance at WO-CLOSE.
7 Change the GL cost of the 60009 back to 30.00, verify the current cost is still 30.00.
