Method change variance (MCV), when calculated, is posted by the following transactions:

MCV is calculated as the difference between the final operation cost recorded in the cumulative order and the GL standard cost of the finished material, extended by the quantity being reported. In the backflush and move transactions, MCV can be posted when moving from the output queue of the last operation to finished material inventory.

In the transactions where labor is reported, MCV is also generated when reporting at a work center other than the cumulative order operation work center. MCV is calculated as the difference between the standard labor and burden rates of the work center being reported and the standard labor and burden rates of the cumulative order operation work center, extended by the number of hours reported. This prevents unexpected rate variances from being applied to work centers.

In Cumulative Order Close, MCV can be posted when transferring WIP quantities to new cumulative orders. MCV is calculated as the difference between the operation cost in the former cumulative order operation and the operation cost of the new cumulative order operation, extended by the quantity transferred.

See Cumulative Order Close.

Method change variances are posted only if GL standard costing is in effect for the finished item. They are not posted if GL average costing is in effect.