Production & Costing

Work Orders from Release to Close

A work order makes a quantity of an item from its bill of materials or recipe. It is released (reserving components), components are issued to it, production is reported (receiving the finished goods), and it is closed (posting the variances). Every step is a stock movement, so the order's cost and the stock ledger always agree.

Where to find it

Architect Panel → ERP - Operations:

• Production — the console: the Work orders tab, plus planned orders, demand and work centres; its badge counts released or in-progress work orders past their due date

Admin Panel → Inventory & Production:

• Production — the same console for production staff

Who can use it

ERP: Inventory or ERP: Reporting opens the console; creating and progressing work orders needs ERP: Inventory (or ERP: Administration) and write access to the company. Closing needs post access as well, because it posts to the ledger.

Creating a work order

1. Open Production, go to Work orders and click New work order (or convert a planned order from MRP).
2. Enter the Item to make (only items with an active bill of materials or recipe), Quantity, Due and Start (blank is the due date).
3. Choose Issue components from and Receive finished goods into; blank uses the components' and the item's default locations.
4. For a lot-tracked item, enter the Finished goods lot (it defaults to the work order number).
5. Tick Backflush to issue components automatically when production is reported.
6. Click Create work order.

The order takes a snapshot of the structure effective on the start date (scrap included), its routing, and its standard cost. Later changes to the structure do not change it.

Running it

1. Release: reserves what each component still needs at the issue location. Shortages do not stop the release; the message lists them.
2. Issue: in the Components card, enter quantities under Issue now and click Issue the quantities entered, or click Issue all outstanding. Lot-tracked components are picked first-expiry-first-out. The order moves to In progress.
3. Report production: enter Good and Scrapped, the Finished goods lot, tick Backflush components if wanted, and click Report. For serial-tracked items, enter one serial per good unit or generate them from the work order number. When completed plus scrapped reaches the quantity, the order is Completed.
4. Close: confirm with Yes, close. Unused reservations are released and the variances are posted. A closed work order cannot be reopened. Force close closes an in-progress order that will make no more.

If the item has a routing, report each operation instead: Report operation takes Good, Scrapped, Setup minutes, Run minutes and Operation done, and reporting the last operation receives the finished goods. An operation cannot pass on more than the one before it.

The order's statuses are Planned, Released, In progress, Completed, Closed and Cancelled.

Dates and corrections

Each step takes a Date: blank is now. A date in the future, more than a year ago, before the release, before stock accounting went live, or in a closed accounting period is refused. Correct release date can only move the release earlier. To undo an issue, use Return on the component; to undo a report, use Reverse in the order's Stock movements card. Backflushed components stay issued until returned separately. Cancel is allowed only while the order holds nothing: return components and reverse production first.

What goes wrong

• "'X' has no bill of material or recipe effective on D - a work order needs one."
• "'X' is a phantom sub-assembly: it is never made on its own work order."
• "… release it before issuing components."
• "WO has a routing: report its operations …": report operations, not production.
• "Closing posts the work order's variance to the general ledger, and you do not have post access to this company."
• "Components are still issued to WO - return them to stock … before cancelling, or close it instead."

Worked example

A planner converts a planned order into WO for 50 pumps due Friday. On Monday they release it; two components are short and the message says so. Stores issue everything available on Tuesday and the rest on Wednesday when it arrives. The line reports operation 10 for 50 good, then operation 20 for 49 good and 1 scrapped, which receives 49 pumps into finished goods. On Friday the order is Completed and they close it; the message gives the material and conversion variances and the journal.

Recommendations

• Release only what you intend to start, so reservations mean something.
• Book on the day; back-dating is limited and must stay in open periods.
• Use backflush for cheap, high-volume components and manual issue for the rest.
• Close completed orders promptly so variances land in the right month.

Production Costing and Variances

A work order collects the actual cost of making something: the components issued to it, and, where it is routed, the labour and overhead of the operations reported. Finished goods go into stock at the order's standard cost. When the order is closed, the difference between actual and standard is posted as a variance, so you see whether production ran to cost.

Where to find it

Architect Panel → ERP - Operations:

• Production — the console: each work order's cost figures and Close
• Stock — the console: the Set-up tab holds the WIP, absorption and variance accounts
• Stock Accounting — the same per-company accounts as a datastore

Admin Panel → Inventory & Production:

• Production — work orders, for production staff
• Stock — the Set-up tab with the stock accounts

The standard cost of a work order

When a work order is created it fixes its standard unit cost, split into material and conversion (labour and overhead):

• for a standard-costed item, the item's standard cost, with conversion from its cost roll-up;
• otherwise the rolled-up standard cost of its structure;
• otherwise the item's standard cost, all as material;
• otherwise an estimate from its components' costs.

The detail shows it as Standard unit cost beside Material issued, Produced at standard, Actual conversion and Variance.

What each step posts

Postings reach the ledger only when the company's stock posts to the general ledger (see Stock & Inventory).

• Issuing components: Dr Work in progress, Cr Inventory, at the cost of the layers consumed.
• Reporting production: Dr Inventory, Cr Work in progress, at the standard unit cost. For a standard-costed item any difference goes to the production variance account. Each good unit also absorbs the standard conversion cost.
• Reporting an operation: its setup and run minutes are costed at the operation's labour and overhead rates and added to the order's actual conversion. No journal is posted until close.
• Closing: one journal. Material variance is what was issued less the material in what was produced (Dr Variance / Cr WIP, reversed if favourable). Conversion is absorbed (Dr WIP / Cr Labour and overhead absorbed). If operations were reported, the actual conversion is absorbed instead and the difference from standard posts as conversion variance.

Setting the accounts

1. Open Stock, go to Set-up and find Stock accounting.
2. Check Work in progress (group default 1310) and Labour and overhead absorbed (group default 5170, created as "Production labour and overhead absorbed" if missing).
3. Set Production variance (work orders) to keep production variances apart from purchase price variance. Blank posts them to the purchase price variance account.
4. Click Save stock accounting (ERP: Finance or ERP: Administration).

Keep the manufacturing WIP account separate from project WIP.

Reading the close

The close message reads, for example, "Material variance …, conversion absorbed … (actual, from operation reports), conversion variance … (journal …). N unused reservation(s) released." On the order, Variance shows the material and conversion split and the journal. A positive variance is an overspend (adverse); a negative one is favourable.

What goes wrong

• "Not closed - the variance could not be posted: …": usually a closed period or a missing account. Nothing is closed until it posts.
• A large material variance: components issued but not used (return them before closing), scrap not reported, or a structure that understates quantities.
• Conversion variance on every order: routing times or work centre rates are wrong; roll up the cost again after correcting them.
• Nothing posts at all: stock does not post to the ledger for this company, so the variance is recorded on the order only.

Worked example

A work order for 50 pumps has a standard of 61.40 each: 46.90 material and 14.50 conversion. Stores issue components costing 2,410.00. Operations reported take 13.2 hours, costed at 760.00. 49 good pumps are received at standard, 3,008.60. On close, material in production is 49 × 46.90 = 2,298.10, so the material variance is 111.90 adverse; conversion absorbed is the actual 760.00 against a standard of 49 × 14.50 = 710.50, so the conversion variance is 49.50 adverse. Both post in one journal.

Recommendations

• Set a separate production variance account before the first close.
• Return unused components before closing, so the variance is real.
• Report operations on routed items; it is what makes conversion variance meaningful.
• Review variances by item monthly and correct structures or routings that keep missing.

Rolling Up Standard Costs

A cost roll-up works out what one unit of a made item costs: the material in its structure, level by level, plus the labour and overhead from its routing. You use it to price a product, to set the standard cost that work orders and standard-costed stock are valued at, and to see which components have no cost at all.

Where to find it

Architect Panel → ERP - Operations:

• Structures — the console: the Cost roll-up tab
• Standard Costs — the rolled-up cost rows, one per item and cost version
• Items — each item's Cost history tab shows its rolled-up costs

Admin Panel → Inventory & Production:

• Structures — the same console for planners and cost staff

Where each cost comes from

For each component the roll-up uses, in order:

• rolled up: a sub-assembly is rolled up first, recursively;
• cost version: a Standard Costs row for the version you chose;
• item standard cost: the item's own standard (for the "standard" version);
• current stock cost: the item's current cost (for any other version);
• NO COST: counted at zero and listed as missing.

Conversion cost comes from the structure's routing if it has one; otherwise from any labour and overhead typed on the item's own cost row.

Rolling up a cost

1. Open Structures, enter the Item and the Effective on date in the bar, and go to Cost roll-up.
2. Enter the Cost version. "standard" is the default; use another name (for example "quote-2027") to cost a scenario without touching standards.
3. For the standard version, decide whether to tick Also make it the item's standard cost and and revalue stock on hand.
4. Click Roll up cost… and confirm with Roll up. This writes the cost of the item and of every sub-assembly beneath it, replacing their existing costs in that version.
5. Read the result: Material, Labour, Overhead and Total per unit, then the Cost of one X by component table with quantity, unit cost, extended cost and where each cost came from.

Rolling up needs ERP: Inventory and write access. Validation runs first: a structure with a loop or more than 25 levels is refused, because a roll-up over a loop stores a wrong cost that nothing downstream can spot.

Making it the standard

With Also make it the item's standard cost ticked, the new total becomes the item's standard cost. A standard-costed item with stock on hand keeps its old standard unless you also tick and revalue stock on hand, which re-prices that stock and posts a revaluation journal in the same step (see Stock & Inventory). Work orders created afterwards use the new standard; existing work orders keep theirs.

What goes wrong

• "Not rolled up - … Fix the structure first": run Validate and remove the loop.
• Components counted at zero: the warning lists them; give them a standard cost on the Items console.
• "… Its standard cost was NOT changed: that stock would need revaluing first": tick and revalue stock on hand, or leave the standard alone.
• "A cost version is a short name of letters, digits, spaces, '.', '_' or '-'."

Worked example

A planner rolls up the standard cost of a pump after a new routing is saved. The result is material 46.90, labour 9.52, overhead 4.98, total 61.40 per unit, with one component marked NO COST. They give that component a standard on the Items console, roll up again (total 62.15), tick both boxes, and the 30 pumps in stock are revalued from 61.40 to 62.15 with a journal of 22.50.

Recommendations

• Roll up after any structure or routing change.
• Clear every NO COST line before trusting a total.
• Use named cost versions for quotes and what-ifs, and keep "standard" for what stock is valued at.
• Change standards at a period end, with revaluation ticked, so variances compare like with like.