Friday, May 3, 2013

Microsoft Dynamics AX 2012 Manufacturing - Project Primer (Part3) continued

Please see the beginning on this article here: http://ax2012manufacturing.blogspot.com/2013/05/microsoft-dynamics-ax-2012.html 

Section E: Execution

 
The next step in Car tire (AlexTire) batch order life cycle is to release batch order which releases batch order from top floor to shop floor and indicates that batch order can be started
 
Batch order: AlexTire – Release
 
 
Production orders
 
Once release is finished you can see the list of batch orders and their statuses on Production orders list page
 
 

At this moment no changes happened to inventory transactions
 
Inventory transactions
 
 

The next step in Car tire (AlexTire) batch order life cycle is to start batch order
 
Batch order: AlexTire – Start
 
 

Infolog
 
As the result the following message will be displayed informing that Picking list journal and Route card journal have been posted for the consumption of material and labor 
 
 

Production orders




Picking list journal is used to post material consumption

Batch order: AlexTire – Picking list journal

Picking list journal header references Batch order for Car tire (AlexTire)




Picking list journal lines have details of what ingredients have been picked for Car tire (AlexTire) production




Route card journal is used to post labor consumption

Batch order: AlexTire – Route card journal

Route card journal header references Batch order for Car tire (AlexTire)




Route card journal lines have details of what operations have been performed for Car tire (AlexTire) production




Batch order: AlexTire – Jobs

Please note that Job status for jobs changed to Waiting




At this moment the system physically updated issue inventory transactions for Car tire (AlexTire) Formula ingredients. By other words ingredients for Car tire (AlexTire) have been used in production process
 
Inventory transactions




Please note that issue inventory transactions for Car tire (AlexTire) Formula ingredients changed their statuses to Deducted

Batch order: AlexTire – Production posting

The result of material and labor consumption for Car tire (AlexTire) batch order is reflected in Production posting details




Please note that the system also calculated Indirect costs based on Costing sheet setup

Please see details of Production posting for Car tire (AlexTire) batch order in the table below
 
Material consumption
 
Material consumption is 39$ based on cost of Car tire (AlexTire) Formula ingredients
                                              
*Inventory transactions
 
Inventory issue transactions for Car tire (AlexTire) Formula ingredients will be displayed on Voucher transactions screen for material consumption
<![if !vml]><![endif]>
 
*Voucher transactions
 
Ledger voucher provides details on which account was credited for “Production, picking list”, which account was debited for “Production offset picking list” as well as on additional postings happened because of material overhead applied 
 
<![if !vml]><![endif]>
 
Route consumption
 
Route consumption is 37.5$ based on cost of operations for Process and per Quantity for Car tire (AlexTire)
 
*Inventory transactions
 
Inventory receipt transaction for Car tire (AlexTire) will be displayed on Voucher transactions screen for route consumption
 
<![if !vml]><![endif]>
 
*Voucher transactions
 
Ledger voucher provides details on which account was credited for “Production WIP issue”, which account was debited for “Production - WIP” as well as on additional postings happened because of labor overhead applied
 
<![if !vml]><![endif]>
 
*Route transactions
 
Route transactions show the details of labor consumption postings for Process jobs (37.50$) (!)
 
<![if !vml]><![endif]>
 
Indirect cost
 
Indirect cost 5$ represents labor overhead applied to labor consumption based on Costing sheet setup. Please note that plant overhead is calculated based on labor overhead and contributes to the sum
 
*Inventory transactions
 
Inventory receipt transactions for Car tire (AlexTire) will be displayed on Voucher transactions screen for indirect cost
 
<![if !vml]><![endif]>
 
*Voucher transactions
 
Ledger voucher provides details on which account was credited for “Estimated indirect absorption”, which account was debited for “Estimated indirect absorption offset” in regards with labor overhead applied
 
<![if !vml]><![endif]>
 
*Indirect cost transactions
 
Indirect cost transactions provide information regarding the breakdown of indirect costs incurred which are related to labor consumption according to cost groups set up in Costing sheet 
 
<![if !vml]><![endif]>
 
 
The next step in Car tire (AlexTire) batch order life cycle is to report production order as finished

Batch order: AlexTire – Report as finished




Infolog

As the result the following message will be displayed informing that Report as finished journal has been posted for the receipt of finished goods as well as co/by products into inventory




Once you reported batch order as finished you can see the list of Production orders on Production orders list page

Production orders




Report as finished journal is used to record finished good receipt as well as co/by product receipts into inventory

Batch order: AlexTire – Report as finished journal

Report as finished journal header references Batch order for Car tire (AlexTire)




Report as finished journal lines have details of what finished goods and what co/by products have been received into inventory




Batch order: AlexTire – Jobs

Please note that Job status for jobs changed to Ended




Inventory transactions

At this moment the system physically updated receipt inventory transaction for Car tire (AlexTire) as well as for Co-Slag co-product and By-Slag by-product. By other words Car tire (AlexTire) has been produced and is available now as well as secondary outcomes - co/by products: Co-Slag co-product and By-Slag by-product. Please also note that the system also physically updated auto loss/profit issue inventory transaction for Car tire (AlexTire) and auto loss/profit issue transactions for Co-products (Co-products and By-products) to automatically reduce on-hand because Car tire (AlexTire) and its Co-products (Co-products and By-products) have been consumed to the project




Batch order: AlexTire – Production posting

The result of reporting Car tire (AlexTire) batch order as finished is reflected in Production posting details




Please see details of Production posting for Car tire (AlexTire) batch order in the table below
 
Report as finished
 
Report as finished amount is 83.10$ based on standard cost of Car tire (AlexTire)
 
*Inventory transactions
 
Inventory receipt transactions for Car tire (AlexTire) will be displayed on Voucher transactions screen for Report as finished
 
<![if !vml]><![endif]>
 
*Voucher transactions
 
<![if !vml]><![endif]>
 
Report as finished (Co-product)
 
*Inventory transactions
 
Inventory receipt transactions for Co-Slag co-product will be displayed on Voucher transactions screen for Report as finished
 
<![if !vml]><![endif]>
 
*Voucher transactions
 
<![if !vml]><![endif]>
 
Report as finished (By-product)
 
*Inventory transactions
 
Inventory receipt transactions for By-Slag by-product will be displayed on Voucher transactions screen for Report as finished
 
<![if !vml]><![endif]>
 
*Voucher transactions
 
<![if !vml]><![endif]>
 

Section F: Costing

 
The next step in Tire (AlexTire) batch order life cycle is to end batch order

Batch order: AlexTire – End




Once you ended batch order you can see the list of batch orders on Production orders list page

Production orders




From costing perspective after ending batch order the system calculated actual cost of batch order based on actual material and labor consumption

Batch order: AlexTire – Price calculation




Please note that the system segregates consumption of materials from consumption of labor on Overview costing tab. Also different types of overhead costs are represented based on Costing sheet setup




You can also review Price calculation details for co-products




You can review production variances for Co-products on Variance screen as Summary




Or you can review production variances for Co-products on Variance screen in Details




In this particular example no cost will be allocated to co-product. Please see Appendix A for different examples of cost allocation

Inventory transactions
 
At this moment the system financially updated all receipt and issue inventory transactions related to Car tire (AlexTire) production




Please note that the system recorded financial costs for inventory transactions according to posted material and labor consumption as well as all applied overheads. Please also note that the system financially updated inventory transactions for Co/By products and posted cost adjustments to offset costs for Co/By products consumed to project. Please see Appendix A and Appendix B for examples of different setups as it relates to cost allocation for co-products and burden cost for by-products. (!)

Batch order: AlexTire – Production posting

The result of ending Car tire (AlexTire) batch order is reflected in Production posting details




Please see details of Production posting for Car tire (AlexTire) batch order in the table below
 
Costing
 
Costing amount 83.00$ reflects the actual cost of batch order which includes material consumption, labor consumption and various overheads applied (!)
 
*Inventory transactions
 
All inventory transactions related to Car tire (AlexTire) production will be displayed on Voucher transactions screen for costing
<![if !vml]><![endif]>
 
*Voucher transactions
 
Ledger voucher provides details on which account was credited for “Production issue” and which account was debited for “Production offset account issue”. Similarly which account was credited for “Production offset account receipt” and which account was debited for “Production receipt”.  Cost adjustment is reflected in “Production substitution variance” posting.
 
<![if !vml]><![endif]>
 
Please note that when batch order was ended the system reversed all previous postings for WIP (Work in process) including material consumption, labor consumption and all applied overheads
 
Costing (Co-product)
 
Costing amount 0.15$ reflects the fact that production cost is not allocated to co-products in this scenario (!)
 
*Inventory transactions
 
All inventory transactions related to Co-product production will be displayed on Voucher transactions screen for costing
 
<![if !vml]><![endif]>
 
*Voucher transactions
 
Ledger voucher provides details on which account was credited for “Production issue” and which account was debited for “Production offset account issue”. Similarly which account was credited for “Production offset account receipt” and which account was debited for “Production receipt”.  Cost adjustment is reflected in “Production substitution variance” posting.
 
<![if !vml]><![endif]>
 
Please note that when batch order was ended the system reversed all previous postings for WIP (Work in process) including material consumption, labor consumption and all applied overheads
 
At this point because of project batch order Posting method = Finished you can review Project committed costs related to finished product as well as Co-products (Co-products and By-products). Please note that all committed costs transactions are closed. After ending project production order the system reversed and closed finished product related committed cost transaction

Project – Committed costs




You can do extended project cost control analysis using Cost control screen

Project – Cost control




The system reversed committed cost transaction and posted real item project transaction representing finished product consumed into the project

Project transactions




Please see details of project transactions below

Project item transaction – Car tire (AlexTire) (General)




Project item transaction – Car tire (AlexTire) (Cost)




Please note that cost price for Car tire (AlexTire) is 83$ which corresponds to cost of production (!)

Project item transaction – Car tire (AlexTire) (Sales) (!)




Project item transaction – Car tire (AlexTire) (Voucher)




Ledger voucher provides details on which account was credited for “Inventory, inventory issue” and which account was debited for “Project – cost”, etc as well as details of ledger postings related to applied overheads

Project item transaction – Car tire (AlexTire) (Ledger updates)




Project item transaction – Co-Slag (General)




Project item transaction – Co-Slag (Cost)




Please note that cost price for Co-Slag is 0.10$ which corresponds to the cost of Co-product (!)

Project item transaction – Co-Slag (Sales) (!)




Project item transaction – Co-Slag (Voucher)




Ledger voucher provides details on which account was credited for “Inventory, inventory issue” and which account was debited for “Project – cost”, etc as well as details of ledger postings related to applied overheads

Project item transaction – Co-Slag (Ledger updates)




Project item transaction – By-Slag (General)




Project item transaction – By-Slag (Cost)




Please note that cost price for By-Slag is 0.20$ which corresponds to the cost of By-product (!)

Project item transaction – By-Slag (Sales) (!)




Project item transaction – By-Slag (Voucher)




Ledger voucher provides details on which account was credited for “Inventory, inventory issue” and which account was debited for “Project – cost”, etc as well as details of ledger postings related to applied overheads

Project item transaction – By-Slag (Ledger updates)



Appendix A: Co-products

 
Please see different scenarios for cost allocation for co-products described below. For the sake of clarity in these scenarios only co-product (and no by-product) is the secondary outcome for production process.

Scenarios

<![if !supportLists]>1.       <![endif]>Cost allocation = None
In this scenario the system doesn’t do any cost allocation for co-products

Formula: AlexTire – Co-Products


Please note that Cost allocation = None for Co-Slag co-product. This means that the system will not allocate cost onto Co-Slag co-product

Estimate

Inventory transactions


Project – Committed cost


Project – Cost control


End

Inventory transactions


Project – Committed cost


Project – Cost control


Project transactions


<![if !supportLists]>2.       <![endif]>Cost allocation = Manual
In this scenario the system will do cost allocation for co-products in accordance with Cost allocation percent specified manually
 
Formula: AlexTire – Co-Products


Please note that Cost allocation = Manual and Cost allocation percent = 50% for Co-Slag co-product. This means that the system will evenly (50%/50%) allocate cost onto Co-Slag co-product and Car tire (AlexTire) product based on total production cost

Estimate

Inventory transactions


Project – Committed cost


Project – Cost control


End

Inventory transactions


Project – Committed cost


Project – Cost control


Project transactions


<![if !supportLists]>3.       <![endif]>Cost allocation = TCA (Total cost allocation)
In this scenario the system will do cost allocation for co-products in accordance with TCA (Total cost allocation) principle

Formula: AlexTire


Please note that Total cost allocation checkbox is selected for the formula to enable TCA (Total cost allocation) for co-products

Formula: AlexTire – Co-Products (Estimate cost)


Based on TCA (Total cost allocation) principle the system calculates the cost as a weighted average between the quantities that are reported as finished for product and co-products. On Estimate cost screen you can calculate Cost allocation percentages for co-products using Allocate cost percentages function.

Formula: AlexTire – Co-Products


As the result Cost allocation percentages will be calculated for co-products. In this scenario Cost allocation percentage = 0.1332%

Estimate

Inventory transactions


Project – Committed cost


Project – Cost control


End

Inventory transactions


Project – Committed cost


Project – Cost control


Project transactions

Appendix B: By-products

Please see different scenarios for burden cost for by-products described below. For the sake of clarity in these scenarios only by-product (and no co-product) is the secondary outcome for production process.

Scenarios
<![if !supportLists]>1.       <![endif]>Burden = None
In this scenario the system doesn’t add burden cost related to by-products to total production cost

Formula: AlexTire – Co-Products


Please note that Burden = None for By-Slag by-product. This means that the system will not add burden cost related to By-Slag by-product to total production cost

Estimate

Inventory transactions


Project – Committed cost


Project – Cost control


End

Inventory transactions


Project – Committed cost


Project – Cost control


Project transactions


 
<![if !supportLists]>2.       <![endif]>Burden = Per (Percent)
The system allows you to add burden cost related to by-products to total production cost based on Percent, Per series and Per quantity. In this scenario the system will add burden cost related to by-products in accordance with By-product burden amount (Percent) specified manually

Formula: AlexTire – Co-Products


Please note that Burden = Percent for By-Slag by-product. This means that the system will add burden cost of By-Slag by-product as 50% percentage of total production cost into total production cost

Estimate

Inventory transactions


Project – Committed cost


Project – Cost control


End

Inventory transactions


Project – Committed cost


Project – Cost control


Project transactions


When you End the batch order the burden value is calculated automatically and posted in Route card journal adding to the cost of the batch order

Infolog


Production order: AlexTire – Route card journal

Route card journal header references Batch order for Car tire (AlexTire)


Route card journal lines have details of burden cost applied for Car tire (AlexTire) production


Batch order: AlexTire – Production posting

The result of burden cost applied for Car tire (AlexTire) batch order is reflected in Production posting details


Please see details of Production posting for Car tire (AlexTire) batch order in the table below
 
Route consumption
 
Route consumption is 38.25$ based on burden applied for Car tire (AlexTire) production
 
*Inventory transactions
 
Inventory receipt transaction for Car tire (AlexTire) will be displayed on Voucher transactions screen for route consumption
 
<![if !vml]><![endif]>
 
*Voucher transactions
 
Ledger voucher provides details on which account was credited for “Production WIP issue”, which account was debited for “Production - WIP” because of burden applied
 
<![if !vml]><![endif]>
 
*Route transactions
 
Route transactions show the details of burden posting (38.25$)
 
<![if !vml]><![endif]>
 
  
Summary: This document describes a primer of project manufacturing approach to Car tire production in Microsoft Dynamics AX 2012. The scenario operates with single level formula with co/by-products. Batch order is a main document in process approach which controls manufacturing process and provides a context for cost accounting. However in project manufacturing scenario the project itself provides cost context as well as extended committed costs and cost control capabilities. In this scenario I highlighted all aspects of manufacturing process including setup, creation, estimation, scheduling, execution and costing. Most importantly I’m giving a detailed practical example of how to implement typical manufacturing scenario using process approach in Microsoft Dynamics AX 2012. This provides a foundation for comparison between traditional approach and process approach in Microsoft Dynamics AX 2012. Please review other documents in the series to compare traditional manufacturing approach with other manufacturing approaches in Microsoft Dynamics AX 2012. Please note that this solution is a prototype which showcases flexibility of Microsoft Dynamics AX 2012 platform.

Version: Microsoft Dynamics AX 2012 R2 Demo VM (USMF)

Author: Alex Anikiev, PhD, MCP

Tags: Microsoft Dynamics ERP, Microsoft Dynamics AX 2012, Manufacturing, Production, Project Manufacturing, Process Manufacturing, Process Approach, Project Accounting, Batch Order, Setup, Creation, Estimation, Scheduling, Execution, Costing.

Note: This document is intended for information purposes only, presented as it is with no warranties from the author. This document may be updated with more content to better outline the concepts and describe the examples.

Download: You can also download this material as Microsoft Word document  and AX model from my SkyDrive here: http://sdrv.ms/Yu1ftN
Your feedback is much appreciated! 

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