Microsoft Dynamics AX 2012 Manufacturing - Project Primer (Part4) continued

Please see the beginning on this article here: http://ax2012manufacturing.blogspot.com/2013/05/microsoft-dynamics-ax-2012_3.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 30$ based on cost of Rubber                                                *Inventory transactions   Inventory issue transactions for Rubber 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]>   Material consumption   Material consumption is 4$ based on cost of Carbon                                                *Inventory transactions   Inventory issue transactions for Carbon 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]>   Material consumption   Material consumption is 5$ based on cost of Zink Oxide                                                *Inventory transactions   Inventory issue transactions for Zink Oxide 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 37.50$ based on cost of Route operations 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]>

 

At this point you can review Project committed costs related to consumed material and labor

Project – Committed costs

 

Please note that the system reversed project committed costs for material and labor after material and labor have been actually consumed in production process. The only open committed cost transaction left is for labor Process job because the job itself is not yet Ended 

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

Project – Cost control

The system reversed committed cost transactions and posted real item and hour project transactions representing material and labor consumption into the project

Project transactions

Please note because project batch order Posting type = Consumed the system posted project transactions based on consumed Formula ingredients and Route operations

Please see details of project transactions below

Project item transaction – Rubber (General)

Project item transaction – Rubber (Cost)

Please note that cost price for Rubber is 30$ which corresponds to cost of ingredient (!)

Project item transaction – Rubber (Sales) (!)

Project item transaction – Rubber (Voucher)

Ledger voucher provides details on which account was credited for “Production, picking list” and which account was debited for “Project – cost”

Project item transaction – Rubber (Ledger updates)

Project item transaction – Carbon (General)

Project item transaction – Carbon (Cost)

Please note that cost price for Carbon is 4$ which corresponds to cost of ingredient (!)

Project item transaction – Carbon (Sales) (!)

Project item transaction – Carbon (Voucher)

Ledger voucher provides details on which account was credited for “Production, picking list” and which account was debited for “Project – cost”

Project item transaction – Carbon (Ledger updates)

Project item transaction – Zink Oxide (General)

Project item transaction – Zink Oxide (Cost)

Please note that cost price for Zink Oxide is 5$ which corresponds to cost of ingredient

Project item transaction – Zink Oxide (Sales) (!)

Project item transaction – Zink Oxide (Voucher)

Ledger voucher provides details on which account was credited for “Production, picking list” and which account was debited for “Project – cost”

Project item transaction – Zink Oxide (Ledger updates)

Project hour transaction – Process* (General)

Project hour transaction – Process* (Cost)

Please note that cost price for Process labor is 15$ as defined on the cost category

Project hour transaction – Process* (Sales)

Please note that sales price for Process labor is 30$ as defined by Project – sales price setup

Project hour transaction – Process* (Voucher)

Ledger voucher provides details on which account was credited for “Project – payroll allocation” and which account was debited for “Project – cost”

Project hour transaction – Process* (Ledger updates)

Project hour transaction – Process ** (General)

Project hour transaction – Process** (Cost)

Please note that cost price for Process labor is 15$ as defined on the cost category

Project hour transaction – Process** (Sales)

Please note that sales price for Process labor is 30$ as defined by Project – sales price setup

Project hour transaction – Process** (Voucher)

Ledger voucher provides details on which account was credited for “Project – payroll allocation” and which account was debited for “Project – cost”

Project hour transaction – Process** (Ledger updates)

Project hour transaction – Process*** (General)

Project hour transaction – Process*** (Cost)

Please note that cost price for Process labor is 15$ as defined on the cost category

Project hour transaction – Process*** (Sales)

Please note that sales price for Process labor is 30$ as defined by Project – sales price setup

Project hour transaction – Process*** (Voucher)

Ledger voucher provides details on which account was credited for “Project – payroll allocation” and which account was debited for “Project – cost”

Project hour transaction – Process*** (Ledger updates)

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 0.20$ (!)   *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]>

 

At this point you can review Project committed costs related to consumed material and labor. Please note that all committed costs transactions are closed. After reporting project production order as finished and ending Process job the system also reversed and closed committed cost transaction for Process job

Project – Committed costs

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

Project – Cost control

At this moment no changes happened to project transactions

Project transactions

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. Our Costing sheet is empty that’s why we don’t have Costing sheet details

However on Costing sheet tab you can also see an aggregated Total as well as breakdown based on Cost groups defined in Costing sheet

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 is 76.50$ 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) batch order 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 (!)   *Inventory transactions   All inventory transactions related to Car tire (AlexTire) production order 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]>

 

At this point no changes happened to committed cost transactions

Project – Committed costs

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

Project – Cost control

Since the time when project item and hour transactions have been posted against the project, they are ready to be included into Project invoice proposal in order to invoice the customer 

Project transactions

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

Start

Inventory transactions

Project – Committed cost

Project – Cost control

Project transactions

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

Start

Inventory transactions

Project – Committed cost

Project – Cost control

Project transactions

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

Start

Inventory transactions

Project – Committed cost

Project – Cost control

Project transactions

End

Inventory transactions

Please note that financial cost for Co-Slag co-product inventory receipt transaction is 0.12$ which was calculated as percentage based on total production cost

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

Start

Inventory transactions

Project – Committed cost

Project – Cost control

Project transactions

End

Inventory transactions

Please note that financial cost for By-Slag by-product inventory receipt transaction is 0 (Zero) and
total cost of production was not increased (no burden)

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

Start

Inventory transactions

Project – Committed cost

Project – Cost control

Project transactions

End

Inventory transactions

Please note that financial cost for By-Slag by-product inventory receipt transaction is 0 (Zero) and financial cost of Car tire (AlexTire) inventory receipt transaction increased to 130.57$ because burden cost applied

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

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!