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CP-111:Optimizing CostpointMaterials and Manufacturing to Meet Your Needs
Debbie WhitePartner, Kinetek Consulting
DELTEK
| IBM
| GO
VCO
N| E
XP
ERTS
• Kinetek, a Deltek GovCon Partner and IBM Premier Business Partner is the industry leader in providing solutions for Fortune 500 companies in need of full lifecycle implementation services for Deltek solutions.
• Our services include design, deployment, testing, integration, training, and support services for Deltek Costpoint Accounting, Manufactuirng and Material Management, GCS Premier, Time & Expense, Costpoint Enterprise Reporting, Cognos BI/TM1.
• Our combination of industry consulting experience, Deltek, and IBM know-how makes us the go-to team for your every need.
• Contact us at (888)-546-3835 or visit us at www.kinetek.com
Who We Are.
AG
END
A
• Introduction
• Sales Order Entry
• Inventory Costing
• What does Inventory Mean to You?
• Overhead – Applying Indirect Costs
• Synching up the Production Process to Labor
• Inventory and the General Ledger
• Reconciliation Inventory to the General Ledger
• Wrap-Up and Questions
Agenda
Project Costs and Tracking
Compliance
Customer Satisfaction
Design and Engineering
Materials Planning
Resources
Quality
Lean Manufacturing
Day to Day Challenges
Sales Order Entry
SA
LESO
RD
ERE
NTR
YCustomer Orders
• Will we deliver on time?
• Does the product meet customer quality expectations?
• Are we keeping our customers happy?
• What’s are profitability?
SA
LESO
RD
ERE
NTR
YSales Orders
• Detailed customer order tracking
• Supports project billing and revenue recognition
• Creates inventory and manufacturing demand – MRP
• Consumes forecasts
• Requires:
• Customer setup
• Item billing setup
• Project setup
• Project to charge
• Revenue recognition
SA
LESO
RD
ERE
NTR
YRevenue Recognition
• Shipment Sales – Revenue formula for project must be *ETPL
• Unbilled AR – Revenue formula for project can be independent of
sales order
• Liquidation – Revenue formula for project can be independent of
sales order
• Deferred Revenue – Revenue formula for project must be *ETPL
• Ready for Use – Revenue formula for project must be *ETPL
• Prepay – Revenue formula for project must be *ETPL
*ETPL = Equal to Project Ledger Sales
SA
LESO
RD
ERE
NTR
YCost of Goods Sold• Inventory Journal
Inventory Issues book COGS based on project Inventory average actual or standard costs
Option to use a “Clearing Account” to hold costs until revenue recognition
COGS can be rolled up or booked by cost element
• Non-Inventory Costs
Manage sales order cost types
Sequence for defining cost sources
• Project Controls Costs
WIP projects
Direct projects
Additional costs charged to projects are not included in inventory average costing.
SA
LESO
RD
ERE
NTR
YCOGS by Cost Element
X
**All Loaded Costs
Inventory
CH
ALLE
NG
ES
OF
INV
ENT
OR
Y
Inventory
• Do we know where are parts are and who they belong to?
• What about DFAR, MMAS and CAS requirements?
• Can we handle cycle counts?
• What about costing?
12
INV
ENTO
RY
Average Actual Costing
• Average actual costs are calculated independently for each part,
project, and inventory abbreviation combination.
• Purchased or Manufactured Costs post to the project ledger based
on the actual cost procured or produced.
• New receipts (purchase order and manufacturing order reliefs go
into inventory at actual costs, if inventory exists the system blends
the new actual with the existing inventory value to calculate the new
average actual cost for inventory valuation.
INV
ENTO
RY
Example
• Part = 12345 Rev 1
• Project = 10003.002.001
• Inventory Abbreviation Code = “Raw Materials 10003.002”
QTY on Hand = 10
Cost $100 each
Total Inventory Value $1000
New PO Receipt Qty = 20
Cost $110 each
Total Receipt Value $2200
New QTY on Hand = 30
New Average/Actual Cost $106.67 each ($3200/30)
Total Inventory Value $3200
Average Cost for Part 12345 Rev 1 in Project 10003.002.001, Inventory Abbreviation Raw Matls 10003.002 = $106.67 each
INV
ENTO
RY
Standard Costing
• Project level costing
• Detailed variance reporting by cost element
• Optional labor efficiency variance
• Automated process for updating buy and make part’s standard
costs
• Complete audit trail of standard cost history.
INV
ENTO
RY
Manage Inventory Projects
INV
ENTO
RY
Average Cost Variances
INV
ENTO
RY
Standard Cost Variances
WO
RK
INP
RO
CESS
MO WIP Variance
Check this every month to avoid year end surprises!
Whose Inventory is it?
What is Inventory?
Quantity and Location
Costs
Serial and Lot Numbers
Shelf Life
Transactions
Ownership
Inventory Abbreviations
INV
ENTO
RY
21
Inventory by Ownership
• Asset Inventory
• Work In Process Project Inventory
• Expensed Inventory
• Government or Customer Furnished Inventory
Adherence to DFAR, MMAS and CAS
INV
ENTO
RY
22
INV
ENTO
RY
Common Stock/Asset Inventory
• Company owned – Balance Sheet
• Inventory Project and all accounts must be in the
project account group
• All transactions are posted to the general ledger
• Parts can be issued to any project, account and
organization
• Raw materials, work in process and finished
goods are tracked separately
INV
ENTO
RY
Common Stock/Asset Inventory
• Raw Materials Inventory Abbreviations
A single account and organization for raw materials
Overhead can be applied to raw materials upon receipt
• Finished Goods
Options for a single roll up account or breakdown by cost
Finished Goods accounts are not included in cost pools
• Work In Process
Part of the finished goods abbreviation
Requires separate accounts for each cost element
Additional required accounts – WIP Manufacturing Order
Asset Relief, Subassembly WIP Account (non-burdened)
and Variance Accounts
INV
ENTO
RY• Project Owned - Income Statement
• Expensed at purchase
• Materials hard tagged to the project
• Parts are typically hard coded to the project
and movement is restricted
• Only G/L activity upon cost roll up with the
project or inventory transfers
(borrow/payback to another project)
• Typically cost plus or reimbursable project
types
Project Expensed Inventory
INV
ENTO
RY
Project Expensed Inventory
• Raw Materials are purchased directly to the project as an expense
• Finished Goods and WIP Accounts can be the same account and
organization
No cost movement between Finished Goods and WIP is
posted to the general ledger
Overhead variances are captured in completed
manufacturing orders for reporting but are not posted as a
variance to the project
• Cost roll up options
• Borrow/Payback Transfers are used to transfer inventory from one
project to another project
INV
ENTO
RY• Project Tracked
• Materials hard tagged to the project
• Parts usage controlled by the project
• All transactions are posted to the general
ledger
• Inventory costs are recognized as expense
when product is shipped
• Typically fixed price projects
Project Work In Process
INV
ENTO
RY
WIP Project Inventory
• Raw Materials purchased directly to project asset account
• Finished goods and WIP accounts require separate accounts
• Additional required accounts – WIP Manufacturing Order
Asset Relief, Subassembly WIP Account (non-burdened) and
Variance Accounts
• Transactions flow through WIP Manufacturing Order Asset
Relief account when moving from WIP to Finished Goods
• Customer Delivery can trigger COGS transaction through
sales order entry
INV
ENTO
RYThe core principle of Topic 606 is that an entity
should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.*
*ACIPA Financial Reporting Brief
Project Work In Process
INV
ENTO
RY• Project tracked
• Tracked in inventory only
• Materials hard tagged to the
project
• Parts usage controlled by the
project
• On hand, on order and costs
tracked in inventory
• Returned Material (RMA)
• No accounts or organizations
• NO G/L Activity!
Government (GFM) or Customer Furnished
INV
ENTO
RY
Inventory Abbreviations
• Sample Asset Inventory Abbreviation Accounts
INV
ENTO
RY• Do you burden on Receipt?
• How can we prevent double
dipping on O/H?
• How do my O/H costs get
allocated?
• What if I have a variance in a
closed manufacturing order?
Accounts Required
INV
ENTO
RY
Inventory Abbreviations Accounts
• Key Points
All accounts are considered part of the sub-ledger
Common Stock and Project WIP accounts require reconciliation
to the general Ledger – Don’t Wait Until Year End!!!
Each account must be used specifically for this purpose, these
accounts CANNOT be used for any other purpose or process
in Costpoint!
No adjusting journal entries unless well documented
Manufacturing order trailing costs (WIP Variances) should be
monitored monthly
Timing is key to accurate manufacturing costs which leads to
accurate cost of goods sold
If your company purchases directly to Finished Goods and has
Manufacturing Orders, use separate Finished Goods accounts
Overhead –
Applying Indirect Costs
OV
ERH
EAD/B
UR
DEN
Overhead – Applying Indirect Costs
• Impact to General Ledger and Inventory Ledger
• General Ledger and Projects will incur burden regardless of
Inventory burdening decisions
• Burden on Inventory Ledger is only applied to costs that pass
through manufacturing orders or purchase order receipts
• Monitoring variances between target and actual rates should be
calculated monthly to avoid year end surprises!
Source table for rates: INVT_BURD_SUM and
INVT_BURD_SUM_DETL provides additional information.
OV
ERH
EAD/B
UR
DEN
Inventory Burdening-Setup
• Target or Actual Rates
• Raw Material Burdening
Issue to an MO
Material Receipt
• The Raw abbrev must be
checked to apply burden
• Not available on Finished
Goods abbrev
OV
ERH
EAD/B
UR
DEN
Cost Pools
• Pool Cost – Fringe benefits, freight, stockroom personnel
• Pool Base – Accounts and organizations to which overhead % are
applied – raw materials, WIP materials, Labor, Subcontract etc.
• Pool Rates – Actual (computed) and Target Rates by Period
1) Build Rate Application Table
2) Compute Pool Rates
3) Compute Inventory Burden
Rates
Synching up the
Production Process to
Labor
LA
BO
R
• Typical Timesheet cycles are
weekly, but for production, this can
cause timing issues for costing on
sub-assemblies and final
assemblies
• Timing can cause delays with
production, or missing costs on
assemblies.
• Costs include Labor and Overhead
• Daily or In Process Timesheets can
reduce delays in relieving
manufacturing order and ensuring
the MO is accurately costed
Manufacturing Order Labor
Inventory and the
General Ledger
REC
ON
CILIA
TIONCommon Stock Transaction Impact
REC
ON
CILIA
TIONReconciling Inventory
General Ledger
§ Purchase Order Accruals
§ Adjusting Journal Entries
§ Purchase cost discrepancies between
material received (Stocked) and the AP
(Paid)
Inventory
§ Issues to and from the same project, account and organization
§ Purchases without part numbers or inventory
abbreviations
§ Bad close timing - Inventory extracts and
reports (stock status/MO cost report) MUST be created on the calendar day of the close
REC
ON
CILIA
TIONReconciling WIP
General Ledger
• Labor recorded against the Project not Manufacturing Order
• Subcontract Labor (on MO, but not included
in GL until the A/P Voucher is Posted
• WIP Variances – Target vs Actual rates
• Adjusting Journal Entries
Inventory
• MO Reliefs at zero cost
• Modify MO cost utilities (updates the MO but
not the GL)
• Trailing MO costs (rate changes or actual
rates will guarantee a trailing cost, also can be correcting timesheets, extra inventory
issue and vouchers cost changes)
ASK
NO
WO
RE
MA
ILM
EL
ATER
Questions?
