In this Document

APPLIES TO:

GOAL

What is the logic behind WIP Final Completion variances in an Average Costing setup?

SOLUTION

The design for wip completions in an average costing environment is as follows:
   -  The relief of material costs will be based on standard requirements. 

   -  A standard requirement is such that the quantity per assembly of the component/sub-assembly required to build one unit of  the assembly can be identified.

   -  A standard requirement can be distinguished from a non-standard requirement by the value of the quantity_per_assembly column in the WIP_REQUIREMENT_OPERATIONS table.  The non-standard requirements will have a zero value for the column and the standard requirements will have non-zero values for the column.

   -  Upon definition of the Job, Oracle WIP snapshots the bill and stores it in WIP_REQUIREMENT_OPERATIONS. 
This table will contain an association of component (inventory_item_id) to operation (operation_seq_num) for a specific job 
(wip_entity_id).

   -  Additional records can be created later in this table by the following: 
          1.  Issuing a component (on the bill) to an operation at which it is not required (the requirement being based on the bill) 
through the WIP Material Transactions form. 
          2.  Issuing a component (not on the bill) to an operation through the WIP Material Transactions form. 
          3. Manually updating the Material requirement for the job through the Update WIP Requirements form by adding one or more components at one or more operations with non-zero quantity per assembly.

    -  Cases 1 & 2 do not constitute standard requirements. Costs associated with such material issues will not be relieved 
during regular completions.  All such costs,  in excess of the cost based on standard requirements,  will be relieved during the 
final completion*.

    -  Case 3 constitutes a standard requirement.

    -  During regular completions,  the costs derived will be on the basis of standard requirements.

    -  The relief of resource/overhead costs depends on the wip parameters setting for average costing also (apart from other factors). 

    - * Final completion is a mechanism that is provided to flush out all residual costs in the job.  In Standard costing, any excess costs residing in the job at close time are recognized as variances.

    -  In an Average costing scenario, some users like to account for and track variances and some may not track variances. 
In such cases, the user can utilize the functionality of  "Final completion."   This can be implemented in the following ways. 
          1.  An option will be provided which will permit the user to decide if the system should determine the final completion. 
If the option is in the affirmative,  all extra costs in the job will be flushed out when the following occurs: 
(Current completion quantity + Prior completion quantity + Prior scrap quantity) >= Job quantity. 
This option has to be set at the Organization level. (WIP Parameters -> Average Costing -> Auto Compute Final Completion). However, the user may still check the final completion flag for any completion transaction and have costs flushed out from the job. 
          2.  If the option is not set to YES, the user must manually identify a specific completion transaction as the final completion transaction. When this is done,  all costs in the job will be flushed out. T his can be repeated as many times as 
necessary (via the Final Completion check box in the Assembly Completion form) 
          3.  As exceptions to 1 and 2 above, if there are costs left in the job that were not flushed out, they will be written to job variance accounts at Job close time. 

    -  Residual costs could be left in the job owing to the following : 
           1.  The user chooses to set the Option to YES but does not complete/scrap all units. 
           2.  The job earns costs between the last final completion and the close transaction