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Reducing Work Order cost for returned materials

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m1court View Drop Down
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    Posted: 03 Mar 2013 at 7:56pm
In our jewelry business, we issue rough casted gold parts to goldsmiths for further processing into finished items. During the production process, gold powder and gold scrap are generated. Since these latter items are both inventory, they need to be accounted for as returns to inventory and  the related cost has to be credited to the Work Order cost so only the net gold issuance is included in the job costing.

The only way that I can figure out to return these items to stock is to use Direct Receive. However, if I do that, the Work Order cost will not be reduced for the return. Is there some other way to reflect these material returns as a reduction of the Work Order cost?
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Debra View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Debra Quote  Post ReplyReply Direct Link To This Post Posted: 05 Mar 2013 at 1:46pm
When you pull inventory from stock and submit it to a job, move it into a logical different location like WO-123. Create one and then reuse it when order is close. Move everything that you gave a goldsmith for the job. When finished product and left overs get returned to you, Issue Parts for the work order. Consume only proper amounts from location WO-123. Finally restock the leftovers. 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote m1court Quote  Post ReplyReply Direct Link To This Post Posted: 05 Mar 2013 at 9:50pm
Thanks for the reply Debra. I've just purchased the software so now I really need to get this up and running ASAP.

I think I understand what you are saying but just to be sure, here is a hypothetical transaction. After going through it, appreciate if you could let me know if that's what you meant.

1. I create a new logical warehouse location 'Goldsmith#1'.

2. Move 100g gold scrap to that location from location 'MAIN'.

3. Goldsmith consumes 70g scrap. 65g contained in finished piece and 5g yield loss. I go to the Work Order screen and issue gold scrap of 70g so only the cost of actual usages gets charged to job cost.

4. Goldsmith finishes piece and returns 20g scrap which I move from location 'Goldsmith#1' to 'MAIN'.

5. Goldsmith also returns 10g gold powder that needs to be recorded separately since it cannot be used until after it is refined. Here is my concern - I can only move it back to 'MAIN' as GOLD SCRAP but it needs to go back into inventory as GOLD POWDER. The only way I can figure to do this (and it is a bit circuitous) is to make a Direct Issue adjustment to write off 10g gold scrap and then make a Direct Receive adjustment to record the receipt of Gold Powder. Is there a more efficient way to do this?

6. Since I will need to record a cost value for the Direct Receive adjustment, I presume I would get that from the Negative Inventory Adj report?

Thanks and regards. . Michael



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Debra View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Debra Quote  Post ReplyReply Direct Link To This Post Posted: 07 Mar 2013 at 8:48pm

Hi Michael,

This seems to be right. The conversions like scrap into powder can be done with work orders as well. But it seems unneeded in this case. When adjusting scrap down and receiving powder, use the originating work order number for the reference. Move 20g of scrap back  to storage, consume 10g by direct issue using your WO#-E in the  reference field and "WO Issue" for the Adj code, receive 10g of powder with WO#-E in the reference and Assembled for the Adj code.

The E stands for Extra. Or use any other qualifier to separate transactions for the computer, but make them look related to a human.

This way you can run a report and see what consumed/produced by work order and it will show: 

80g of scrap consumed

1 piece produced

10g or powder produced.

10g of powder produced.

To know work order input/output run, reports with filter =WO#.

To see all related transactions, use filter CONTAINS WO#-

To see only side effects, use filter = WO#-E

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