> On Thu, Mar 15, 2012 at 2:59 AM, robert <

be...@gmail.com> wrote:

> > Hi,

>

> > Repacked 15 kg of dried meat in 57 bags of 250 gram.

>

> > Bom: scrap 5% of 15kg is 750 gr is 3 bags. Thus 60-3=57 bags produced.

> > And 14.25 kg needed.

>

> > Standard rate is 8.98 /kg

>

> First of all, In BOM to produce 1 bag of FG (small bags) require 15/57=

> 0.263kg (not .25 kg as you mentioned in BOM) raw material (dried meat).

> Scrap should also be considered as required raw material.

>

> For explanation, I am considering 0.25 kg RM (Raw Material) / 1 bag FG. So

> in this case, basically we are ignoring scrap.

>

> Hence, Production cost of 1 bag of FG = 8.98/.25 = 2.245 (you did not

> mention any operational cost)

>

>

>

> > In the backflush

>

> > QTY:14.25

> > Incoming rate:9.52

> > Total: 135.66

>

> > The purchase price was 15*8.98=134.70 the unit price for production

> > should be : 134.70/14.25= 9.45 and not 9.52.

> > Of course, the total sld be the same as the purchase price (135.66)

>

> You have made a production order to produce 57 bags of FG item.

>

> In backflush, incoming rate of RM is 9.52 as per valuation rate - FIFO (it

> will not consider standard rate 8.98).

> And qty = 14.25 kg (not 15 kg as we ignored scrap while making BOM)

> So, amount of consumed RM = 9.52 *14.25 = 135.66

>

> Here we can not consider standard rate, because it will calculate wrong

> valuation rate.

>

> > Than the second line of backflush:

>

> > QTY=57.00

> > Incoming Rate: 2.25

> > Amount: 127.97

>

> > Cannot identify the origin of 2.25 (as standard rate is 2.10) , looks

> > like it is standard plus tax (6%)= 2.226 (??).

>

> Incoming rate 2.25 (actually 2.245) of FG comes from BOM which is

> production cost of that item.

>

>

>

> > Than the total amount is the sum of the two amounts (263.63) , which I

> > believe is meaningless and misleading.

>

> Yes, Total amount here does not convey anything. We will hide that field in

> case of backflush.

>

>

>

> > Further, in order to calculate the profitability of sales, one wld

> > expect that the item production price, in this case 9.52 ( my math) is

> > somewhere recorded, in order to allow calculation of profits.

>

> To calculate profitability of sales, item production price are maintained

> in the system which is in this case 2.245 / 1 bag (not 9.52)

>

>

>

> > A logical thing would be that this would be the standard rate, or that

> > the would be an extra field in produced items, namely production

> > costs.

>

> > Please explain logic and mathematics.

>

> > Thanks and rgds roebert

>

> If you found anything wrong or have any doubt in the above explanation,

> please reply.

>

> --

> Regards,

> Nabin Hait

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