Cost variance transaction case study 1
A transaction is written to the MATRECTRANS table or the INVOICETRANS table, or both, for the entire variance. The value of UPDATEINVENTORY in MAXVARS is 1, the default, and the quantity of the item on the invoice is less than or equal to the current balance of the item in the storeroom at the time of invoice approval.
UPDATEINVENTORY = 1 (the default) and Invoice Quantity ≤ Current® Balance
For the items remaining in inventory, the average cost of the item is updated to reflect the per unit variance by writing a transaction of TRANSTYPE = INVOICE to the MATRECTRANS table for the amount in inventory.
In this example, you approve an invoice for 20 bearings at CAD3.30 each. The base currency is US dollars, and the exchange rate is currently CAD5.00 per USD1.00. At the point of receipt, the item price is only CAD3.00, and the exchange rate is CAD6.00 per USD1.00.
At receipt, the bearings are CAD3.00 = USD0.50 each.
At invoice approval, the bearings are CAD3.30 = USD0.66 each.
Average cost change
Originally, 10 items were in the storeroom at $0.50 each. Upon receipt, there are 30 items at $0.50 each for a total value of $15.00. Upon invoice approval, the value increases by $3.20 to $18.20. The average cost is $18.20 divided by 30 = $0.61.
If you capitalize this item, the average cost in the storeroom changes. If the item you capitalized has a zero cost in the storeroom before you approve the invoice, it has a positive cost after you approve the invoice.
GL account source | Debit | Credit | GL account source |
---|---|---|---|
Debit account established upon insertion of invoice line = Purchase order line debit account | ($0.66-$0.50) x 20 = $3.20 | ($0.66-$0.50) x 20 = $3.20 | Purchase order line credit account = company RBNI account |