Aarto
Reputable Poster
Hi There!
I'm working for an oil company and they have some very specific needs when it comes to product costing
Once a month, the crude oil prices are set and the inventory is recosted using the new crude oil prices.
Some products are blends (made up of two or more crude oils) and these products should be recosted based on the crude oil (component) costs (using the percentage of each component against the total)
The problem is that the BOM in OneWorld is just a template, the actual quantities of the components can vary between blends (sometimes an additive is added or the quantities vary slightly) They would like to take this into account when recosting the end product
Also, they do use multi-level BOM:s
OneWorld will (a the moment) only be used for product costing. No sales/Purchase transactions are made in OneWorld. The inventory transactions are interfaced from legacy systems using "Product Activity data" server
I figure work orders with actual cost would be the way to go here.
As i gather, we could create a work order in OneWorld with whatever was blended during the month and complete the work order when the component cost is established for that month.
However, we would need to recost the entire stock of the finished product, not only the quantity that was blended during the month AND we need to recost the stock using "historical component quantites"
i.e
- we blend 70 TM product A, 30 TM product B to 100 TM product C in July
- we sell 25 TM of the product in july
- we blend 72 TM product A, 28 TM product B to 100 TM product C in August
We will have 175 TM of finished product and the cost would have to be calculated from the components using FIFO
this is how i see the calculation, but i see now way of doing this in OneWorld
Recosting in end of August, the base oil price is set to 10 per TM (A) and 20 per TM (B)
We have sold 25 TM in july, so this quantity would have to be deducted from the july lot
We would have to count backwards to deduct the sold quantitiy from july lot. 100 - 25 = 75
(52,5 * 10 ) + (22,5 * 20) = 1.300 per 75 TM (july lot)
(72 * 10) + (28 * 20) = 1.280 per 100 TM (august lot)
total cost for 175 TM = 2.580
2.580/175 = 14,74 per TM (cost per unit, TM)
I hope i have been able to desribe the problem correctly.
to summarize ..
1. Retrieve total qty on hand
2. Calculate total stock value backwards (from most recent work order, replacing the component cost on the WO with the newest one) until total on-hand stock has been "acounted for"
3. Recost the end product using "total value / quantity on hand = unit price"
Naturally, since the transactions that were created using the blends are imported to OneWorld, i could do the same using Item Ledger only (as long as i know which transactions belong together)
Whichever method i choose, there would still be some modification work needed unless there is a standard way of doing this (or a best practice)
Luckily, the company has not decided to use the recosting method but they are endorsing it and it will possibly be required
I am looking for best practices and how this has been solved elsewhere in the oil industry using OneWorld. I would appreciate any help and pointers you can share...
With regards...
I'm working for an oil company and they have some very specific needs when it comes to product costing
Once a month, the crude oil prices are set and the inventory is recosted using the new crude oil prices.
Some products are blends (made up of two or more crude oils) and these products should be recosted based on the crude oil (component) costs (using the percentage of each component against the total)
The problem is that the BOM in OneWorld is just a template, the actual quantities of the components can vary between blends (sometimes an additive is added or the quantities vary slightly) They would like to take this into account when recosting the end product
Also, they do use multi-level BOM:s
OneWorld will (a the moment) only be used for product costing. No sales/Purchase transactions are made in OneWorld. The inventory transactions are interfaced from legacy systems using "Product Activity data" server
I figure work orders with actual cost would be the way to go here.
As i gather, we could create a work order in OneWorld with whatever was blended during the month and complete the work order when the component cost is established for that month.
However, we would need to recost the entire stock of the finished product, not only the quantity that was blended during the month AND we need to recost the stock using "historical component quantites"
i.e
- we blend 70 TM product A, 30 TM product B to 100 TM product C in July
- we sell 25 TM of the product in july
- we blend 72 TM product A, 28 TM product B to 100 TM product C in August
We will have 175 TM of finished product and the cost would have to be calculated from the components using FIFO
this is how i see the calculation, but i see now way of doing this in OneWorld
Recosting in end of August, the base oil price is set to 10 per TM (A) and 20 per TM (B)
We have sold 25 TM in july, so this quantity would have to be deducted from the july lot
We would have to count backwards to deduct the sold quantitiy from july lot. 100 - 25 = 75
(52,5 * 10 ) + (22,5 * 20) = 1.300 per 75 TM (july lot)
(72 * 10) + (28 * 20) = 1.280 per 100 TM (august lot)
total cost for 175 TM = 2.580
2.580/175 = 14,74 per TM (cost per unit, TM)
I hope i have been able to desribe the problem correctly.
to summarize ..
1. Retrieve total qty on hand
2. Calculate total stock value backwards (from most recent work order, replacing the component cost on the WO with the newest one) until total on-hand stock has been "acounted for"
3. Recost the end product using "total value / quantity on hand = unit price"
Naturally, since the transactions that were created using the blends are imported to OneWorld, i could do the same using Item Ledger only (as long as i know which transactions belong together)
Whichever method i choose, there would still be some modification work needed unless there is a standard way of doing this (or a best practice)
Luckily, the company has not decided to use the recosting method but they are endorsing it and it will possibly be required
I am looking for best practices and how this has been solved elsewhere in the oil industry using OneWorld. I would appreciate any help and pointers you can share...
With regards...
