OPM Financials-Costing Discussion for the ERP Implementation


The Summary of the costing meeting for ERP Implementation yesterday.

1.      Separate costing for batches run at night shift: As discussed, to separately account for the night shift allowances to the batches run in the night shift following actions would be required:

i)      Labour Resources on all batches will have to be segregated into day time labour and night time labour to segregate the labour hours for day shift and night shift.

ii)     The Night shift allowance and other night shift specific allowances will be captured in different GL Accounts directly from the Payroll module.

iii)    The Night shift allowance cost aggregated in Step (ii) will be allocated to the Batches based on the night time labour hours captured on the batch in Step (i) and will reflect as a higher Batch Cost.

The applicability of the above solution depends on the following

(i)     whether the labour hours for the day time and night time can be captured on every production batch separately
(ii)    If it is desirable to load the products manufactured in the night shift with the extra night shift allowance cost as opposed to apportioning the cost equally to all the products and batches with in a plant.

The same has to be discussed amongst the Sonata Manufacturing, Marketing and Finance departments and communicated to KPMG.

2.       Resource Cost per hour will be based on the average resource rate for the cost center which will include the expenses related to all the equipment in that cost center / cost pool
3.      Costing for Samples (Physician’s/Export): Since the production of samples is decided after the completion of base product manufacturing. There will be separate formula (FO, FLP) and batch for the base product and the commercial product/samples. Hence the Cost of Base Product will be as per the FO and routing and for the samples the Base Product will be used as an Ingredient in the FLP. So the Base Product, Commercial Product and the Samples will be costed separately.

4.      Excess packaging material consumed: The cost of excess material consumed in a batch will reflect in the Material usage variance Report (Standard Report) which will show standard vs actual quantity of the material used along with the variance percentage.
5.      Cost of New Product Development: Least Cost Formulator functionality to be explored by KPMG for the new Product development,  if the batches run for New Product Development are not being captured in the system, the cost of new products can be ascertained based on the formula and proposed routing ( the standard rates of the cost centers used in the routing will be captured in the system for commercial product costing)

6.      Change in formula used for Production: The Costing formula used for Standard Costing can be separated in the system from the Production formula to effectively track the variance.

7.      TDS on Cumulative Balances: Deduction of TDS on cumulative balances to be automated in the system.

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