In a previous post, I explained how to configure actual and standard cost in JDE. Now, how do you confirm whether the actual costs are working or not as desired?
Actual Cost Troubleshooting
If you are using Actual Cost, you may experience the following issues:
Variances when running a variance report: This means that you are updating hours, quantities, and material issues after work order completions.
Production costs do not match with GL costs: You are probably using a different cost from Actual Cost (09). If you are using the average cost, it is important to know that these costs usually are not updated correctly.
Production costs are inconsistent: If you experience cost changes every time you complete a work order, you probably have not set the Inventory Cost level to 3. Check to see if you are updating the cost from purchasing to the same location and production lots.
Standard Cost Troubleshooting
If you are using Standard Cost, you will be experiencing the following issues on variances:
Engineering Variance: You might be making significant changes on your routings or BOMs after freezing your costs.
Planned Variance: Your current routings and/or BOMs are probably obsolete or out of date so you need to correct them on the fly when you create your work orders.
Actual Variance: Your current routings and/or BOMs are probably inconsistent with your needs or you are also probably inefficient so your costs are lower than you imagine.
Improving Costing Methods
Because setting up costs in JDE isn’t always easy, the success depends on the objectives that you pursue.
To do it right, you can define the object cost for any period based on the following criteria:
How often do I change item costs?
Do I produce goods for high volume or low volume unique items?
Are my costs subject to market changes (elastic demand)?
Do I have many additional overhead costs that are more expensive than the production costs itself?
Are my products purchased as well as manufactured to cover the demand?
Should I change the sales price when I change the cost? Are these variables related?
Finally, make sure you understand the level of detail and the purpose of maintaining costs throughout JDE. It doesn’t hurt to be careful, and to double check your work.