# FG valuation in erpnext

I’ve always made to realize that your FG value = actual RM + Actual PKG + overheads

BOM cost is only for reference and may or may not be applicable at all times. My WO consumption defines the cost of FG not bom. Erpnext works other way. What’s the logic?

Hi,

Could you elaborate what you mean by the above? What is different in ERPNext?

Your original statements are valid.
BoM = Cost of all BoM constituents
But, it is possible that while processing the WO, you use different quantities of RM to make the Finished Goods. Not to mention, overheads too.

I see that is happening correctly in my case. Maybe if you can explain what ‘difference’ you have observed, it would be easier to comment.

Here is my scenario:

BOM
Item A 2Kg @ 5\$ = 10\$
Item B 3Kg @ 2\$ = 6\$
Total BOM Cost = 16 \$

Work Order - Same BOM as above
Item A 3Kg @ 5\$ = 15\$ (I added more because my chemical reaction needed it like this for this case)
Item B 3Kg @ 2\$ = 6\$

I expected the FG Cost to be 21\$ (Which is the actual cost)
However, ERPNext posts FG with 16\$ which according to me is wrong.

See the screenshots below:
Stock Entry Costs:

Journal Entries:

I can’t wrap my head around the FG costing and why is the INR12 not added to my asset valuation of the FG because of which my COGS shows -ve balance all the time and my PnL shows huge profits which I never booked…

Please check if you have Valuation Rate set for the item at Rs. 6,031.00? That could be the reason why the value of the raw materials is not transferring to the valuation of the manufactured item.

Hope this helps.

Thanks

Jay

I double-checked. I have not set any valuation on item

Anyone?

@asoral
At
Installed Apps

ERPNext: v12.20.0 (version-12)

Frappe Framework: v12.17.0 (version-12)

and
Installed Apps

ERPNext: v13.0.0 (version-13)

Frappe Framework: v13.0.0 (version-13)
I tested version 12 and 13 indicated above for your reported issue and such behavior is not seen.
Maybe you need to update .
Thanks

I have perpetual inventory switched on. This seems like standard costing and not Lot Costing. What do you see when you switch on the perpetual inventory?

I always use perpetual inventory.

Your BOM is in \$ in the text you provided and the Entries seem to be in INR.

If your Work Order / BOM is for a particular consumption and you are changing the consumption, how are you making the manufacturing entry. Can you post the accounting ledger for the manufacturing entry?

I didn’t read your problem completely well, so let’s try again if you feel up to it.

Thanks

Jay

the test on my v13 is as following

refer to your screenshot, the Cost Of Goods Sold account should be Stock Adjustment account per system default, normally it is a kind of manufacturing output, so I used the account name manufacturing cost-output, Stock Expense is a kind of manufacturing cost - material consumption(input). balance of manufacturing cost (both input and out) is production variance, need to be distributed between COGS and stock based on whether manufactured stock sold out or remain in inventory. the real Cost Of Goods Sold is posted when goods delivered to customer.

so please check your system version, if possible try the same case on latest version 13.