Production

Hi,

Repacked 15 kg of dried meat in 57 bags of 250 gram.

Bom: scrap 5% of 15kg is 750 gr is 3 bags. Thus 60-3=57 bags produced.
And 14.25 kg needed.

Standard rate is 8.98 /kg

In the backflush

QTY:14.25
Incoming rate:9.52
Total: 135.66

The purchase price was 15*8.98=134.70 the unit price for production
should be : 134.70/14.25= 9.45 and not 9.52.
Of course, the total sld be the same as the purchase price (135.66)

Than the second line of backflush:

QTY=57.00
Incoming Rate: 2.25
Amount: 127.97

Cannot identify the origin of 2.25 (as standard rate is 2.10) , looks
like it is standard plus tax (6%)= 2.226 (??).

Than the total amount is the sum of the two amounts (263.63) , which I
believe is meaningless and misleading.

Further, in order to calculate the profitability of sales, one wld
expect that the item production price, in this case 9.52 ( my math) is
somewhere recorded, in order to allow calculation of profits.

A logical thing would be that this would be the standard rate, or that
the would be an extra field in produced items, namely production
costs.

Please explain logic and mathematics.

Thanks and rgds roebert

Hi Robert,

Please see comment in green color below

On Thu, Mar 15, 2012 at 2:59 AM, robert <be…@gmail.com> wrote:
Hi,

Repacked 15 kg of dried meat in 57 bags of 250 gram.

Bom: scrap 5% of 15kg is 750 gr is 3 bags. Thus 60-3=57 bags produced.
And 14.25 kg needed.

Standard rate is 8.98 /kg

First of all, In BOM to produce 1 bag of FG (small bags) require 15/57= 0.263kg (not .25 kg as you mentioned in BOM) raw material (dried meat). Scrap should also be considered as required raw material.

For explanation, I am considering 0.25 kg RM (Raw Material) / 1 bag FG. So in this case, basically we are ignoring scrap.

Hence, Production cost of 1 bag of FG = 8.98/.25 = 2.245 (you did not mention any operational cost)


In the backflush

QTY:14.25
Incoming rate:9.52
Total: 135.66

The purchase price was 15*8.98=134.70 the unit price for production
should be : 134.70/14.25= 9.45 and not 9.52.
Of course, the total sld be the same as the purchase price (135.66)


You have made a production order to produce 57 bags of FG item.

In backflush, incoming rate of RM is 9.52 as per valuation rate - FIFO (it will not consider standard rate 8.98).
And qty = 14.25 kg (not 15 kg as we ignored scrap while making BOM)
So, amount of consumed RM = 9.52 *14.25 = 135.66

Here we can not consider standard rate, because it will calculate wrong valuation rate.

Than the second line of backflush:



QTY=57.00

Incoming Rate: 2.25

Amount: 127.97



Cannot identify the origin of 2.25 (as standard rate is 2.10) , looks

like it is standard plus tax (6%)= 2.226 (??).


Incoming rate 2.25 (actually 2.245) of FG comes from BOM which is production cost of that item.

Than the total amount is the sum of the two amounts (263.63) , which I
believe is meaningless and misleading.

Yes, Total amount here does not convey anything. We will hide that field in case of backflush.

Further, in order to calculate the profitability of sales, one wld
expect that the item production price, in this case 9.52 ( my math) is
somewhere recorded, in order to allow calculation of profits.

To calculate profitability of sales, item production price are maintained in the system which is in this case 2.245 / 1 bag (not 9.52)

A logical thing would be that this would be the standard rate, or that
the would be an extra field in produced items, namely production
costs.

Please explain logic and mathematics.

Thanks and rgds roebert



If you found anything wrong or have any doubt in the above explanation, please reply.


--
Regards,
Nabin Hait
---------------------------------------------------------------------------------
ERPNext - World's most affordable ERP - (Rs 299 / $7 per user per month)


Hi Nabin,

Thanks for elaborate reply. You can copy/paste it the
documentation :slight_smile: I looks logical, thnx.

Brings me to your last comment; I have been trying to list the
profitability of items, but sofar did not succeed.
(by the way, checking profitabilities is, i know from experience, aslo
a good error check, that date are correctly entered).

An “extended price” list showing purchase rate, production cost rate,
(if applicable), the tax rate (or rates), the sales price, the taxes
(Vat amount), the profit (sales rate- purchase rate)/(1+vat/100), and
the profit as an % of sales rate.
I believe such a table is a crucial information for any business.

Related to this the profit of the actual sales in the trend analyser
(that allows grouping per item, customer etc) also taking into account
the “real sales price” (one may have typed over the fetched price, or
not avialble, and the discounts offered. This would give a quick
overview whether the discounts (Dogs Love It, is quite generous in
this sense, but I am not capable of seeing the profitability per
customer/sales, and as a consequence “see” that we are maybe somewhat
overgenerous)

rgds Robert

On Mar 15, 8:15 am, Nabin Hait na...@iwebnotes.com wrote:

Hi Robert,

Please see comment in green color below

On Thu, Mar 15, 2012 at 2:59 AM, robert be...@gmail.com wrote:

Hi,

Repacked 15 kg of dried meat in 57 bags of 250 gram.

Bom: scrap 5% of 15kg is 750 gr is 3 bags. Thus 60-3=57 bags produced.
And 14.25 kg needed.

Standard rate is 8.98 /kg

First of all, In BOM to produce 1 bag of FG (small bags) require 15/57=
0.263kg (not .25 kg as you mentioned in BOM) raw material (dried meat).
Scrap should also be considered as required raw material.

For explanation, I am considering 0.25 kg RM (Raw Material) / 1 bag FG. So
in this case, basically we are ignoring scrap.

Hence, Production cost of 1 bag of FG = 8.98/.25 = 2.245 (you did not
mention any operational cost)

In the backflush

QTY:14.25
Incoming rate:9.52
Total: 135.66

The purchase price was 15*8.98=134.70 the unit price for production
should be : 134.70/14.25= 9.45 and not 9.52.
Of course, the total sld be the same as the purchase price (135.66)

You have made a production order to produce 57 bags of FG item.

In backflush, incoming rate of RM is 9.52 as per valuation rate - FIFO (it
will not consider standard rate 8.98).
And qty = 14.25 kg (not 15 kg as we ignored scrap while making BOM)
So, amount of consumed RM = 9.52 *14.25 = 135.66

Here we can not consider standard rate, because it will calculate wrong
valuation rate.

Than the second line of backflush:

QTY=57.00
Incoming Rate: 2.25
Amount: 127.97

Cannot identify the origin of 2.25 (as standard rate is 2.10) , looks
like it is standard plus tax (6%)= 2.226 (??).

Incoming rate 2.25 (actually 2.245) of FG comes from BOM which is
production cost of that item.

Than the total amount is the sum of the two amounts (263.63) , which I
believe is meaningless and misleading.

Yes, Total amount here does not convey anything. We will hide that field in
case of backflush.

Further, in order to calculate the profitability of sales, one wld
expect that the item production price, in this case 9.52 ( my math) is
somewhere recorded, in order to allow calculation of profits.

To calculate profitability of sales, item production price are maintained
in the system which is in this case 2.245 / 1 bag (not 9.52)

A logical thing would be that this would be the standard rate, or that
the would be an extra field in produced items, namely production
costs.

Please explain logic and mathematics.

Thanks and rgds roebert

If you found anything wrong or have any doubt in the above explanation,
please reply.


Regards,
Nabin Hait


ERPNext - World’s most affordable ERP - (Rs 299 / $7 per user per month)

Website:https://www.erpnext.com

Hi Robert,

Yes, we can definitely add this example in our documentation.

Regarding profitability, currently there is no report in the system that shows item/customer wise profitability. Only in sales invoice there are Gross Profit and Gross Profit % field that calculates profit amount for that invoice.


We will definitely make item/customer wise profitability report later. I have added your request in github issue list https://github.com/webnotes/erpnext/issues/244




On Thu, Mar 15, 2012 at 3:29 PM, robert <be…@gmail.com> wrote:

Hi Nabin,



Thanks for elaborate reply. You can copy/paste it the

documentation :slight_smile: I looks logical, thnx.



Brings me to your last comment; I have been trying to list the

profitability of items, but sofar did not succeed.

(by the way, checking profitabilities is, i know from experience, aslo

a good error check, that date are correctly entered).



An “extended price” list showing purchase rate, production cost rate,

(if applicable), the tax rate (or rates), the sales price, the taxes

(Vat amount), the profit (sales rate- purchase rate)/(1+vat/100), and

the profit as an % of sales rate.

I believe such a table is a crucial information for any business.



Related to this the profit of the actual sales in the trend analyser

(that allows grouping per item, customer etc) also taking into account

the “real sales price” (one may have typed over the fetched price, or

not avialble, and the discounts offered. This would give a quick

overview whether the discounts (Dogs Love It, is quite generous in

this sense, but I am not capable of seeing the profitability per

customer/sales, and as a consequence “see” that we are maybe somewhat

overgenerous)



rgds Robert




On Mar 15, 8:15 am, Nabin Hait <na...@iwebnotes.com> wrote:
> Hi Robert,
>
> Please see comment in green color below
>
> On Thu, Mar 15, 2012 at 2:59 AM, robert <be...@gmail.com> wrote:
> > Hi,
>
> > Repacked 15 kg of dried meat in 57 bags of 250 gram.
>
> > Bom: scrap 5% of 15kg is 750 gr is 3 bags. Thus 60-3=57 bags produced.
> > And 14.25 kg needed.
>
> > Standard rate is 8.98 /kg
>
> First of all, In BOM to produce 1 bag of FG (small bags) require 15/57=
> 0.263kg (not .25 kg as you mentioned in BOM) raw material (dried meat).
> Scrap should also be considered as required raw material.
>
> For explanation, I am considering 0.25 kg RM (Raw Material) / 1 bag FG. So
> in this case, basically we are ignoring scrap.
>
> Hence, Production cost of 1 bag of FG = 8.98/.25 = 2.245 (you did not
> mention any operational cost)
>
>
>
> > In the backflush
>
> > QTY:14.25
> > Incoming rate:9.52
> > Total: 135.66
>
> > The purchase price was 15*8.98=134.70 the unit price for production
> > should be : 134.70/14.25= 9.45 and not 9.52.
> > Of course, the total sld be the same as the purchase price (135.66)
>
> You have made a production order to produce 57 bags of FG item.
>
> In backflush, incoming rate of RM is 9.52 as per valuation rate - FIFO (it
> will not consider standard rate 8.98).
> And qty = 14.25 kg (not 15 kg as we ignored scrap while making BOM)
> So, amount of consumed RM = 9.52 *14.25 = 135.66
>
> Here we can not consider standard rate, because it will calculate wrong
> valuation rate.
>
> > Than the second line of backflush:
>
> > QTY=57.00
> > Incoming Rate: 2.25
> > Amount: 127.97
>
> > Cannot identify the origin of 2.25 (as standard rate is 2.10) , looks
> > like it is standard plus tax (6%)= 2.226 (??).
>
> Incoming rate 2.25 (actually 2.245) of FG comes from BOM which is
> production cost of that item.
>
>
>
> > Than the total amount is the sum of the two amounts (263.63) , which I
> > believe is meaningless and misleading.
>
> Yes, Total amount here does not convey anything. We will hide that field in
> case of backflush.
>
>
>
> > Further, in order to calculate the profitability of sales, one wld
> > expect that the item production price, in this case 9.52 ( my math) is
> > somewhere recorded, in order to allow calculation of profits.
>
> To calculate profitability of sales, item production price are maintained
> in the system which is in this case 2.245 / 1 bag (not 9.52)
>
>
>
> > A logical thing would be that this would be the standard rate, or that
> > the would be an extra field in produced items, namely production
> > costs.
>
> > Please explain logic and mathematics.
>
> > Thanks and rgds roebert
>
> If you found anything wrong or have any doubt in the above explanation,
> please reply.
>
> --
> Regards,
> Nabin Hait
> --------------------------------------------------------------------------- ------
> ERPNext - World's most affordable ERP - (Rs 299 / $7 per user per month)
>
> Website:https://www.erpnext.com



--
Regards,
Nabin Hait
---------------------------------------------------------------------------------
ERPNext - World's most affordable ERP - (Rs 299 / $7 per user per month)