COSTING USER EVENT

D R E W W I N B O R N

A N D

K I R K S O U T H C O T T

CHALLENGE:

Too many transactions avocado pulp output transactions in the item ledger entry table

RESOLUTION:

Create a separate form and table in the 50000 range to track only pulp trans

actions including the line, employee, lbs, etc.

Create a separate form and table in the 50000 range to track only pulp transactions including the production line, employee, lbs, etc.

Simple shop-floor form created to populate the avocado output table

LBS and Banda (production line) register automatically from the scale

Hour and date record into the table based on the actual date/time to further reduce the shop-floor information input requirements

CHALLENGE:

Fresherized Foods’ margins are highly reliant upon the cost of fresh avocados

All avocados bought in Mexico are purchased at the spot price (no contracts), which leads a very volatile cost of material structure

Fresherized felt was key to have the material cost recorded in NAV separate from the other parts of COGS (manufacturing, repair & maintenance, supplies, etc)

Fresherized wanted to the cost of material readily available in NAV without having to deduct the other COGS costs from the cost per case recorded in the NAV GL, item ledger entry, and value entry tables

RESOLUTION:

Fresherized utilized the alternate cost tables for the manufacturing cost which results in only the material cost per case being recorded in the GL, item ledger entry, and value entry tables

Alternative Cost tables are utilized and updated once per quarter to reflect the actual manufacturing cost per lb by SKU based on the most recent quarter’s financials

HOW TO PROPERLY CALCULATE THE MANUFACTURING COST PER LB USING BASE-VARIABLE ABSORPTION COSTING

The primary objective of Base-Variable Absorption is to accurately apply manufacturing costs by finished good SKU that take into account both the manufacturing facility’s fixed and variable costs

First, manufacturing plant’s expenses should first be divided into base (fixed), variable, and semi-variable. This will produce a base cost per lb (or whatever UOM is utilized) and a variable cost per lb. JustFoodERP can be very helpful in identifying these costs.

Next, the throughput of each SKU should be identified. If using the JustFoodERP rountings, calculate the time it takes each SKU to move through the production facility. Then, using either a simple or weighted throughput average, calculate the “throughput factor of each item”.

Last, multiply the variable cost per lb only to the throughput factor and add this result to the Base cost per lb. This will provide the Base-Variable absorption rate per lb.

DIVIDE MANUFACTURING EXPENSES INTO BASE, VARIABLE, AND SEMI-VARIABLE

Use GL Balance by Dimension, or any other method to pull balances from GL accounts, to pull the manufacturing expenses to be used in the study.

DIVIDE MANUFACTURING EXPENSES INTO BASE, VARIABLE, AND SEMI-VARIABLE

Pull the output LBS by finished goods by SKU from JustFoodERP

DIVIDE MANUFACTURING EXPENSES INTO BASE, VARIABLE, AND SEMI-VARIABLE

34.6% 65.4%Manufacturing Cost Account Total Base Variable Semi-Variable Base Variable Base Variable

Manufacturing Labor 440,610$ 440,610$ 152,451$ 288,159$ 152,451$ 288,159$ Supplies 142,365 142,365 - 142,365 Repair & Maintenance - UHP 185,384 185,384 - 185,384 Office 26,306 26,306 26,306 - Professional Services + 134,057 134,057 134,057 -

928,722$ 160,363$ 327,749$ 440,610$ 152,451$ 288,159$ 312,814$ 615,908$

Base-Variable Allocations 33.7% 66.3%*Semi-Variable Allocation Factors derived from fixed and variable labor costs

Total LBS of Output 1,776,404

Base Cost per LBTotal Base Cost 312,814$ Total LBS of Output ÷ 1,776,404

Base Cost per LB 0.176$

Variable Cost per LBTotal Variable Cost 615,908$ Total LBS of Output ÷ 1,776,404

Variable Cost per LB 0.347$

Total Manufacturing Cost per LB 0.52$

Semi-Variable Allocation* TOTALS

CALCULATE THROUGHPUT FACTORS BY SKU

The combination of the JustFoodERP routings and JET or Powerpivot reports gives you the ability to easily calculate the throughput by SKU

Net Total ThroughputRouting No. Weight Lot Size Run Time Lot LBS Item # Description LBS/hr LBS Output Weighted Factors

P2_ROLL_H_16 1.00 1.00 0.24 1.00 0128280 CS Sysco Avocado Half 12/16 oz 252.63 24,128 x 6,095,548 5.33 P2_DINI2_2_12 0.75 296.00 10.05 222.00 11275 Sig. Cafe Guac Mild 6/12 oz 1,325.24 735,198 x 974,314,810 1.02 P2_MLTI5_P_32 2.00 96.00 5.50 192.00 120700 Brinker Avocado Bags 8/2 LB 2,094.55 202,278 x 423,679,748 0.64 P1_HBK_S54_15 0.94 1,510.00 70.00 1,415.63 14178 Wholly Guac Classic 8/15oz 1,213.39 814,801 x 988,673,152 1.11

Simple Average Throughput LBS/hr 1,221 1,776,404 2,392,763,259

LBS per Hr x LBS of Output 2,392,763,259 LBS of Output ÷ 1,776,404

Weighted Throughput LBS/hr 1,347

Throughput LBS JET report using Routings

APPLY THROUGHPUT FACTORS AND CALCULATE TOTAL SKU COST PER LB Check that total cost per lb multiplied by the LBS of output

ties to financials and then load the costs into the alternate cost tables Base Variable Throughput Variable Total Cost/LB LBS Total Cost

Item # Description Cost/LB Cost/LB Factor Cost/LB Cost/LB Adjusted Output Tie to Financials0128280 CS Sysco Avocado Half 12/16 oz 0.176$ 0.347$ 5.33 1.849$ 2.02$ 1.93$ 24,128 46,524$ 11275 Sig. Cafe Guac Mild 6/12 oz 0.176 0.347 1.02 0.352 0.53 0.50 735,198 370,027 120700 Brinker Avocado Bags 8/2 LB 0.176 0.347 0.64 0.223 0.40 0.38 202,278 76,874 14178 Wholly Guac Classic 8/15oz 0.176 0.347 1.11 0.385 0.56 0.53 814,801 435,298

928,722$

PRODUCTION COSTING SCENARIOS

• Work center by time

• Work center by unit

• Cost on routing based on unit

• Labor on routing and overhead on workcenter

• BOM components items as labor and overhead

LABOR AND OVERHEAD ON PRODUCTION BOM

Production Order Statistics

Bill of Material

CHALLENGE:

Raw Materials move into production room without a specific production order number being assigned

Production room similar to a giant hopper, raw materials moved into one end and finished goods outputted from the other side

Impossible to identify the exact lbs of a specific lot of avocados/film/trays that were consumed on a specific production order

RESOLUTION:

Fresherized utilized the “Full Bin Consumption” functionality in NAV