Methods Change Variance and Advanced Repetitive Cumulative Orders

Posted on: December 30, 2014 | By: Andy Vitullo | QAD Financials

This blog will discuss one of the many causes of Method Change Variance for Labor and Burden when using the Advanced Repetitive module in QAD’s Enterprise Applications. To set the stage for this condition, assume the following;

1. A Cumulative order exists for an item.
2. A change to an operations routing run time has occurred for the item in number 1.
3. A cost roll-up does not occur.

When production is reported on the existing cumulative order, no variance will occur. This lack of transactions happens for a couple of reasons:

1. The cumulative order was created with the original routing run time.
2. The standard of the item has not changed.

At the end of a production month, typically, a cumulative order is closed and a new cumulative order is opened for that item. At this point, the new cumulative order takes on the changed routing. Remember, in this scenario, the item cost has not been rolled. When production is reported for the item, a methods change variance will be recorded. This amount is equivalent to the “change in routing run time for the operation multiplied by the operation work center’s labor and burden rates”. 

It is important to understand the components of this calculation to ensure that labor and burden absorption is properly stated. Ultimately, you will need to reclass this from Methods Change Variance to a Labor and a Burden Variance account. We have developed a browse that parses labor and burden from method variance.

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