Manufacturing
Know what it costs while you make it.
Material issues, production hours, overhead and finished output are costed as each is recorded, so work in progress and product cost build up on the work order during production. The stock ledger is still reconciled to the accounts.
Production journey
Production journey
Follow production from materials to finished goods.
Planning records come first and post nothing. From the first material issue, each event updates quantities and makes its accounting entry when it is recorded.
1Bill of materials and work order
The product's components and quantities, and an order for how many to make.
Record only · no entryPlanning records change no stock and post nothing.
2Release and reserve
A second person releases the order; its materials are set aside.
Changes availability onlyReserved materials stop counting as available. Value is unchanged.
3Material issue
Components move from stock into work in progress for this order.
Accounting entry at the timeValue moves from stock to work in progress at weighted average cost.
4Production confirmation
Labour and machine hours, and good output, are confirmed against the order.
Accounting entry at the timeHours are costed at the company's set rates and added to work in progress.
5Overhead absorption
Overhead is applied to the confirmed hours at predetermined rates.
Accounting entry at the timeAbsorbed overhead is added to work in progress.
6Finished-goods receipt
Confirmed good output is received into a warehouse, or into quarantine if it fails a quality check.
Accounting entry at the timeIts share of work in progress moves to finished stock at actual cost.
7Variance and close
Actual cost is compared with standard; the order is closed separately once nothing remains in work in progress.
Analysis · no separate entryExplains the difference. Finished stock already carries actual cost.
Cost builds up on the work order as each event is recorded, not at the end. Components can also be issued automatically when output is confirmed. Material returns and reversals are recorded as further entries at their original cost.
Work orders
What is planned, issued and completed, on one order.
A work order is made from a bill of materials, so the components it needs follow from the quantity planned. Quantities issued and output completed are recorded against it as production happens.
- Component requirements come from the bill of materials
- Issues beyond the plan or unplanned substitutes need an authorised exception
- Completed output can be received part-way through the order
WO-1042 · Industrial pump assembly · at 14 May 2027 · GBP
- Planned
- 120 units
- Completed and received
- 78 units
- Still to make
- 42 units
- Status
- Released, in progress
78 ÷ 120 units. A quantity measure, not a measure of cost or effort.
| Component | Per unit | Issued | In 78 completed |
|---|---|---|---|
| Pump housing | 1 | 120 | 78 |
| Drive shaft assembly | 1 | 120 | 78 |
| Sealing kit | 2 | 240 | 156 |
| Control module | 1 | 120 | 78 |
| Fastener set | 4 | 480 | 312 |
Work in progress
Cost moves to finished goods as output is received.
Work in progress on each order is the cost recorded against it, less what has already moved to finished goods. It is tracked as a stock state, reconciled to the ledger, and must be nil before an order can close.
- Materials, activity and overhead kept as separate parts of the cost
- Finished stock enters at actual production cost and joins the item's weighted average
- A receipt can never take more cost than the order holds
WO-1042 · actual recorded cost at 14 May 2027 · GBP
- Materials issued
- £60,000
- All components for 120 units, at average cost
- +Production activity
- £9,360
- Labour and machine hours for 78 units, at set rates
- +Overhead absorbed
- £4,680
- On the same confirmed hours
- =Production cost accumulated
- £74,040
- −Transferred to finished goods
- £53,040
- 78 units received: £39,000 materials + £9,360 activity + £4,680 overhead
- =Remaining in work in progress
- £21,000
- Materials already issued for the 42 units still to make
Variance
A variance should point back to what happened.
When an order is complete, its actual cost is compared with the standard allowed for the good units made. The difference is split by cause, such as material price or usage, hours and overhead, so it can be investigated. Running the analysis and closing the order need separate authority.
WO-1042 after all 120 units are received · standard allowed for 120 good units vs actual recorded cost · GBP
| Cost | Standard | Actual | Variance | Points back to |
|---|---|---|---|---|
| Materials | £58,800 | £60,000 | £1,200 adverse | Components issued at an average cost above the standard price |
| Production activity | £14,040 | £14,400 | £360 adverse | 120 hours recorded against 117 standard hours |
| Overhead | £7,020 | £7,200 | £180 adverse | Overhead absorbed on the 3 extra hours |
| Total | £79,860 | £81,600 | £1,740 adverse |
Materials
- Standard
- £58,800
- Actual
- £60,000
- Variance
- £1,200 adverse
Components issued at an average cost above the standard price
Production activity
- Standard
- £14,040
- Actual
- £14,400
- Variance
- £360 adverse
120 hours recorded against 117 standard hours
Overhead
- Standard
- £7,020
- Actual
- £7,200
- Variance
- £180 adverse
Overhead absorbed on the 3 extra hours
Total
- Standard
- £79,860
- Actual
- £81,600
- Variance
- £1,740 adverse
Inventory connection
Materials and finished goods stay in the same stock record.
Components are issued from, and finished output received into, the same inventory used for purchasing and sales. Stock waiting for a quality decision is held apart and does not count as available.
Connected across the platform
Related areas.
- Inventory & OperationsMaterials are issued from stock and finished output is received into it.
- Procurement & SpendPurchased components arrive as goods receipts before they are issued.
- Customers & RevenueCustomer orders are fulfilled from received finished stock.
- FinanceIssues, confirmations, overhead and receipts post to the same general ledger.
- Management AccountingCost and variance reports read production records; they do not change them.
- Working CapitalWork in progress and finished stock read alongside receivables and payables.
SynqLedger Intelligence
Can answer questions about work in progress against the ledger and the position of open work orders for the selected company. It does not yet trace production cost order by order into management reporting. It explains and suggests; it cannot post journals, approve actions, move money or change records.
See manufacturing and production costs in action.
A guided walkthrough of a work order from material issue and production confirmation to finished-goods receipt and variance, in a sandbox company.