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Common sources of production variances

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This article explains various typical sources of each type of production variance.

Here are some typical sources of a lot size variance:

  • The good quantity for a production order differs from the calculation quantity that is used in the standard cost calculation. The quantity provides the basis for amortizing constant costs.
  • The value of constant costs on the production order differs from the constant costs that are used in the standard cost calculation. The constant costs on the production order can differ for several reasons. For example, the constant costs might reflect the following factors:
    • Manual changes to the production bill of materials (BOM) or route
    • The selection of a different BOM version or route version when you create the production order
    • Planned engineering changes to the BOM version or route version that is assigned to the item

Here are some typical sources of a production price variance:

  • The cost category (and cost category price) for the reported consumption of a routing operation differs from the cost category that is used in standard cost calculation.
  • The active cost for the cost category price differs from the cost category price that is used in standard cost calculation.

Here are some typical sources of a production quantity variance:

  • You over-issue or under-issue a material component.
  • You over-report or under-report the time for a routing operation.
  • You over-receive or under-receive the good quantity of the parent item, relative to the order quantity. However, you issue components and report operations completely, based on the order quantity for the production order.

Here are some typical sources of a production substitution variance:

  • You issue a material component that isn't on the production BOM.
  • You manually add a component to the production BOM and report that component as consumed.
  • You report an item as consumed but don't manually add it to the production BOM.
  • You manually add an operation to the production route and report that operation as consumed.
  • When you create the production order, you select a BOM version that differs from the BOM version that is used in the standard cost calculation.
  • When you create the production order, you select a route version that differs from the route version that is used in the standard cost calculation.