Scrap and Waste in Production: To Process a Production Order That Includes Quarantined Scrap

The following activity will walk you through the process of recording item production that includes scrapped items; the cost of scrapped items must be written off to a specific GL account, and the scrapped items must be moved to a specific warehouse location (quarantined).

Story

Suppose that based on the analyzed demand from previous periods of sales, the sales department of SweetLife has asked the production department to produce three juicers. Further suppose that during juicer assembly, a shop-floor employee assembled one of the juicers but found out that it does not work. The production manager asked the employee to record this juicer as scrap and to move the juicer to the dedicated warehouse location for quarantined scrap. According to the system settings, the cost of the scrapped item will be moved to a specific GL account.

Also suppose that the quantity of scrapped items can be included in the quantity of completed items because although one of the juicers is defective and must be moved to quarantine to be inspected, a completely new juicer does not need to be produced.

Acting as a production manager, you will create a production order for producing three juicers and process all related transactions. In a production environment, a shop-floor employee would create a labor transaction on their own. To streamline this activity, you will enter this transaction as a production manager.

Configuration Overview

In the U100 dataset, the following tasks have been performed for the purposes of this activity:

  • On the Warehouses (IN204000) form, the WORKHOUSE warehouse has been defined, and its locations include MGI and MTL.
  • On the Stock Items (IN202500) form, the CFJFRTSCR, PULPCONT1L, JUICECUP05L, MRBASE, FNSIEVE, and GRDISC01 stock items have been defined.

Process Overview

In this activity, to process the documents and transactions related to the production of the juicers with quarantined scrap, you will do the following:

  1. On the Production Preferences (AM102000) form, select the check box that causes the scrapped quantity to be added to the completed quantity.
  2. On the Production Order Maintenance (AM201500) form, create and release the production order.
  3. On the Materials (AM300000) form, issue the materials required for the assembly operation.
  4. On the Labor (AM301000) form, record the labor spent on the juicer assembly, the quantity of produced items, and the quantity of scrapped items.
  5. On the Production Order Maintenance form, review the production order balances after you have completed the assembly operation.
  6. On the WIP Adjustment (AM308000) and Receipts (IN301000) forms, review the scrap-related transactions, which the system generated when you released the labor transaction.
  7. On the Close Production Orders (AM506000) form, close the production order.

System Preparation

Before you start performing the activity, do the following in a company with the U100 dataset preloaded:

  1. As prerequisites to the current activity, perform the Configuration of Scrap, Waste, and By-Products in Production: Implementation Activity so that the system is ready for processing the production of juicers with the recording of scrap.
  2. Launch the MYOB Acumatica website, and sign in to the company. You should sign in as the production manager by using the peters username and the 123 password.
  3. In the info area, in the upper-right corner of the top pane of the MYOB Acumatica screen, make sure that the business date in your system is set to today’s date. For simplicity, in this activity, you will create and process all documents in the system on this business date.

Step 1: Setting Up the Scrapped Quantity to Be Included in the Completed Quantity

You will select the check box that causes the scrap quantity to be added to the quantity of completed items in production orders. Do the following:

  1. Open the Production Preferences (AM102000) form.
  2. In the Data Entry Settings section, select the Include Scrap in Completions check box.
  3. On the form toolbar, click Save.

Step 2: Creating the Production Order

To create the production order for the three juicers, do the following:

  1. On the Production Order Maintenance (AM201500) form, add a new record.
  2. In the Summary area, specify the following settings:
    • Order Type: RO (inserted automatically)
    • Inventory ID: CFJFRTSCR
    • Warehouse: WORKHOUSE (inserted automatically)
    • Location: MGI (inserted automatically)
    • Order Date: Today's date (inserted automatically)
    • Description: Production of 3 juicers
  3. On the General tab, do the following:
    1. In the Qty. to Produce box, specify 3.
    2. Make sure that Estimated is selected in the Costing Method box.
    3. Notice that WORKHOUSE is selected in the Scrap Warehouse box. The system copied this value based on the settings of the RO production order type on the Production Order Types (AM201100) form.
    4. Notice that SCRAP is selected in the Scrap Location box. The system also copied this value from the settings of the RO production order type.
  4. On the form toolbar, click Save.
  5. On the form toolbar, click Release Order. The order's status is changed to Released.

Step 3: Issuing Materials for the Operation

In this step, you will issue the materials for the assembly operation of the production order. Do the following:

  1. While you are still viewing the production order on the Production Order Maintenance (AM201500) form, on the More menu (under Transactions), click Release Materials. The system opens the Material Wizard 2 (AM300020) form with the list of materials needed for the assembly operation.
  2. On the form toolbar, click Select All. The system creates a material transaction and opens it on the Materials (AM300000) form.
  3. In the Summary area, do the following:
    1. In the Description box, specify Materials for the assembly operation.
    2. Clear the Hold check box. The system changes the transaction's status to Balanced.
  4. On the form toolbar, click Release. The system releases the material transaction and changes the status of the transaction to Released.
  5. Open the Production Order Maintenance form with the production order you created earlier in this activity, and notice that the status of the production order has changed to In Process.

Step 4: Releasing a Labor Transaction

Suppose that Carlos Cruz, a worker in the work center, spent 30 minutes setting up the working environment for juicer assembly, assembled three juicers for one hour, tested the juicers, and found out that one juicer does not work. This item must be entered as a scrapped item. To record the time spent on juicer assembly, the assembled quantity of juicers, and the scrapped juicer, do the following:

  1. On the Labor (AM301000) form, add a new record.
  2. In the table, make sure that the following columns are displayed:
    • Scrap Action
    • Qty is Scrap

    If the columns are not displayed, add the columns by using the Column Configurator dialog box.

  3. On the table toolbar, click Add Row.
  4. In the row, specify the following settings:
    • Labor Type: Direct
    • Order Type: RO
    • Production Nbr.: The number of the production order that you created earlier in this activity
    • Employee ID: EP00000027 (Carlos Cruz)
    • Shift: 0001
    • Labor Time: 01:10
    • Quantity: 2
  5. Add another row for the scrapped item, and in the row, specify the following settings:
    • Labor Type: Direct
    • Order Type: RO
    • Production Nbr.: The number of the production order that you created earlier in this activity
    • Employee ID: EP00000027 (Carlos Cruz)
    • Shift: 0001
    • Labor Time: 00:20 (the time the worker spent on the scrapped juicer)
    • Scrap Action: Quarantine (inserted automatically)
    • Reason Code: SCRAP
    • Quantity: 1
    • Warehouse: WORKHOUSE (inserted automatically)
    • Location: SCRAP (inserted automatically)
    • Qty Scrapped: 1 (automatically copied from the Quantity column)
    • Qty is Scrap: Selected (selected automatically when you specified the reason code and the scrapped quantity)
  6. In the Summary area, do the following:
    1. Make sure that today's date is specified in the Date box.
    2. In the Description box, specify Recording the time for assembly of 3 juicers, the completed quantity, and the scrapped quantity.
    3. Clear the Hold check box. The system changes the transaction's status to Balanced.
  7. On the form toolbar, click Release. The system creates and releases the cost transaction to record the labor costs and releases the labor transaction.

Step 5: Reviewing the Production Order Balance

To review the production order balance now that you have recorded the completion of the assembly operation, do the following on the Production Order Maintenance (AM201500) form:

  1. Open the production order you created earlier in this activity, and notice that the order status is Completed.
  2. Go to the General tab, and notice that the following settings are displayed:
    • Qty. Complete: 2
    • Qty. Scrapped: 1

    Notice that the sum of the completed and scrapped items is 3, which equals the quantity to produce.

  3. On the Totals tab, review the production order balance (shown in the screenshot below) as follows:
    1. Notice that in the Actual section, the Scrap box contains 482.39.
    2. Notice that the WIP Total and MFG to Inventory boxes contain 964.78.
      Figure 1. The balances of the completed production order


    3. Notice that all boxes in the Variance section contain 0.00, which means that the planned costs are equal to the actual costs.

Step 6: Reviewing the Scrap-Related Transactions

When you released the labor transaction, the system created a WIP adjustment transaction to move the cost of the scrapped item to the 51600 GL account and an inventory receipt transaction to move the scrapped item to the SCRAP warehouse location. To review the transactions, do the following:

  1. While you are still viewing the production order on the Production Order Maintenance (AM201500) form, open the Events tab.
  2. In the row with the WIP Adjustment document type, click the link in the Batch Nbr. column. The system opens the WIP Adjustment (AM308000) form in a new window with the WIP adjustment selected.
  3. Notice that the only row contains the following settings:
    • The Cost Adj column contains the cost of the scrapped item.
    • The Reason Code column contains SCRAP, which you specified in the labor transaction.
    • The Account column contains 51600, which is the GL account for scrap costs; the system copied the GL account from the reason code settings.
    • The GL Batch Nbr. column contains the reference number of the GL batch related to this transaction. (This column is hidden by default.)
  4. On the Receipts (IN301000) form, open the receipt with today's date and a total quantity of 1.
  5. Go to the Details tab, and notice that the only line contains the following settings:
    • Warehouse: WORKHOUSE
    • Location: SCRAP
    • Quantity: 1
    • Ext. Cost.: 482.39
    • Reason Code: SCRAP
  6. Go to the Financial tab, and notice that the reference number of the related GL batch is displayed.

Step 7: Closing the Production Order

Now you will close the production order. Do the following:

  1. While you are still viewing the production order on the Production Order Maintenance (AM201500) form, on the More menu (under Processing), click Close Order. The system opens the Close Production Orders (AM506000) form with a row for the production order added.
  2. Notice that the check box in the unlabeled column of this row is selected.
  3. On the form toolbar, click Process. In the Processing dialog box, which opens, review the processing details, and when the processing is completed, click Close.
  4. Go to the Production Order Maintenance form, and notice that the status of the production order has changed to Closed.

You have successfully created the production order for the assembly of three juicers, recorded the scrapped item, and processed all the transactions related to the production.