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Work Order Variance cost in average cost method

Accepted answer
edited Jul 21, 2021 5:56PM in Costing 7 comments


Work Order Variance cost in average cost method


Hi All,

With average cost method, if we complete a work order with different issue quantity rather than the actual required quantity. The the difference amount should hit a variance account.

But in this case it is hitting WIP account. Is this the expected behavior or we can do some setups in SLA to divert it to a variance account ?

Example: Comp1 - 3$ and comp2 - 2$ , FG requires two each to complete (so FG cost is 10$). To complete one unit of FG, the WIP issue is supposed to be 2 each, but if we issue 1 for comp1 and 2 for comp2. In this case after work order completion the FG cost will be averaged out from 10$ to x$. And the variance will be say 1.5$

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