Follow up on FIFO in Management Accounting

Here you will see an example of a FIFO flow. You will also see how the follow-up of FIFO works in the management accounting.

Prerequisites:

A manufactured part called "T-FIFO" that consists of 1 piece of "K-FIFO" (purchased part) + Work 1h/piece.

Standard price "T-FIFO" = 501 kronor (SEK) each

Standard price "K-FIFO" = 15 kronor (SEK) each

Purchase order "K-FIFO" = 18 kronor (SEK) each

Flow:

1. We create manufacturing order 1941 and manufacture 10 pieces of "T-FIFO".
2. Coding the arrival to stock of 10 pieces of "K-FIFO":
   
   
3. Coding final coding of supplier invoice and linking of order:
   
   Here you will see the contra entry from preliminary price (180 kronor) to the price according to the supplier invoice "final price" (200 kronor). The fact that the Register Supplier Invoice procedure affects the inventory log this way is a result of the FIFO development.
   The following applies when deleting and crediting supplier invoices. If you delete the supplier invoice at this stage, the coding under item 3 will be undone so the coding goes back to where it was at item 2 "preliminary price". This applies to all inventory transactions that might have been made, such as material withdrawals for production.
   If you credit the invoice via the Crediting of order tab in the Register Supplier Invoice procedure, then item 3 will also go back to item 2 "preliminary price".
   If you credit the difference, if you reverse the old price and register the new price in one and the same credit invoice, the final price from the "old price" will be coded to the new price according to the credit invoice.
4. Withdrawal of material for production. We report 5 pieces of "T-FIFO" as finished and report more time than planned: 5,8 hours instead of 5 hours.
   
   
   
   Please note! As long as the final price is not known for "T-FIFO", the preliminary price (standard price) will be used which is 501 kronor each.
5. Arrival of the finished manufacturing order 1941 to stock: We report the 5 remaining pieces of "T-FIFO". The reported time is 5,5 hours instead of 5 hours.
   
   
6. Final reporting of manufacturing order and price calculation in the Price Calculation - Inventory Movements procedure. We final report manufacturing order 1941 and then use the Price Calculation - Inventory Movements procedure to calculate the order's total costs.
   
   The "actual price" for manufacturing 10 pieces of "T-FIFO" is 569,18 kronor each instead of 501 kronor each which is the standard price for "T-FIFO". This means that a value of 681,80 kronor (5691,8-5010 = 681,80) will be shown in the WIP list.
   
   Saving price calculation - inventory movements for order 50512 results in an additional inventory log record.
   
   The "reversal" from preliminary price (standard price) to final price will now be made.
7. Check calculation differences:
   
   The manufacturing order does not contain any calculation differences, which means that the 681,80 kronor remaining in WIP has now been coded to the finished stock.
8. Delivery and invoicing of customer order 50513.