Posting of Overhead

[Former Member]

I am trying to set up the out of the box functionality of absorbing overhead through Production Lot overhead absorption.  I have set up an overhead rate.

Then I set up a overhead rule.

Then when I go to run the process I am not seeing the posting I would expect.  Does anybody know what I am doing wrong? Why is it hitting an expense in account and not applied overhead?  How do I get this out of WIP?

[parveen_kumar6 · Accepted solution]

Hello Matt

The G/L Accounts which you configure in the calculation base will be used as G/L Account(Origin).

These accounts are used as G/L accounts (origin) in postings to deferred cost accounts. G/L accounts (origin) reveal the individual cost elements that constitute the deferred costs.

The actual posting to the G/L Account will be determined based account determination settings in the Cost Subledger.

1. Go to Business Configuration Workcenter.
2. Go to the Activity “Charts of Accounts, Financial Reporting Structures, Account Determination”
3. Click on Costs under the Account Determination.
4. Select the Overhead Absorption tab
5. The G/L Account configured here for the Account Determination group selected in the Overhead Rule.

Hope this helps.

Thanks

Parveen Kumar

[Former Member · Accepted solution]

Hi Parveen,

Thanks for the answer I get the GL account mapping piece but the system appears to always want to debit WIP.  How do I relieve WIP for these additional costs once I have posted the Absorption?  Is there a step by step tutorial on the whole process?  Maybe a YouTube you know of?

[parveen_kumar6 · Accepted solution]

Hello Matt,

I believe your production lot is not finished yet and the WIP clearing run has not been executed. Hence the WIP account is debited. Once the the production lot is completed, its work-in-process inventory is zeroed out by the work in process (WIP) clearing run.The WIP clearing run reduces the WIP inventory of completed production lots to zero, which adjusts the value of the work in process accordingly.

If you would have executed the WIP Clearing run before the Overhead Absorption Run,then material consumption account should have debited instead of WIP account.

You will have to refer to several help center document on Overhead Absorption and Production lot to understand the full process.Then you can try out different scenarios in the system.

1. Overhead Absorption by Production Lots

2. Calculation Bases for Overhead Absorption

3. Production Lots – Overhead Absorption Quick Guide

4. WIP Clearing Quick Guide

5. Valuation of Work in Process

It is always a good idea to start with the Help center document to understand the whole process.

Thanks

Parveen Kumar