Example 5:
In Period 1, 100 chocolate bars were produced from 10 kilograms of cocoa and 10 liters of milk. The resulting price and exchange rate differences of the raw materials are allocated to the finished product on a pro rata basis. See also:
Example: Price and Exchange Rate Differences
Production order for 100 chocolate bars of production version 1:
Plan |
Actual | ||||
Quantity |
Price / Activity price |
Quantity |
Price / Activity price | ||
BOM |
Cocoa |
10 kg |
MXN 200 |
10 kg |
MXN 200 |
Milk |
10 liters |
MXN 600 |
10 liters |
MXN 600 | |
Routing |
Setup (MXN 50/hr) |
1 hour |
MXN 50 |
2 hours |
MXN 100 |
Production (MXN 50/hr) |
3 hours |
MXN 150 |
5 hours |
MXN 250 | |
Total |
MXN 1000 |
MXN 1150 |
Single-Level Price Determination
Single-Level Price Determination: Cocoa
The prices for the cocoa and the milk are determined by means of single-level price determination.
Material price analysis
for the material cocoa in period 1 after single-level price determination:
Quantity |
Preliminary valuation |
Price differences |
Exchange rate differences |
Price | |
Beginning inventory |
10 kg |
MXN 200 |
0 |
0 |
MXN 20 |
Receipts |
20 kg |
MXN 400 |
MXN 42 |
MXN 42 |
MXN 24.2 |
Other inward/outward movements |
0 |
0 |
0 |
0 |
0 |
Cumulated inventory |
30 kg |
MXN 600 |
MXN 42 |
MXN 42 |
MXN 22.8 |
Consumption N ot allocated Production Chocolate Goods issue |
10 kg 10 kg 10 kg 10 kg |
MXN 200 MXN 200 MXN 200 MXN 200 |
MXN 14 0 0 0 |
MXN 14 0 0 0 |
MXN 22.8 MXN 20 MXN 20 MXN 20 |
Ending inventory |
20 kg |
MXN 400 |
MXN 28 |
MXN 28 |
MXN 22.8 |
See also:
Example: Goods IssueExample: Single-Level Price Determination
Price differences are assigned to consumption through material price determination. If these differences are not used in multilevel price determination, or if multilevel price determination has not yet taken place, these price differences appear in material price analysis under Consumption/not allocated.
Single-Level Price Determination: Milk
The material milk has only price differences resulting from two different procurements. No exchange rate differences arise. Milk is procured only from local producers (and therefore not in a foreign currency).
Material price analysis
for the material milk in period 1 after single-level price determination:
Quantity |
Preliminary valuation |
Price differences |
Exchange rate differences |
Price | |
Beginning inventory |
0 liter |
0 |
0 |
0 |
60 MXN |
Receipts Goods receipt 1 Goods receipt 2 |
20 liters |
MXN 1200 |
MXN 140 |
|
MXN 67 |
Other inward/outward movements |
0 |
0 |
0 |
0 |
0 |
Cumulated inventory |
40 liters |
MXN 2400 |
MXN 240 |
0 |
MXN 66 |
Consumption Production Chocolate Goods issue |
10 liters 10 liters 10 liters 10 liters |
MXN 600 MXN 600 MXN 600 MXN 600 |
MXN 60 0 0 0 |
0 |
MXN 66 MXN 60 MXN 60 MXN 60 |
Ending inventory |
30 liters |
MXN 1800 |
MXN 180 |
0 |
MXN 66 |
Material price analysis
for the finished product chocolate in period 1 after single-level price determination:
Quantity |
Preliminary valuation |
Price differences |
Exchange rate differences |
Price | |
Beginning inventory |
0 bars |
0 |
0 |
0 |
MXN 10 |
Receipts Production Order settlement Goods receipt |
100 bars |
MXN 1000 |
MXN 150 |
0 |
MXN 11.5 |
Other inward/outward movements |
0 |
0 |
0 |
0 |
0 |
Cumulated inventory |
100 bars |
MXN 1000 |
MXN 150 |
0 |
MXN 11.5 |
Consumption |
|||||
Ending inventory |
100 bars |
MXN 1000 |
MXN 150 |
0 |
MXN 11.5 |
Multilevel Price Determination
The price and exchange rate differences from single-level material price determination of both raw materials appear in material price analysis of the finished product chocolate in the column receipts. There you see the documents from the lower levels. As with single-level price determination, the price and exchange rate differences from milk and cocoa are proportionally allocated to consumption and ending inventory after multilevel material price determination.
Material price analysis
for the material cocoa in period 1 after multilevel price determination:
Quantity |
Preliminary valuation |
Price differences |
Exchange rate differences |
Price | |
Beginning inventory |
10 kg |
MXN 200 |
0 |
0 |
MXN 20 |
Receipts |
20 kg |
MXN 400 |
MXN 42 |
MXN 42 |
MXN 24.2 |
Other inward/outward movements |
0 |
0 |
0 |
0 |
0 |
Cumulated inventory |
30 kg |
MXN 600 |
MXN 42 |
MXN 42 |
MXN 22.8 |
Consumption Production Chocolate Multilevel price determination Goods issue |
10 kg 10kg |
MXN 200 MXN 200 |
MXN 14 0 |
MXN 14 0 |
MXN 22.8 MXN 20 |
Ending inventory |
20 kg |
MXN 400 |
MXN 28 |
MXN 28 |
MXN 22.8 |
Material price analysis
for the material milk in period 1 after multilevel price determination:
Quantity |
Preliminary valuation |
Price differences |
Exchange rate differences |
Price | |
Beginning inventory |
0 liters |
0 |
0 |
0 |
MXN 60 |
Receipts Goods receipt 1 Goods receipt 2 |
20 liters |
MXN 1200 |
MXN 140 |
|
MXN 67 |
Other inward/outward movements |
0 |
0 |
0 |
0 |
0 |
Cumulated inventory |
40 liters |
MXN 2400 |
MXN 240 |
0 |
MXN 66 |
Consumption Chocolate Multilevel price det erm . Goods issue |
10 liters 10 liters |
MXN 600 MXN 600 |
MXN 60 0 |
0 |
MXN 66 MXN 60 |
Ending inventory |
30 liters |
MXN 1800 |
MXN 180 |
0 |
MXN 66 |
Material price analysis
for the material chocolate in period 1 after multilevel price determination:
Quantity |
Preliminary valuation |
Price differences |
Exchange rate differences |
Price | |
Beginning inventory |
0 bars |
0 |
0 |
0 |
MXN 10 |
Receipts Production Multilevel price determination Order settlement Goods receipt |
100 bars 0 100 bars |
MXN 1000 0 MXN 1000 |
MXN 224 MXN 150 0 |
MXN 14 0 0 |
MXN 12.4 0 MXN 10 |
Other inward/outward movements |
0 |
0 |
0 |
0 |
0 |
Cumulated inventory |
100 bars |
MXN 1000 |
MXN 224 |
MXN 14 |
MXN 12.4 |
Consumption |
|||||
Ending inventory |
100 bars |
MXN 1000 |
MXN 224 |
MXN 14 |
MXN 12.4 |
Closing Entries with Revaluation of Materials
Note: In this example, it is assumed that the closing entry of the material cocoa in the first period is not made until now with the closing entries for multilevel price determination.
Closing entries for
No. |
P* |
Inventory |
Price differences cocoa |
Price differences milk |
Price differences chocolate |
Exchange rate differences cocoa |
Exchange rate differences chocolate |
Price differences of lower level |
Exchange rate differences of lower level | ||||||||
2 |
1 |
|
20 |
|
|
|
|
|
|
|
|
|
|
| |||
12 |
2 |
238 |
224 |
14 |
* Period