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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
0

10 kg
10 kg
10 kg

MXN 200
0

MXN 200
MXN 200
MXN 200

MXN 14
MXN 14

0
0
0

MXN 14
MXN 14

0
0
0

MXN 22.8
0

MXN 20
MXN 20
MXN 20

Ending inventory

20 kg

MXN 400

MXN 28

MXN 28

MXN 22.8

See also: Example: Goods Issue

Example: 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
20 liters


MXN 1200
MXN 1200


MXN 100
MXN 140


0
0


MXN 65
MXN 67

Other inward/outward movements

0

0

0

0

0

Cumulated inventory

40 liters

MXN 2400

MXN 240

0

MXN 66

Consumption
Not allocated

Production
Chocolate
Goods issue

10 liters
0

10 liters
10 liters
10 liters

MXN 600
0

MXN 600
MXN 600
MXN 600

MXN 60
MXN 60

0
0
0

0
0
0
0
0

MXN 66
0

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
100 bars
0
100 bars

MXN 1000
MXN 1000
0
MXN 1000

MXN 150
MXN 150
MXN 150
0

0
0
0
0

MXN 11.5
MXN 11.5
0
MXN 10

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
10 kg
10 kg
0

10kg

MXN 200
MXN 200
MXN 200
0

MXN 200

MXN 14
MXN 14
MXN 14
MXN 14

0

MXN 14
MXN 14
MXN 14
MXN 14

0

MXN 22.8
MXN 22.8
MXN 22.8
0

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
20 liters


MXN 1200
MXN 1200


MXN 100
MXN 140


0
0


MXN 65
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
Multilevel price det erm .
Goods issue

10 liters
10 liters
10 liters
0


10 liters

MXN 600
MXN 600
MXN 600
0


MXN 600

MXN 60
MXN 60
MXN 60
MXN 60


0

0
0
0
0

0

MXN 66
MXN 60
MXN 60
0


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
100 bars
0

0
100 bars

MXN 1000
MXN 1000
0

0
MXN 1000

MXN 224
MXN 224
MXN
74
MXN 150
0

MXN 14
MXN 14
MXN 74

0
0

MXN 12.4
MXN 12.4
0

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
3
0
0
0
6
8
9
10
11

1








150

88

 

20
22






28


14



100
140







180

60





150








150


42






28


14

   









74










74









14










14

12

2

 

238

       

224

     

14

         

* Period

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