Example for Reporting Point Backflush and Work in Process

In this example the work in process is valuated on the basis of a preliminary cost estimate for the product cost collector.

Operations 0010 and 0030 are defined as reporting points (milestones)

In operation 0010, 2 liters of raw materials and 15 minutes of internal activities are used for each finished ton according to the version-specific cost estimate. The cost of goods manufactured per ton for this operation is USD 150.

In operation 0020, 1.5 liters of raw materials and 10 minutes of internal activities are used for each finished ton according to the version-specific cost estimate. The cost of goods manufactured per ton for this operation is USD 100.

In operation 0030, 15 minutes of internal activities are used for each finished ton according to the version-specific cost estimate. The cost of goods manufactured per ton for this operation is USD 50.

At the first reporting point (after operation 0010), 9 tons yield and 1 ton scrap are confirmed. At the second reporting point (after operation 0030), 3 tons yield are confirmed.

The target costs for operation 0010 are USD 1350 (9 tons x USD 150). The target costs for operation 0020 are USD 300 (3 tons x USD 100). The target costs for operation 0030 are USD 150 (3 tons x USD 50).

The work in process is USD 1800 (1350 + 300 + 150).