How to close a production order: WIP and variances

While an order is released, what you issue is debited to Work in process (WIP) and what you receive is credited at the order's standard cost. Whatever is left over or missing at the end is the Variance. Closing the order calculates it and brings that order's work in process to zero.

How the cost is calculated

• Order cost: on release, Nori fixes the unit cost with each component's planned quantity at its average cost, plus resource hours, minus by-products, divided by the planned quantity.
• Issue: components leave at the current average cost and are debited to work in process. Resources add hours times cost per hour.
• Receipt: the product comes in at the order's cost and is credited to work in process.
• The order's Work in process = issued − received. You see it on the order.

Why: with partial receipts the actual cost isn't known yet, because issues and hours are still missing. So, as in SAP, each receipt comes in at standard cost and the actual cost is corrected on closing.

Close the order

1. Open the released order in Production › Production orders.
2. Click Close order.
3. Review the notice: it shows the work in process that will be distributed.
4. Enter the Closing date and confirm.

Nori distributes the variance like this:

• The part that belongs to product still in stock adjusts its average cost (it is revalued).
• The part of product that already left (sold, transferred) goes to the Production variance account.

The order shows the Variance and how much went to the product's cost and how much to the account. On a disassembly order the whole variance goes to the account.

After closing, nothing more is issued, received or cancelled on the order, and any remaining reservations are released.

The journal entries

With accounting on, each step makes its entry:

Without accounting, the calculation is the same: work in process comes from the order's stock ledger and the revaluation adjusts the average cost.

Set up the accounts

The accounts are in Accounting › Setup › G/L account determination, Inventory tab (you also get there from Production › Setup › Production accounts):

• Work in process
• Production variance
• Absorbed labor and overhead

Like other inventory accounts, you can change them by warehouse or by item group. See How to set up G/L account determination.

If you don't see…

• Close order: the order isn't released. A planned order is cancelled, not closed.
• A closed period message: the closing date falls in a closed posting period. Use a date in an open period or ask for it to be opened.
• A large variance: check each component's actual vs standard consumption on the order and the Cost and variances by order report. See Batch traceability and production reports.
• Work in process with a balance in the trial balance: there are released orders not yet closed. Find them in Production › Reports › Open and late orders.