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Variable and Fixed Overhead Absorption in Microsoft Dynamics NAV

ArcherPoint How-To Blog: Step-by-step instructions on how to perform specific tasks in Microsoft Dynamics NAV

There are Dynamics NAV clients that would like to separate Variable and Fixed Overhead.

If we look at a Dynamics NAV Work Center Card, we see that we can put in a Direct Unit Cost and an Indirect Cost % or Overhead Rate. However, there is no place to indicate if this cost is Variable or Fixed.

To accommodate a Fixed Cost Component to the Cost of Production, we start by creating a new Work Center that I have named “FIXED OVERHEAD”.

View of the Work Center Card

Figure 1 – View of the Work Center Card

We have set the Direct Unit Cost to 10.00 and the Unit cost Calculation to “Units”.

Creating a new Work Center for the Fixed Cost Component

Figure 2 – Creating a new Work Center for the Fixed Cost Component

We created a new General Product Posting Group called FIXED OH and pointed the Direct Cost Applied Account to a new General Ledger Account that we also called FIXED OH.

Creating a new General Product Posting Group

Figure 3 – Creating a new General Product Posting Group

We then added a Parallel Operation to the Routing Lines using the new FIXED OVERHEAD Work Center.

Adding a Parallel Operation to the Routing Lines

Figure 4 – Adding a Parallel Operation to the Routing Lines

To test it, we created a Released Production Order that calls for the routing to which I added the parallel step.

Creating a Released Production Order that calls for the routing set up previously

Figure 5 – Creating a Released Production Order that calls for the routing set up previously

After we have changed the Production Order to the finished status, we can see in the General Ledger that it reflects the appropriate Debit to the WIP account and to the Fixed Overhead Absorbed account.

The General Ledger shows the appropriate values as desired

Figure 6 – The General Ledger shows the appropriate values as desired

For more information on this or any other Dynamics NAV costing topic, please contact ArcherPoint.

Read more "How To" blogs from ArcherPoint for practical advice on using Microsoft Dynamics NAV.

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Comments

ashoka-nav's picture

Comment: 

Hi Bob,
Above scenario was really good. Please give your comments on the question below:
Why did you select "Fixed-OH" work center as parallel scheduling in route?
Is this not real work center or that OH should apply "chain assembly" work center?
Does this Fixed-OH work center belong to chain assembly work center?
Thanks,

Comment: 

Hello ashoka-nav,

 

I made the fixed overhead operation a parallel operation so that it didn't interfere with the production schedule. I just used this fixed overhead operation for costing and not for production scheduling.

 

Bob

ashoka-nav's picture

Comment: 

Hi Bob.
Thanks for the reply! Can you little bit liberate about NAV production schedule.
Q : Why its pass today date also if i run backward scheduling.( NAV W1). Even though my capacity is there production planning should not start yesterday of day after before yesterday. it should start from today rather than saying if you want to finish it today you had to started some time back(previous date).
 I think it’s going backward (passing today) to give understand the production plan for my future production requirements.
My question is if i want to see production plan from today onwards how can we do that?
 

Comment: 

Hello,

When you backward schedule the system will schedule to days that are before today which I agree is illogical.

In this case when you refresh the production order you should select 'forward schedule'

 

Bob

ashoka-nav's picture

Comment: 

Yes, its correct,
but then it has to run one by one in production order level. Is there a way to run forward schedule in planning worksheet?
other wise it will be a customization( my previous scenario)

Comment: 

From the planning worksheet, you can run the function to  'Refresh Planning Lines' and select forward scheduling.

 

Bob

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