Cost Variance Report

The purpose of the Cost Variance Report is to warn you of standard cost problems and/or gross inaccuracies in those standard inventory costs.

Inventory standard costs will rarely be exactly correct but significant variances between the last cost paid for components to their standard cost or the calculated manufacturing cost to real product finished goods could lead to a variety of costing and pricing problems in the real world.

When you adjust standard cost variances, printing the Cost Variance Report is your first step. Use the Cost Variance Report to compare the current unit costs of the different components of a BOM, as well as the BOM cost, to the existing costs in inventory. There are several parts to this report, which correspond to the options in the Include section:

  • The first compares the total BOM cost calculated using the current component makeup of the BOM to the current standard cost maintained in the Inventory master table. The first section of the report shows the finished product on a single line. The Current Cost is the calculated cost of producing this product based on its current bill of materials. To establish that number, one would need to run the costing function to establish the BOM cost. This current cost should match the finished production cost number, which prints on the Costed Bill of Materials. The Standard Cost is simply the standard cost as defined in Inventory, which can be seen on the Inventory Maintenance screen under the Location tab. The Variance is the difference between the two numbers, subtracting the current cost from the standard cost, and the Percentage is the difference divided by the standard cost.
  • The second section of the report prints the inventory component list for the bill of material. It includes all inventory items at all levels from top to bottom. The Last Cost field is the last cost shown in the inventory location screen. The Standard Cost is the standard cost also shown on the inventory location screen. The Variance is the difference between the standard cost and the last cost, subtracting the last cost from the standard cost. The Percentage is the variance amount divided by the standard cost number.

    Non-inventory components used on the bill of material need not appear on this report since no variance could exist for those items as they have neither last or standard costs.

    Subassemblies are not “calculated” for this report. We assume the stated standard cost in inventory is correct.

  • The third section of the report shows routing steps. There is a section for Labor Setup, Labor, Machine Setup, Machine time and Subcontracting. The Current Setup and Run Time are pulled directly off the bill of material. The Current Cost is established by multiplying the current setup or run time by the machine or labor cost set up in the Labor Type master or the Machine Group master.

    There is only one machine group per operation, but there could be one or two labor types because the bill of material allows the setup of a different setup labor type as opposed to the actual labor run type.

    The Standard Setup and Run Times fields are the times established in the Operation master record as identified for this step. To find this, one would read the Operation master record from the table using the bill of materials routing operation ID.

    The Standard Cost is then calculated by multiplying the run or setup cost by this standard time. The Variance is the difference between the standard cost and the current cost, subtracting the current cost from the standard cost.

    The Percentage is the variance divided by the standard cost amount. The real world issue here is that the standard setup time generally has little or nothing to do with the time defined in the bill of material so this section of the report is usually not used.

If a subcontracting step is involved, the report shows the subcontracted operation, description, vendor, and unit cost. No variance information is printed.

When you adjust standard cost variances, printing the Cost Variance Report is your first step. Use the Cost Variance Report to compare the current unit costs of the different components of a BOM, as well as the BOM cost, to the existing costs in inventory.

This report is not meant to subtotal and give overall information about the BOM. To do that, you need to include subassemblies and overhead. Also, the lot size should be included because it affects the setup cost variances in the labor and machine areas. This report is strictly meant as a tool to point out possible areas of concern due to changing costs of both materials and process steps.

High variances in components could mean the standard cost of your components should be changed. In the machine and labor area, a large variance could point out that you have adjusted your times in the master tables, but haven't changes them in the BOM. It could also mean that the BOM is unique and the variance is meaningless. Variances in the assembly may indicate your estimated costs have changed and either the standard cost or the rolled up current cost may be inaccurate.


To print the Cost Variance Report:

  1. Use the Data Filter to select the range of filtering options or leave the filter blank to include all available data.
  2. Select a location from the Standard Cost Location ID field.
  3. Select the information you want to include in the report from the Include section. The report has an option to print Machine Groups, Labor Types, and Subcontracted Activities, but this part of the report is rarely printed or used and although it shows variances, those variances are usually considered cosmetic information. They normally wouldn't be considered in establishing standard cost. Only the upper two sections of the report are crucial. Note: If you do not have Routing and Resources installed, these options will not be available.
  4. Select the Banded Rows check box, if applicable, to highlight alternating lines on the report to make the report easier to read.
    Note: Use the System Manager Print Preferences function to define the default setting for this check box. You can then override this default when you print the report.
  5. Click a command button to
    6. Select To
    Print Print the Cost Variance Report using the selected criteria.
    Output Output the list as a PDF.
    Send Save the list as a PDF and attach it to an email using your default mail program.
    Preview Preview the Cost Variance Report using the selected criteria.
    Reset Reset all fields and lists to their default selections.