| Correction for issued materials |  |
| Materials are often issued before work on the production order is started. Consequently, the first partial delivery of end items to inventory carries all material costs and is, therefore, much more expensive then the next deliveries. If you apply actual costing, a correction must take place to avoid that all material costs are posted on the first delivery. A correction factor for material costs is applied by ERP LN if the ratio of actual material quantity and estimated material quantity is higher than the production order's completion ratio. Correction factor:
    Expected actual material quantity / Actual material quantity
    =(Completed order qty / Planned order qty * Estimated mat. qty ) / Actual material qty
    =(Completed order qty / Planned order qty) * (Estimated mat. qty / Actual material qty)
Example Material PARTA for production order ZZ0000300: Ordered quantity: 10 Completed quantity: 2 Estimated quantity PARTA: 20 Actual quantity PARTA: 10 Issue costs for PARTA: 150 EUR Correcton factor = (2/10) * (20/10) = 0.40 Expected material costs = Actual material costs = 150 * 0.40 = 60 EUR. |