I - Cost of Sales: General principles

3. Proportional cost of sales

3.3. Semi-standard principle for the Production Cost

The semi-standard principle applies only for WP1 companies.

The semi-standard coat of production for the period can be calculated as follows:

The semi-standard quantities should be that on the product information sheet / formula, namely the document with the list and quantities of products used as well as the manufacturing process.

This sheet is defined by the production departments and updated whenever necessary. It is used by Logistics to start supplying materials.

The semi-standard unit cost should be as close as possible to the actual cost.

It is calculated as follows:

• Raw materials: weighted average cost from the previous month.
  Inventory movements are carried out using the semi-standard cost,
• Finished goods (or intermediate goods) inventory input in semi-standard cost.
  The monthly remeasurement of this standard and of inventory is automatic in the event of a price change. In this system, inventory removals are at the semi-standard of that month and thus follow actual changes.

Note: Even though the cost production is recorded using semi-standards, standard/actual variance in costs of production should be included in the reporting heading "R15410 - Actual/Standard variance - Variable costs of sales".

3.4. Cost of Production variances (applicable for WP1 companies)

3.4.1. Structural variance

There is a structural difference any time the actual cost does not correspond to a task included on the product information sheet / formula.

This is particularly the case for recycling or rework tasks or the use of an installation other than that anticipated for the range (less efficient line or subcontracting).

3.4.2. Price variance

• Order price / invoice price: the difference between the order price and invoice price, which normally should not be significant, is included in price differences.
  Another cause for differences can be provisions for discounts based on estimated annual consumption. This difference is kept as an expense for the period and is not allocated to the products.
  The standard / actual differences should be analyzed and variances included in the value of inventories where the impact is material.
  The Purchasing Department is responsible for keeping this difference as close to zero as possible. In this case, the latter are recorded in the period and do not cause the standards to be reviewed.
• Revaluating inventories: inventory revaluations (raw materials, semi-finished goods, finished goods) resulting from monthly reviews of the semi-standards costs of production at the start of the month represent a price difference.
  This difference is not allocated to the products and does not cause the standard to be reviewed.

3.4.3. Performance variance

The performance difference shows the over or under consumption of products compared to the product information sheet / formula. Given that this sheet is regularly updated, any difference in consumption must be abnormal.

The difference should therefore be recorded as an expense for the period without being allocated to the products.