COSTING PROBLEMS WITH USING PHANTOMS IN SUBASSEMBLIES

We are looking for a solution to our phantom subassembly costing
problem.  

 

Currently we use phantoms defined as a subassembly in two separate
scenarios:

.

1.                  As a repair part sold to customers. 
The phantom has a routing for contract (outside) services so the proper
cost and appropriate selling price can be determined.



2.                  As a subassembly that is immediately consumed by the
next production operation.   
The phantom in Scenario #1 is a sub-assembly of a higher level
component.  This higher level component has its own separate routing
which includes the cost of ALL contract services needed to complete the
higher level component. [This "all" cost includes the cost for
assembling and incorporating the scenario #1 subassembly into the higher
level component - the contractor quotes the higher level assembly costs
separately - and, the contract cost for the higher level can be lower
than the scenario #1 costs due to volume].

 

The Phantom has the same part number in both scenarios.  For example:
The cost of the Repair Part (Scenario #1) rolls up into the projected
cost of the higher level component (Scenario #2).  Consequently, the
higher level component production cost is overstated for inventory and
inflates the cost of the higher level component.

 

When the production job is purged for the Scenario #2 component, the
cost relating to the contract costs of the Phantom Repair Part (Scenario
#1) is not included in the Bill of Material (Scenario #2).  As a result,
the Production Job close-out computes a favorable variance, increasing
inventory value again.  

 

The Company does not want to change the item type from phantom to 1 or 2
because that will increase the administrative effort required to plan
and monitor inventory.  

 

Is there an alternative method of using phantoms that will provide
accurate inventory values and production costs?  

 

We welcome all suggestions to assist us in resolving this problem.

 

 

 

Peggy Shimko

Gross Given Manufacturing Company

Phone:  651-290-4362

Fax:  651-224-3609

E-Mail:  pshimko@xxxxxxxxxxxxxxxxxxxxx