Foam variances arise if the actual usage of foam chemicals is different from the usage prescribed in the BOM’s.
The variance can be determined monthly by comparing the actual foam used to the material recoveries for the month.
Actual foam usage is calculated by valuing the foam chemicals issued from the controlled raw material store to the mixing plant, adjusted for any stock of chemicals held at the mixing plant
Recoveries are calculated by extracting from the BOM’s the foam recovery for each model of refrigerator and spare part doors and multiplying this by the production for the month. While there are many refrigerator and spare part C/A and SKU numbers, many of these have the same quantity of foam in the BOM’s. Therefore, this data can be extracted and managed by model type.
The difference between the foam issued and recovered is a variance that should be released to Variances in the G/L each month (as opposed to leaving this in Factory WIP which will cause a stocktake variance).
Step 1 Stores Process
Firstly, investigate the stores issue process. As I understand it, foam chemicals are initially booked into the Thailand Dangerous Goods Store (which is a controlled store). The chemicals are issued to Factory WIP and delivered to the foam mixing plant on a KanBan card.
A report needs to be set up to capture the issues of foam chemicals from the Dangerous Goods Store to the foam plant.
Step 2 Determine Chemicals used for the Month
To determine the chemicals used for the month, the following calculation will have to be performed:
Stocktake the chemicals at the Foam Mixing Plant, including chemicals in the mixing tank, at beginning of month Value THB
Plus chemicals issued from Dangerous Goods Store during month Plus Value THB
Stocktake the chemicals at the Foam Mixing Plant, including chemicals in the mixing tank, at end of month Minus Value THB
Usage for Month Total THB
You will need assistance from Production staff to ascertain the quantity of chemicals in the mixing tank. You will then need to break this down into the various chemicals based on the proportion of chemicals in the mixing tank
Step 3 Determine Usage as per BOM’s
The next step is to determine the usage as per the BOMS for each refrigerator model and spare part doors.
This step may initially appear to be quite onerous. However, I suspect that this only has to be done for each model type (and not C/A) and spare part doors as the usage will be common. I can talk this through further with you.
Step 4 Monthly Process
At end of month you need to get the total production of refrigerators and spare part doors and the number of refrigerator cabinets and doors that have been foamed and then scrapped.
You then calculate the foam usage for that production based on the BOM’s and compare to the actual chemicals used. Factory WIP is then adjusted for any difference with the contra being Variances.