We are currently facing an issue where our WIP is being driven to a negative balance that appears to be driven by partially completed shop orders.

As customer demand fluctuates, our production planning schedules are adjusted based on the priority of the newer orders/jobs received. Orders currently in process may be paused to start the newer, higher priority orders. Because of this, we have many shop orders which are processed partially, have operations reported partially and have shop order receipts received partially into finished goods. At any given time, there are a large number of shop orders found in partially completed status.

The partially completed shop orders are receiving the full cost of material and labor into finished goods instead of a proportionate amount of material and labor. As a result, it appears that more cost is being taken out of WIP than has been added to it.

For example,

• A 500 piece shop order is partially completed with 300 pieces.
• Expecting only the following to be received into FG/relieved from WIP:
  • Actual material cost for 300 pieces
  • Actual labor cost reported for the 300 pieces 
• Cost currently being received into FG/relieved from WIP:
  • Total cost of material issued/backflushed for the 500 pieces,
  • Total estimated labor cost for the 500 piece order.

• Results in an overstated weighted average cost per part for the 300 pieces received.
• When the remaining labor is added and the balance of the 200 pieces on the shop order is completed,
  • the quantity and total material labor cost in FG is adjusted
  • results in a correct weighted average cost per part for the 500 piece total.
• This creates a timing issue if some of the initial 300 pieces received are sold before the balance of the shop order is completed. Cost of goods sold is incorrectly overstated for these parts. Cost for parts sold after the shop order is completed would be incorrectly understated.

Is there a process or are there settings that will allow the shop orders to be partially closed with only the material and labor cost related to the completed pieces being received into finished goods?