Objective:

To introduce a mechanism in Dynamics 365 Finance & Operations (F&O) that allows manufacturers to allocate a recovery cost to by-products, ensuring that cost distribution reflects predefined recovery prices, which is critical for industries like seed crushing, oil extraction, and perishable goods production.

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Requirement Description:

New Recovery Price Form:

• Introduce a new form in Dynamics 365 F&O called "By-Product Recovery Price Setup".
• Purpose: To allow users to predefine recovery prices for specific by-products.
• Fields in the Recovery Price Form:
• By-Product ID
• Recovery Price (per unit)
• Effective Date
• Expiry Date (optional)
• Currency
• Note: The recovery price will be used during both estimation and actual cost calculations in production orders.

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Production Order Cost Allocation:

• When executing production orders:
• The system should retrieve the recovery price for the by-product from the Recovery Price Form based on the effective date.
• During Production Estimates:
• Multiply the recovery price with the estimated production quantity of the by-product to calculate the total recovery cost.
• Subtract this recovery cost from the total production cost pool.
• Allocate the remaining cost across main products or co-products.
• At Production Order Completion (Actuals):
• Multiply the recovery price with the actual production quantity of the by-product.
• Allocate this calculated recovery cost to the by-product.
• The remaining cost should be proportionately distributed to main and co-products based on production quantities or standard cost methods.

-----------------------------------------------------------------------------------------------Cost Allocation Logic:

• Formula for Recovery Cost:
• Recovery Cost = Recovery Price * Produced Quantity of By-Product
• Distribution Logic:
• Recovery cost is directly assigned to the by-product.
• Remaining cost is distributed to the main product and co-products based on the production order's predefined costing method (e.g., weight-based, value-based, or percentage-based).

------------------------------------------------------------------------------------------------Integration with Cost Management:

• Ensure that the recovery cost allocation flows seamlessly into the Cost Management module for accurate cost tracking and reporting.
• Recovery cost should be reflected in:
• Production Order Cost Analysis
• Inventory Valuation Reports
• Financial Postings

------------------------------------------------------------------------------------------------Impact on Estimation and Actual Costing:

• During Estimates: Recovery price and quantities will be derived based on estimates, enabling visibility into preliminary cost allocation.
• During Actual Cost Calculation: Final recovery price and actual production quantities will drive accurate cost allocation.

------------------------------------------------------------------------------------------------Business Benefits:

• Ensures accurate cost allocation for by-products based on recovery value.
• Supports industries such as seed crushing, oil extraction, and perishable goods production, where by-products hold significant recovery value.
• Improves cost visibility for by-products and main products.
• Helps businesses achieve better cost optimization and profitability insights.

------------------------------------------------------------------------------------------------High-Level Flow:

• Predefine the recovery price for by-products in the By-Product Recovery Price Setup form.
• Create and release a production order.
• During production order estimation:
• System calculates the estimated recovery cost for by-products.
• Remaining cost is allocated to the main product and co-products.
• During production order execution and completion:
• System calculates the actual recovery cost for by-products based on the actual quantities.
• Final cost allocation is performed.
• Costs reflect accurately in Cost Management and Financial Reports.

Technical Considerations:

• Introduce a table for recovery prices.
• Modify cost allocation logic in production orders to accommodate recovery price allocation for by-products.
• Ensure compatibility with existing costing methods.
• Add validations to ensure recovery price setup exists for applicable by-products.

------------------------------------------------------------------------------------------------Industries Benefiting:

• Seed Crushing Industry
• Oil Extraction Industry
• Perishable Goods Production

This enhancement will provide manufacturers with greater control over cost allocation, improve financial accuracy, and enable Dynamics 365 F&O to meet industry-specific requirements for by-product cost recovery.