Sage 100 Work Order Costing: Where Variances Come From
A work order closes, the margin looks wrong, and nobody can say why. The estimate said one thing, the actual cost says another — and by the time the variance surfaces, the job is already shipped and invoiced.
Work order costing in Sage 100 is where a manufacturing job turns into a number: material, labor, and overhead collected against a single work order, then compared with what the job was supposed to cost. When those two figures disagree, the difference is the variance — and the variance is rarely one mistake. It is usually three different gaps, hiding in three different parts of the job, surfacing only when the work order closes.
Three Places a Variance Can Hide
Material. The bill of materials says what the job should consume; the work order records what it actually consumed. Was material issued in the quantities the BOM expected, or did substitutions, scrap, and extra issues quietly push the job over? If the BOM itself is out of date, every work order built from it inherits the same error — and the variance repeats job after job.
Labor. Hours posted to the work order are only as reliable as the recording behind them. Time charged to the wrong job, time entered late, or time that never gets entered at all — each one moves the labor cost without leaving an obvious trace. Is the variance a shop-floor problem, or a recording problem? The total alone cannot tell you.
Overhead. Overhead applied to a work order follows a rate and a base, not the actual cost of running the shop that week. When the rate no longer reflects reality, even a job with perfect material and labor can close with a variance that belongs to neither — it belongs to the assumption underneath the rate.
What Ignoring Variances Costs
An unexplained variance does not stay in one job. It carries into the next quote, priced off a cost that was never really understood. Margins drift a little on every job, estimates miss in the same direction, and nobody can say which jobs made money and which ones only looked like they did — until a bad quarter forces the question.
Find Where Your Variances Come From — Free
Our free Sage 100 Health Check looks at how work order costing is set up in your system — BOM accuracy, material and labor recording, and how overhead is applied — and where your variances are most likely hiding. Every Digit Masters consultant is a licensed U.S. CPA, so the review covers your costing as well as your system, and our support plans keep the setup working once it is fixed. Before you price another job off a number you cannot explain, find out where the gap comes from.
Related Services
This topic connects directly to our core service areas: Sage 100 Manufacturing, Sage 100 Consulting, and our free Sage 100 Health Check. Related reading: our Production Management post and our management reports post. If you're working through a similar challenge, contact us for a free consultation.
