Case Study 15: Mattress Retailer Price Variance Resolution
A. The Company Industry:
Mattress manufacturing and retail with extensive product catalog, frequent promotional pricing, and high-volume consumer sales through showrooms and e-commerce
B. What needed to be done:
The mattress retailer experienced significant price discrepancies between the General Ledger and inventory subledgers caused by rapid price changes during inflationary periods and disruptive price estimation methodologies in the costing system. The issue created monthly reconciliation challenges with unexplained variances between subledger inventory values and GL control accounts, inaccurate gross margin reporting, and financial statement concerns during audit reviews. A custom solution was required to identify root causes of price variances, implement corrective pricing and costing logic, and develop reconciliation processes to detect and resolve future discrepancies.
C. How Dynatuners accomplished the deliverable:
Dynatuners conducted forensic analysis of inventory transactions, cost adjustments, and price changes to identify the root causes of GL-to-subledger variances. The investigation revealed issues with moving average cost calculations when high-frequency price changes occurred, timing differences between purchase order price updates and receipt postings, and incorrect standard cost variance postings for promotional markdowns. Custom X++ code was developed to implement enhanced price variance detection logic that flagged transactions where invoice prices deviated significantly from expected costs based on recent procurement history. The team implemented automated reconciliation batch jobs that compared inventory value reports with GL account balances daily, automatically investigating variances exceeding threshold tolerances and generating exception reports for accounting review. Corrective processes were established including inventory recalculation procedures for moving average items experiencing price volatility and enhanced change management workflows requiring approval before significant cost or price modifications. The solution included development of custom reports showing price variance trends by product category, supplier, and time period enabling procurement teams to identify systematic pricing issues. Data correction scripts were executed to resolve historical variances through appropriate adjusting journal entries with full documentation for audit support. Additionally, the team provided training to accounting and procurement teams on proper procedures for price updates, cost adjustments, and month-end inventory reconciliation. The custom solution eliminated unexplained GL variances, restored confidence in inventory valuation accuracy, and provided ongoing monitoring to detect price discrepancy issues before they accumulated into material financial statement impacts.