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Cost Management Oracle APPS

Cost Management Oracle APPS

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Published by: honeyvijay on Jan 06, 2011
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Oracle ApplicationUser Reference ManualCost Management KPIT Cummins Infosystems LimitedPlot No. 35/36, Rajiv Gandhi Infotech Park, Phase I, MIDC, Hinjewadi, PUNE-411057, IndiaTel: +91 20 5652 5000, Fax: +91 20 5652 5001www.kpitcummins.com Table of Contents1. Introduction3i.Important Key Features3ii.Key concepts5iii.Item Cost Definition6iv.Standard Costing9v.Average Costing10vi.Comparison of Standard and Average Costing112. Basic Functionalities of the module12i.Defining Item Costs12ii.Viewing Item Costs12iii.Mass Editing Costing Information12iv.Supply Chain Costing12v.Period Close Activity12vi.View Transactions12vii.Reports12viii.Case Study Standard Costing133. Advanced / other features of the module37i.Retroactive Pricing37ii.Transfer Price Costing38iii.Client Extensions39iv.Account Generation Extension Workflow40v.View Transactions414. Important Set Ups42a)Setups Related to Other Modules42b)Setups Related to Cost Management43i.Set Personal Profile Options45ii.Set Security Functions48iii.Define Cost Types49iv.Defining Activities and Activity Costs50v.Define Cost Groups51vi.Define Material Sub-elements52vii.Define Overheads53viii.Define Material Overhead Defaults54ix.Associate Expenditure Types with Cost Elements55
x.Define Category Accounts (Optional)565. Inter Module Dependencies586. Seeded technical objects597. Periodic Actions, Reconciliations etc.608. Accounting Entries61 1. IntroductionOracle Cost Management is a comprehensive solution that helps organizations define costs then performs cost accounting for supply chain transactions. These activities serve as a key component for complying with regulatory reporting and accounting requirements, for streamlining the use of working capital in organizations, and improved profitability for businesses.i.Important Key Features
It is a cost system for Inventory, Order Management, Purchasing and Work in Process transactions. Cost Management supports various transaction costing, comprehensive valuation and variance reporting and thorough integration with Oracle Financials.The overview of Oracle Cost Management with the other functional modules can berepresented as below: 
It provides flexible Item Cost setup features including multiple cost elements and infinite sub-elements for each element. System defined cost elements are Material, Resource, Overhead, Material Overhead and Outside Processing. All these elements can have multiple Sub-elements help to analyze costs in greater details.This helps to accurately identify and maintain costs and associate them with items.
It enables extensive cost simulation capabilities that help to define costs. Italso supports flexible period based accounting that enables you to transact in more than one open period at the same time. You can simultaneously reconcile andanalyze one open period while conducting business in subsequent open period. Also you can transfer summary of detail account activity to Oracle General Ledger at any time and close the period at any time.
It provides flexible account setup such as accounts by Organization, Sub-Inventory, WIP accounting class such that total item cost can be distributed to right expense accounts and capture valuation in proper asset accounts.
It Supports following types of Costing Methods:i.Standard Costingii.Average Costingiii.LIFO Costingiv.FIFO Costingv.Periodic Average Costingvi.Activity based CostingAs per the scope of this document we will be considering details of only Standard and Average Costing Methods.
It can be broadly categorized based on functional criteria as:a.Product Costing
Rollup costs for bills and routings
Report and view assembly costs by level
Rollup costs based on Levels, Cost Type
Rollup costs using alternate bills and routings
Use Mass Edits to easily maintain costs and accounts
Copy Costs across cost types or organizations
Update costs at any time to revalue inventory and WIPb.Inventory Costing
Maintain perpetual inventory costs
Create inventory transaction accounting entries
Track Asset and Expense items and locations
Use Rule based accounting for Revenue and COGS
c.Manufacturing Costing
Maintain perpetual balances, discrete jobs and schedules
Charge resources at actual or standard cost including OSP
Charge resource cost based on operation completion
Apply overheads by fixed amount per Item / Lot, Percent of Item / Resource Valueand Amount per resource unit. ii.Key conceptsCosting Organization:When we define an inventory organization, we can specify both an Item Master Organization and a costing Organization.Child organization of the costing organization can share the costs of the costing master organization if they are all using Standard Costing and are not manufacturing plants(i.e. are not WIP-enabled).The costing master organization can be a manufacturing plant.Items in each of these organizations will be stored at the same cost, provided they have the “Costing Enabled” and “Inventory Asset Value” attributes controlled at theitem level rather than the Item Organization Level.Organizations using Average costing cannot share costs.Cost Group:A cost group is a set of accounts that hold on hand inventory. Prior to cost groups, sub-inventories were utilized to hold the accounts. The physical and accounting attributes are used in the sub-inventories to track the location, quantity,and value of the inventory.Cost groups were introduced to create separate tracking of the physical and accounting aspects of inventory.Some of the benefits of using a cost group are:Tracking quantity account and quantity movement characteristicsMaintain multiple item costs in each organization when using a perpetual costingmethod (Average, FIFO, and LIFO). Distinct cost is maintained for each item/cost group combination.In standard costing, all inventory of an item carries only the standard cost regardless of cost groups being utilized.Eliminate the need for accounting changes for sub-inventory transfers. Sub-inventory transfers are pure physical moves when using the cost group functionality.If the current organization is not Project References Enabled, the Common cost group is defaulted and cannot be updated. If the organization is Project Reference Enabled, any cost group can be selected.The Common cost group is seeded when Cost Management is installed.The valuation accounts defined in the Organization Parameters window are used for this cost group and cannot be changed or made inactive. However, in an organization that is Project Cost Collection Enabled the name and description of this cost group can be changed.Since Warehouse Management / Inventory Patch set B, there is new functionality with regard to cost groups. Each time a new organization is created, a new cost group is also created for that organization.The same Cost Group is associated with all the Sub-inventories in the Org. However, this could be overridden at the sub-inventory level.Cost Type:A cost type is a set of costs uniquely identified by name. In Standard Costing method, ‘Frozen’ is the seeded cost type. An unlimited number of additional simulation or unimplemented cost types can be defined and updated. iii.Item Cost DefinitionProduct costs are the sum of their elemental costs.The data model the supports item costs is illustrated below: 

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