R12 Cost Management Fundamentals Vol 1

R12 Oracle Cost Management
Fundamentals Ed 1
Volume 1 - Student Guide
m y
d e
c a
e A
c l
r a
O ly
l & On
D50085GC10
Edition 1.0
n a e
September 2007
t e r U s
D52489
I n
c l e
r a
O
Copyright © 1996, 2007, Oracle. All rights reserved.
This document contains proprietary information and is protected by copyright and other intellectual property laws. You may copy and
print this document solely for your own use in an Oracle training course. The document may not be modified or altered in any way.
Except where your use constitutes "fair use" under copyright law, you may not use, share, download, upload, copy, print, display,
perform, reproduce, publish, license, post, transmit, or distribute this document in whole or in part without the express authorization
of Oracle.
The information contained in this document is subject to change without notice. If you find any problems in the document, please
report them in writing to: Oracle University, 500 Oracle Parkway, Redwood Shores, California 94065 USA. This document is not
warranted to be error-free.
If this documentation is delivered to the United States Government or anyone using the documentation on behalf of the United
States Government, the following notice is applicable:
U.S. GOVERNMENT RIGHTS

The U.S. Government’s rights to use, modify, reproduce, release, perform, display, or disclose these training materials are restricted
by the terms of the applicable Oracle license agreement and/or the applicable U.S. Government contract.
Oracle, JD Edwards, PeopleSoft, and Siebel are registered trademarks of Oracle Corporation and/or its affiliates. Other names may
be trademarks of their respective owners.
Author
Kevin Brown
Technical Contributors and Reviewers
Charles Pirnat, April Nelson
This book was published using: oracletutor

m y
d e
c a
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Table of Contents
Overview of Cost Management ......................................................................................................................1-1

Overview of Cost Management .....................................................................................................................1-3
Course Objectives..........................................................................................................................................1-4
Agenda...........................................................................................................................................................1-5
Product Overview ..........................................................................................................................................1-6
Agenda...........................................................................................................................................................1-7
Role of Cost Management .............................................................................................................................1-8
Agenda...........................................................................................................................................................1-9
Product Costing .............................................................................................................................................1-10
Agenda...........................................................................................................................................................1-13
Inventory Control and Valuation ...................................................................................................................1-14
Agenda...........................................................................................................................................................1-15
Profit Analysis ...............................................................................................................................................1-16
Agenda...........................................................................................................................................................1-17
Management Reporting .................................................................................................................................1-18
Agenda...........................................................................................................................................................1-19
Budgeting and Planning.................................................................................................................................1-20
Agenda...........................................................................................................................................................1-22
Cost Management Business Flow..................................................................................................................1-23
Agenda...........................................................................................................................................................1-25
Oracle Cost Management Integration ............................................................................................................1-26
Summary........................................................................................................................................................1-28
Overview of Setup and Implementation of Cost Management....................................................................2-1
Overview of Setup and Implementation of Cost Management......................................................................2-3
m y
d e
Objectives ......................................................................................................................................................2-4
Agenda...........................................................................................................................................................2-5
c a
Overview .......................................................................................................................................................2-6
e A
Integration......................................................................................................................................................2-9
Describing General Ledger Cost Controls ....................................................................................................3-1
c l
Describing General Ledger Cost Controls.....................................................................................................3-3
Objectives ......................................................................................................................................................3-4
r a
Agenda...........................................................................................................................................................3-5
Overview of Fiscal Period and Controls for Oracle Inventory ......................................................................3-6
O ly
Agenda...........................................................................................................................................................3-7
Functional Currency and Currency Controls .................................................................................................3-8
l & On
Methods of Functional Currency and Currency Controls..............................................................................3-9
Agenda...........................................................................................................................................................3-11
n a e
General Ledger Chart of Accounts ................................................................................................................3-12
Agenda...........................................................................................................................................................3-13
r s
Accounting Periods........................................................................................................................................3-14
e
Accounting Calendar .....................................................................................................................................3-15
t U
Open Accounting Periods ..............................................................................................................................3-16
I n
Agenda...........................................................................................................................................................3-18
Exchange Rates .............................................................................................................................................3-19
c l e
Agenda...........................................................................................................................................................3-21
Set of Books ..................................................................................................................................................3-22
Inter-organization Transfers with Multiple SOBs .........................................................................................3-24
r a
Customization of Set of Books ......................................................................................................................3-25
Summary........................................................................................................................................................3-26
ODescribing Organizational Cost Controls......................................................................................................4-1
R12 Oracle Cost Management Fundamentals Ed 1 Table of Contents

i
Describing Organizational Cost Controls ......................................................................................................4-3
Objectives ......................................................................................................................................................4-4
Agenda...........................................................................................................................................................4-5
Overview .......................................................................................................................................................4-6
Agenda...........................................................................................................................................................4-7
Inventory Organization Controls ...................................................................................................................4-8
Multi-Organization Access Control (MOAC) ...............................................................................................4-9
Agenda...........................................................................................................................................................4-10
Cost Control Level.........................................................................................................................................4-11
Cost Control Parameters ................................................................................................................................4-13
Agenda...........................................................................................................................................................4-16
Costing Method .............................................................................................................................................4-17
Agenda...........................................................................................................................................................4-19
General Ledger Transfer Options ..................................................................................................................4-20
Agenda...........................................................................................................................................................4-21
Organization-Level Default and System Accounts........................................................................................4-22
Example: Average Costing and Sub-inventory..............................................................................................4-25
Organization-Level Default and System Accounts........................................................................................4-26
Agenda...........................................................................................................................................................4-27
Interorganization Transfer Information .........................................................................................................4-28
Summary........................................................................................................................................................4-31
Describing Financial Cost Controls ...............................................................................................................5-1
Describing Financial Cost Controls...............................................................................................................5-3
Objectives ......................................................................................................................................................5-4
Agenda...........................................................................................................................................................5-5
Overview .......................................................................................................................................................5-6
y
Agenda...........................................................................................................................................................5-7
Subinventory Accounts and Controls ............................................................................................................5-8
m
d e
Agenda...........................................................................................................................................................5-10
Receiving Options and Controls ....................................................................................................................5-11
c a
Noninventory Versus Inventory Items...........................................................................................................5-13
Agenda...........................................................................................................................................................5-15
Units of Measure ...........................................................................................................................................5-16
e A
Agenda...........................................................................................................................................................5-17
Categories for Product-Line Costing .............................................................................................................5-18
c l
Agenda...........................................................................................................................................................5-23
Account Aliases.............................................................................................................................................5-24
r a
Agenda...........................................................................................................................................................5-26
Cost Security Profiles ....................................................................................................................................5-27
O ly
Summary........................................................................................................................................................5-29
l & On
Describing WIP Cost Controls .......................................................................................................................6-1
Describing WIP Cost Controls ......................................................................................................................6-3
Objectives ......................................................................................................................................................6-4
a e
Agenda...........................................................................................................................................................6-5
n
e r
Overview .......................................................................................................................................................6-6
s
Agenda...........................................................................................................................................................6-8
t U
WIP Parameters .............................................................................................................................................6-9
I n
WIP Parameters: Repetitive Variance Timing..............................................................................................6-11
Agenda...........................................................................................................................................................6-14
e
WIP Accounting Class...................................................................................................................................6-15
l
Practice 1 - Setting Up The Default WIP Accounting Class .....................................................................6-18
c
Solution – Setting Up The Default WIP Accounting Class .......................................................................6-20
r a
Work-in-Process Costing Differences ...........................................................................................................6-25
Summary........................................................................................................................................................6-26
OSummary of Implementing and Setup for Cost Management .....................................................................7-1

ii
Summary of Implementing and Setup for Cost Management........................................................................7-3
Objectives ......................................................................................................................................................7-4
Agenda...........................................................................................................................................................7-5
Overview of Costing Information...................................................................................................................8-1
Overview of Costing Information..................................................................................................................8-3
Objectives ......................................................................................................................................................8-4
Agenda...........................................................................................................................................................8-5
Overview .......................................................................................................................................................8-6
Unit Integration .............................................................................................................................................8-9
Defining Cost Types.........................................................................................................................................9-1
Defining Cost Types......................................................................................................................................9-3
Objectives ......................................................................................................................................................9-4
Agenda...........................................................................................................................................................9-5
Overview .......................................................................................................................................................9-6
Agenda...........................................................................................................................................................9-8
Cost Types .....................................................................................................................................................9-9
Agenda...........................................................................................................................................................9-11
Cost Type Controls for Inventory and Manufacturing..................................................................................9-12
Agenda...........................................................................................................................................................9-13
Cost Type Controls with Bills of Material....................................................................................................9-14
Practice 2 - Defining Items ........................................................................................................................9-16
Solution – Defining Items..........................................................................................................................9-19
Practice 3 - Defining Cost Types...............................................................................................................9-25
Solution – Defining Cost Types.................................................................................................................9-27
Summary........................................................................................................................................................9-30
Describing Cost Elements ...............................................................................................................................10-1
m y
d e
Describing Cost Elements..............................................................................................................................10-3
Objectives ......................................................................................................................................................10-4
c a
Agenda...........................................................................................................................................................10-5
Overview .......................................................................................................................................................10-6
Agenda...........................................................................................................................................................10-8
e A
Cost Elements ................................................................................................................................................10-9
Subelements...................................................................................................................................................10-11
c l
Basis Types....................................................................................................................................................10-12
Summary........................................................................................................................................................10-14
r a
Defining Item Costs .........................................................................................................................................11-1
Defining Item Costs.......................................................................................................................................11-3
O ly
Objectives ......................................................................................................................................................11-4
l & On
Agenda...........................................................................................................................................................11-5
Overview .......................................................................................................................................................11-6
Agenda...........................................................................................................................................................11-7
a e
Material Subelements ....................................................................................................................................11-8
n
e r
Practice 4 - Material Overhead ..................................................................................................................11-11
s
Solution – Material Overhead....................................................................................................................11-12
t U
Agenda...........................................................................................................................................................11-14
I n
Item Cost Controls.........................................................................................................................................11-15
Agenda...........................................................................................................................................................11-17
e
Item Costs......................................................................................................................................................11-18
l
Practice 5 - Purchased Item Costs..............................................................................................................11-19
c
Solution – Purchased Item Costs ...............................................................................................................11-22
r a
Summary........................................................................................................................................................11-28
Defining Resource and Overhead Costs ........................................................................................................12-1
O Defining Resource and Overhead Costs ........................................................................................................12-3

iii
Objectives ......................................................................................................................................................12-4
Agenda...........................................................................................................................................................12-5
Overview of Manufacturing Cost Setup ........................................................................................................12-6
Agenda...........................................................................................................................................................12-7
BOM Parameters ...........................................................................................................................................12-8
Agenda...........................................................................................................................................................12-9
Resource Subelements and Costs ..................................................................................................................12-10
Practice 6 - Defining Resources.................................................................................................................12-13
Solution – Defining Resources ..................................................................................................................12-14
Agenda...........................................................................................................................................................12-17
Defining Departments and Associating Resources........................................................................................12-18
Agenda...........................................................................................................................................................12-19
Three-Way Association .................................................................................................................................12-20
Practice 7 - Overheads ...............................................................................................................................12-21
Solution - Overheads .................................................................................................................................12-23
Practice 8 - Defining Departments.............................................................................................................12-25
Solution – Defining Departments ..............................................................................................................12-28
Agenda...........................................................................................................................................................12-33
Defining Routings .........................................................................................................................................12-34
Practice 9 - Defining Routings...................................................................................................................12-36
Solution – Defining Routings ....................................................................................................................12-39
Agenda...........................................................................................................................................................12-44
Bills of Material.............................................................................................................................................12-45
Practice 10 - Defining Bills Of Material....................................................................................................12-47
Solution – Defining Bills Of Material .......................................................................................................12-49
Summary........................................................................................................................................................12-53
Summary of Costing Information ..................................................................................................................13-1
Summary of Costing Information ..................................................................................................................13-3
m y
d e
Objectives ......................................................................................................................................................13-4
Agenda Summary ..........................................................................................................................................13-5
c a
Rolling Up and Updating Costs ......................................................................................................................14-1
Rolling Up and Updating Costs .....................................................................................................................14-3
A
Objectives ......................................................................................................................................................14-4
Agenda...........................................................................................................................................................14-5
e
c l
This-Level and Previous-Level Costing ........................................................................................................14-6
Agenda...........................................................................................................................................................14-7
r a
Supply Chain Cost Rollup .............................................................................................................................14-8
Agenda...........................................................................................................................................................14-12
Phantom Costing ...........................................................................................................................................14-13
O ly
Practice 11 - Supply Chain Cost Rollup ....................................................................................................14-17
l & On
Solution – Supply Chain Cost Rollup........................................................................................................14-19
Practice 12 - Supply Chain Cost Rollup Analysis .....................................................................................14-22
Solution – Supply Chain Cost Rollup Analysis .........................................................................................14-23
a e
Agenda...........................................................................................................................................................14-32
n
e r
How the Standard Cost Update Works ..........................................................................................................14-33
s
Practice 13 - Cost Update ..........................................................................................................................14-36
t U
Solution – Cost Update..............................................................................................................................14-40
I n
Agenda...........................................................................................................................................................14-51
Item Cost Inquiries ........................................................................................................................................14-52
e
Agenda...........................................................................................................................................................14-54
l
Copying Costs ...............................................................................................................................................14-55
c
Practice 25 - Copying Costs Across Organizations ...................................................................................14-57
r a Solution - Copying Costs Across Organizations .......................................................................................14-59

Agenda...........................................................................................................................................................14-62
O Editing Item Costs Using Mass Edits ............................................................................................................14-63

Agenda...........................................................................................................................................................14-65

iv
Purging Nonvaluation Cost Types.................................................................................................................14-66
Agenda...........................................................................................................................................................14-67
Editing Item Control Accounts Using Mass Edits........................................................................................14-68
Summary........................................................................................................................................................14-70
Accounting for Inventory Transactions for Average Costing......................................................................15-1
Accounting for Inventory Transactions for Average Costing........................................................................15-3
Objectives ......................................................................................................................................................15-4
Agenda...........................................................................................................................................................15-5
Overview of Average Costing .......................................................................................................................15-6
Agenda...........................................................................................................................................................15-8
Describing Average Costing..........................................................................................................................15-9
Agenda...........................................................................................................................................................15-11
Setting Up Average Costing ..........................................................................................................................15-12
Agenda...........................................................................................................................................................15-15
Average Cost Update.....................................................................................................................................15-16
Agenda...........................................................................................................................................................15-18
Accounting for Inventory Transactions .........................................................................................................15-19
Accounting for Material Transactions ...........................................................................................................15-20
Transaction Processing ..................................................................................................................................15-27
Viewing Item Cost History............................................................................................................................15-29
Inventory Purchasing Transactions................................................................................................................15-31
Transferring Invoice Price Variance..............................................................................................................15-33
Interorganization Transfers............................................................................................................................15-35
Summary........................................................................................................................................................15-39
Accounting for WIP Transactions For Average Costing .............................................................................16-1
Accounting for WIP Transactions for Average Costing................................................................................16-3
y
Objectives ......................................................................................................................................................16-4
m
Agenda...........................................................................................................................................................16-5
d e
Overview Cost Follows Quantity ..................................................................................................................16-6
Agenda...........................................................................................................................................................16-7
Describing the Relationship Between Oracle WIP Transactions and OCM..................................................16-8
c a
Agenda...........................................................................................................................................................16-11
A
Phantom Costing ...........................................................................................................................................16-12
Agenda...........................................................................................................................................................16-15
e
c l
Review of Manufacturing Cost Setup............................................................................................................16-16
Agenda...........................................................................................................................................................16-21
r a
Accounting Flows: Costs Incurred, Components Issued to WIP...................................................................16-22
Agenda...........................................................................................................................................................16-28
Accounting Flows: Costs Relieved, Assembly Completion from WIP .........................................................16-29
O ly
Practice 26 - Average Costing ...................................................................................................................16-34
l & On
Solution - Average Costing .......................................................................................................................16-39
Summary........................................................................................................................................................16-58
n a e
Accounting for Inventory Transactions for Standard Costing....................................................................17-1
Accounting for Inventory Transactions for Standard Costing .......................................................................17-3
r s
Objectives ......................................................................................................................................................17-4
e
Agenda...........................................................................................................................................................17-5
t U
Overview of Standard Costing.......................................................................................................................17-6
I n
Agenda...........................................................................................................................................................17-8
Setting Up Standard Costing .........................................................................................................................17-9
l e
Agenda...........................................................................................................................................................17-10
c
Inventory Purchasing Transactions................................................................................................................17-11
r a
Expense Purchasing Transactions..................................................................................................................17-14
Inter-organization Transfers ..........................................................................................................................17-16
Practice 14 - Inventory Transactions Miscellaneous Receipt ....................................................................17-20
O Solution – Inventory Transactions Miscellaneous Receipt........................................................................17-25

v
Summary........................................................................................................................................................17-38
Accounting for WIP Transactions for Standard Costing.............................................................................18-1
Accounting for WIP Transactions for Standard Costing ...............................................................................18-3
Objectives ......................................................................................................................................................18-4
Agenda...........................................................................................................................................................18-5
Overview Cost Follows Quantity .................................................................................................................18-6
Agenda...........................................................................................................................................................18-8
Accounting Flows: Costs Incurred, Components Issued to WIP...................................................................18-9
Agenda...........................................................................................................................................................18-14
Accounting Flows: Costs Relieved................................................................................................................18-15
Agenda...........................................................................................................................................................18-20
Accounting Flows: Variances........................................................................................................................18-21
Agenda...........................................................................................................................................................18-23
Standard Cost Update ....................................................................................................................................18-24
Practice 15 - WIP Transactions Create Discrete Jobs................................................................................18-25
Solution – WIP Transactions Create Discrete Jobs ...................................................................................18-29
Practice 16 - WIP Transactions Push Materials.........................................................................................18-36
Solution – WIP Transactions Push Materials ............................................................................................18-39
Practice 17 - WIP Transactions Scrap Transactions ..................................................................................18-46
Solution – WIP Transactions Scrap Transactions......................................................................................18-48
Practice 18 - WIP Transactions Move Transactions..................................................................................18-53
Solution - WIP Transactions Move Transactions ......................................................................................18-55
Practice 19 - WIP Transactions Manual Resources ...................................................................................18-58
Solution - WIP Transactions Manual Resources .......................................................................................18-60
Practice 20 - WIP Transactions Easy Completion .....................................................................................18-64
Solution - WIP Transactions Easy Completion .........................................................................................18-66
Practice 21- WIP Transactions Completion Transactions .........................................................................18-71
Solution - WIP Transactions Completion Transactions.............................................................................18-73
m y
Practice 22 - WIP Transactions Overcompletion Transactions .................................................................18-78
Solution - WIP Transactions Overcompletion Transactions......................................................................18-81
d e
c a
Practice 23 - WIP Job Close Transactions.................................................................................................18-85
Solution - WIP Job Close Transactions .....................................................................................................18-87
Summary........................................................................................................................................................18-89
Appendix A: Describing T-Accounts for Inventory Transactions for Standard Costing..........................19-1
e A
c l
Appendix A: Describing T-Accounts for Inventory Transactions for Standard Costing...............................19-3
Objectives ......................................................................................................................................................19-4
r a
Agenda...........................................................................................................................................................19-5
T-Accounts ....................................................................................................................................................19-6
Summary........................................................................................................................................................19-11
O ly
Appendix B: Describing T-Accounts for WIP Transactions for Standard Costing...................................20-1
l & On
Appendix B: Describing T-Accounts for WIP Transactions for Standard Costing .......................................20-3
Objectives ......................................................................................................................................................20-4
n a e
Agenda...........................................................................................................................................................20-5
Summary........................................................................................................................................................20-10
e r s
Analyzing Inventory Transactions .................................................................................................................21-1
t U
Analyzing Inventory Transactions.................................................................................................................21-3
I n
Objectives ......................................................................................................................................................21-4
Agenda...........................................................................................................................................................21-5
e
Overview .......................................................................................................................................................21-6
l
Agenda...........................................................................................................................................................21-7
c
Inventory Distribution Inquiry.......................................................................................................................21-8
r a
Agenda...........................................................................................................................................................21-10
Resubmitting Errored Transactions for Costing ............................................................................................21-11
O Agenda...........................................................................................................................................................21-13
Margin Analysis Reports ...............................................................................................................................21-14

vi
Agenda...........................................................................................................................................................21-18
Analyzing Inventory Transactions.................................................................................................................21-19
Summary........................................................................................................................................................21-22
Analyzing WIP Transactions..........................................................................................................................22-1
Analyzing WIP Transactions.........................................................................................................................22-3
Objectives ......................................................................................................................................................22-4
Agenda...........................................................................................................................................................22-5
Overview of Analyzing WIP Transactions....................................................................................................22-6
Agenda...........................................................................................................................................................22-7
Viewing Job and Schedule Values Online.....................................................................................................22-8
Agenda...........................................................................................................................................................22-10
Reporting and Analyzing WIP Values...........................................................................................................22-11
Summary........................................................................................................................................................22-15
FIFO / LIFO Costing.......................................................................................................................................23-1
FIFO / LIFO Costing .....................................................................................................................................23-3
Objectives ......................................................................................................................................................23-4
Agenda...........................................................................................................................................................23-5
Overview of FIFO / LIFO Costing ................................................................................................................23-6
Agenda...........................................................................................................................................................23-8
Business Value of FIFO / LIFO Costing .......................................................................................................23-9
Agenda...........................................................................................................................................................23-10
Major Features of FIFO / LIFO Costing........................................................................................................23-11
Agenda...........................................................................................................................................................23-13
Setting Up Layer Costing ..............................................................................................................................23-14
Agenda...........................................................................................................................................................23-17
Layer Costing for Manufacturing Prerequisites.............................................................................................23-18
y
Agenda...........................................................................................................................................................23-19
Setting Up Layer Costing with BOM and WIP .............................................................................................23-20
m
Practice 27 - LIFO Costing - Create First Layer........................................................................................23-21
d
Solution - LIFO Costing - Create First Layer ............................................................................................23-23e
c a
Practice 28 - LIFO Adjusting Layer Cost ..................................................................................................23-26
Solution - LIFO Adjusting Layer Cost ......................................................................................................23-28
A
Practice 29 - LIFO Costing - Creating The Second Layer.........................................................................23-31
Solution - LIFO Costing - Creating The Second Layer .............................................................................23-33
e
c l
Practice 30 - Issuing Material LIFO Costing.............................................................................................23-36
Solution - Issuing Material LIFO Costing .................................................................................................23-39
r a
Practice 31 - FIFO Costing - Creating The First Layer .............................................................................23-45
Solution - FIFO Costing - Creating The First Layer..................................................................................23-48
Practice 32 - FIFO - Adjusting Layer Costs ..............................................................................................23-51
O ly
Solution - FIFO - Adjusting Layer Costs...................................................................................................23-53
l & On
Practice 33 - FIFO Costing - Creating The Second Layer .........................................................................23-56
Solution - FIFO Costing - Creating The Second Layer .............................................................................23-58
Practice 34 - Issuing Material FIFO Costing .............................................................................................23-61
a e
Solution - Issuing Material FIFO Costing .................................................................................................23-64
n
e r
Summary........................................................................................................................................................23-70
s
Revenue and COGS Matching .......................................................................................................................24-1
t U
Revenue and COGS Matching.......................................................................................................................24-3
I n
Objectives ......................................................................................................................................................24-4
Agenda...........................................................................................................................................................24-5
l e
Overview .......................................................................................................................................................24-6
c
Agenda...........................................................................................................................................................24-7
r a
Setting Up Revenue / COGS Matching .........................................................................................................24-8
Agenda...........................................................................................................................................................24-9
Revenue / COGS Recognition Methodology.................................................................................................24-10
O Agenda...........................................................................................................................................................24-12

vii
COGS Recognition and Concurrent Processes ..............................................................................................24-13
Agenda...........................................................................................................................................................24-15
Supported Business Scenarios .......................................................................................................................24-16
Summary........................................................................................................................................................24-18
Periodic Average Costing................................................................................................................................25-1
Periodic Average Costing ..............................................................................................................................25-3
Objectives ......................................................................................................................................................25-4
Agenda...........................................................................................................................................................25-5
Overview .......................................................................................................................................................25-6
Agenda...........................................................................................................................................................25-8
Business Value of Periodic Average Costing ...............................................................................................25-9
Agenda...........................................................................................................................................................25-11
Using Periodic Average Costing ...................................................................................................................25-12
Agenda...........................................................................................................................................................25-15
Processing Costs for Periodic Costing...........................................................................................................25-16
Agenda...........................................................................................................................................................25-20
Reporting .......................................................................................................................................................25-21
Agenda...........................................................................................................................................................25-23
Implementation and Setup Considerations ....................................................................................................25-24
Summary........................................................................................................................................................25-28
Periodic Incremental LIFO Costing ..............................................................................................................26-1
Periodic Incremental LIFO Costing...............................................................................................................26-3
Objectives ......................................................................................................................................................26-4
Agenda...........................................................................................................................................................26-5
Overview of Periodic Incremental LIFO Costing..........................................................................................26-6
Business Value of Periodic Incremental LIFO Costing.................................................................................26-8

m y
Agenda...........................................................................................................................................................26-7
Agenda...........................................................................................................................................................26-10
d e
Periodic Incremental LIFO ............................................................................................................................26-11
Agenda...........................................................................................................................................................26-16
c a
Inquiring and Reporting.................................................................................................................................26-17
Agenda...........................................................................................................................................................26-19
A
Implementation and Setup Considerations ....................................................................................................26-20
Summary........................................................................................................................................................26-24
e
c l
Period Close for Inventory Organizations.....................................................................................................27-1
Period Close for Inventory Organizations .....................................................................................................27-3
r a
Objectives ......................................................................................................................................................27-4
Agenda...........................................................................................................................................................27-5
O ly
Overview .......................................................................................................................................................27-6
Agenda...........................................................................................................................................................27-8
l & On
Pending Transactions.....................................................................................................................................27-9
Practice 24 - Period Close..........................................................................................................................27-12
n a e
Solution - Period Close..............................................................................................................................27-15
Agenda...........................................................................................................................................................27-18
r s
Transfer Options ............................................................................................................................................27-19
e
Agenda...........................................................................................................................................................27-21
t U
Closing the Period in Inventory.....................................................................................................................27-22
I n
Agenda...........................................................................................................................................................27-25
Posting to the General Ledger .......................................................................................................................27-26
l e
Agenda...........................................................................................................................................................27-28
c
Reconciling Perpetual Inventory to GL .........................................................................................................27-29
r a
Agenda...........................................................................................................................................................27-31
Client Extensions...........................................................................................................................................27-32
Agenda...........................................................................................................................................................27-34
O Period Close Diagnostics...............................................................................................................................27-35

viii
System Alerts.................................................................................................................................................27-37
Summary........................................................................................................................................................27-38
Subledger Accounting (SLA) ..........................................................................................................................28-1
Subledger Accounting (SLA) ........................................................................................................................28-3
Objectives ......................................................................................................................................................28-4
Agenda...........................................................................................................................................................28-5
Overview of Subledger Accounting ..............................................................................................................28-6
Standard Accounting Process ........................................................................................................................28-8
SLA Accounting Process...............................................................................................................................28-9
Subledger Accounting Profile Option............................................................................................................28-10
Defining Accounting Derivation Rules .........................................................................................................28-11
Create Accounting - Cost Management.........................................................................................................28-12
Transfer Journal Entries to GL - Cost Management ......................................................................................28-13
Viewing Accounting and Accounting Events................................................................................................28-14
Summary........................................................................................................................................................28-16
Appendix C: General Ledger Accounts.........................................................................................................29-1
Appendix C: General Ledger Accounts.........................................................................................................29-3
Objectives ......................................................................................................................................................29-4
Appendix C: General Ledger Accounts.....................................................................................................29-5
Appendix D: Summary of Standard Cost Transactions...............................................................................30-1
Appendix D: Summary of Standard Cost Transactions .................................................................................30-3
Objectives ......................................................................................................................................................30-4
Appendix D: Summary Of Standard Cost Transactions ............................................................................30-5
Appendix E: Effects of Negative Inventory ...................................................................................................31-1
Appendix E: Effects of Negative Inventory...................................................................................................31-3
m y
Objectives ......................................................................................................................................................31-4
Appendix E: Effects Of Negative Inventory..............................................................................................31-5
d e
c a
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

ix
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Preface
Profile
Before You Begin This Course
Before you begin this course, you should have the following qualifications:
• Thorough knowledge of basic accounting concepts
• Working experience with the principles and customary practices of your business area
Prerequisites
• Oracle Inventory and Purchasing
• Oracle Bills of Material and Engineering (if products are installed at your site)
• Oracle Work In Process (if products are installed at your site)
How This Course Is Organized
This is an instructor-led course featuring lecture and hands-on exercises. Online demonstrations
and written practice sessions reinforce the concepts and skills introduced. m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

xi
Related Publications
Oracle Publications
Title Part Number
Oracle Bills of Material User’s Guide B28673-01
Oracle Cost Management User’s Guide B31271-02
Oracle Work in Process User’s Guide B31092-01
Oracle Inventory User’s Guide B31547-03
Additional Publications
• System release bulletins
• Installation and user’s guides
• Read-me files
• International Oracle User’s Group (IOUG) articles
• Oracle Magazine
m y
d e
c a
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

xii
Typographic Conventions
Typographic Conventions in Text
Convention Element Example
Bold italic Glossary term (if The algorithm inserts the new key.
there is a glossary)
Caps and Buttons, Click the Executable button.
lowercase check boxes, Select the Can’t Delete Card check box.
triggers, Assign a When-Validate-Item trigger to the ORD block.
windows Open the Master Schedule window.
Courier new, Code output, Code output: debug.set (‘I”, 300);
case sensitive directory names, Directory: bin (DOS), $FMHOME (UNIX)
(default is filenames, Filename: Locate the init.ora file.
lowercase) passwords, Password: User tiger as your password.
pathnames, Pathname: Open c:\my_docs\projects
URLs, URL: Go to http://www.oracle.com
user input,
User input: Enter 300
usernames
Username: Log on as scott
Initial cap Graphics labels Customer address (but Oracle Payables)
(unless the term is a
Italic
proper noun)
Emphasized words Do not save changes to the database.
m y
and phrases,
titles of books and
For further information, see Oracle7 Server SQL Language
Reference Manual.
d e
courses,
variables
Enter user_id@us.oracle.com, where user_id is the
name of the user.
ca
Quotation
marks
Interface elements
with long names A
Select “Include a reusable module component” and click Finish.
e
that have only
initial caps;
c l
This subject is covered in Unit II, Lesson 3, “Working with
Objects.”
lesson and chapter
titles in cross-
r a
Uppercase
references
SQL column O lyUse the SELECT command to view information stored in the
names, commands,
l
functions, schemas,& On LAST_NAME
column of the EMP table.
table names
n a e
Arrow
Brackets
Commas
Menu paths
Key names
t e r
Key sequences
U s Select File > Save.
Press [Enter].
Press and release keys one at a time:
Plus signs I n
Key combinations
[Alternate], [F], [D]
Press and hold these keys simultaneously: [Ctrl]+[Alt]+[Del]
c l e
r a
O

xiii
Typographic Conventions in Code
Convention Element Example
Caps and Oracle Forms When-Validate-Item
lowercase triggers
Lowercase Column names, SELECT last_name
table names FROM s_emp;
Passwords DROP USER scott

IDENTIFIED BY tiger;
PL/SQL objects OG_ACTIVATE_LAYER
(OG_GET_LAYER (‘prod_pie_layer’))
Lowercase Syntax variables CREATE ROLE role

italic
Uppercase SQL commands and SELECT userid
functions FROM emp;
Typographic Conventions in Oracle Application Navigation Paths

This course uses simplified navigation paths, such as the following example, to direct you
through Oracle Applications.
(N) Invoice > Entry > Invoice Batches Summary (M) Query > Find (B) Approve
m y
This simplified path translates to the following:
d e
1. (N) From the Navigator window, select Invoice then Entry then Invoice Batches
Summary. ca
e A
2.
c l
(M) From the menu, select Query then Find.
3. (B) Click the Approve button.

r a
Notations:
O ly
(N) = Navigator
l & On
(M) = Menu
n a e
(T) = Tab
t e r U s
(B) = Button
I n
l e
(I) = Icon
c
r a (H) = Hyperlink
O (ST) = Sub Tab

xiv
Typographical Conventions in Oracle Application Help System Paths
This course uses a “navigation path” convention to represent actions you perform to find
pertinent information in the Oracle Applications Help System.
The following help navigation path, for example—
(Help) General Ledger > Journals > Enter Journals
—represents the following sequence of actions:
1. In the navigation frame of the help system window, expand the General Ledger entry.
2. Under the General Ledger entry, expand Journals.
3. Under Journals, select Enter Journals.
4. Review the Enter Journals topic that appears in the document frame of the help system
window.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

xv
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

xvi
Overview of Cost
Management
Chapter 1
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Overview of Cost Management

Chapter 1 - Page 1
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 1 - Page 2
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 1 - Page 3
Course Objectives
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 1 - Page 4
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 1 - Page 5
Product Overview
m y
d e
ca
Product Overview
e A
Using this tool you can:
c l
r a
• Value inventory and work in process on a perpetual basis
O ly
• Choose a perpetual costing method, including standard costing, average costing, and
FIFO/LIFO for each organization
& On
• Simulate, analyze and forecast product costs
l
n a e
• Easily update and manage item unit costs
• Define the inventory structure and cost controls that are important to your business
e r s
• View and report item costs, inventory and work in progress values, accounting entries and
gross margins
t U
I n
• Close periods quickly and easily
c l e
• Automatically transfer inventory and work in progress transactions to your general ledger
• Choose costing methods that include Standard costing, Average costing, and Periodic
r a Incremental LIFO costing
O

Chapter 1 - Page 6
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 1 - Page 7
Role of Cost Management
m y
d e
ca
Role of Cost Management
e A
Operational control:
c l
• Establish product costs
r a
• Control and value inventory
• Formulate budgets and plans O ly
Analysis:
l & On
• Analyze profitability
n a e
t e
• Forecast profitabilityr
• Generate management reports
U s
I n
c l e
r a
O

Chapter 1 - Page 8
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 1 - Page 9
Product Costing
m y
d e
ca
Product Costing methods
e A
Standard costing
c l
r a
• Standard costing uses predefined costs that are fixed for a specified period of time.
O ly
• Use standard costing for performance measurement and control.
• Define component costs (material costs) using the projected average acquisition costs and
& On
associated indirect costs (material overhead) over the specified period of time.
l
n a e
• Roll up assembly costs using bills of material and routings:
- Use bills of material to determine the component cost of an assembly.
e r s
- Use routings to apply both internal (resource) and external (outside processing)
t U
conversion costs as well as indirect costs (overhead) to assemblies.
Average costing
I n
c l e
There are two types of average costing
• Moving-average costing
r a
• Periodic costing
O Moving-average costing

Chapter 1 - Page 10
This method uses the transaction cost to derive item costs
• As you receive items into inventory, you re-weigh the average unit cost with the
transaction value.
• In certain instances, you also re-weigh the average unit cost when you issue from
inventory.
• Average costing perpetually values inventory using a costing method based on actual
costs, holding inventory at a weighted average cost.
• At any point in time, the average cost of an item is the cumulative value of all transactions
divided by the cumulative transaction quantity for an item.
Periodic costing
This method values inventory on a periodic basis. There are three principal objectives of
periodic costing
• To capture actual acquisition costs based on supplier invoiced amounts plus other direct
procurement charges required by national legislation or company policy
• To capture actual transaction costs using fully absorbed resource and overhead rates
• To average inventory costs over a prescribed period, rather than on a transactional basis
There are two types of periodic costing
• Periodic Average costing
• Periodic Incremental LIFO costing
FIFO/LIFO costing
• There are two types of perpetual costing methods based on actual costs
m y
- FIFO (First In, First Out)
d e
- LIFO (Last In, First Out)
ca
• These methods are also referred to as layer costing. A perpetual costing method is selected
e A
for each inventory organization including Standard costing, Average costing, FIFO
costing, or LIFO costing. Inventory balances and values are updated perpetually after
l
costing of each transaction is sequentially completed.
c
units used.
r a
• FIFO costing is based on the assumption that the first inventory units acquired are the first
O ly
• LIFO costing is based on the assumption that the last inventory units acquired are the first
units used.
l & On
Layer costing methods are additional costing methods to complement the Standard and
a e
Weighted Average costing methods.
n
Periodic Average costing
t e r s
Periodic average costing establishes costs on a per-item and per-period basis, using the derived
U
I n
cost and final balance as the beginning balance of the next period.
• You can use periodic average costing to cost one or more organizations on a periodic
l e
basis. This cost is based on invoice price, when available.
c
• You can match additional invoiced charges, such as freight, customs, or insurance, to the
r a material receipts.
• For manufactured items, periodic average costing values inventory by including full
O absorption of resource and overhead costs.

Chapter 1 - Page 11
Periodic Incremental LIFO costing
Periodic Incremental LIFO costing values inventory by assuming that the most recently
received item (last in) is the first to be used or sold (first out), but there is no necessary
relationship to the physical movement of specific items.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 1 - Page 12
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 1 - Page 13
Inventory Control and Valuation
m y
d e
ca
Inventory Control and Valuation
e A
Inventory control
c l
r a
You can use cost management to verify the accuracy of on-hand balances by reviewing and
auditing the physical inventory and cycle-count programs performed by materials management.
O ly
Additionally, you can use cost management for reviewing policies and procedures related to
Inventory Valuation
l & On
accessing and acquiring inventory.
a e
Inventory valuation reflects the result of inventory controls (on-hand quantities), product costs
n
t e r
capitalizes its variances.
U s
(unit costs), and potentially the analysis of variances. Every company does not necessarily
I n
c l e
r a
O

Chapter 1 - Page 14
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 1 - Page 15
Profit Analysis
m y
d e
ca
Profit Analysis
e A
Margin Analysis reports
c l
r a
• You can use cost management to determine profitability by analyzing costs associated
with revenue-generating activities.
O ly
• Use the Margin Analysis Reports to report sales revenue, cost of goods sold, and gross
l & On
margin information for each item shipped/invoiced within the specified date range.
• You can print reports in summary and in detail.
n a e
• The costing method of the organization is independent of margin analysis reporting and
t e r
Gross Margin vs. Gross Profit
U s
does not affect the procedure to run margin analysis reports.
I n
• Generally, direct cost of goods sold is shipped inventory valued at one of the costing
methods.
l e
Gross Margin = Revenue – Direct Cost of Goods Sold
c
r a
• Other cost of sales includes manufacturing variances, freight and duty, royalty, warranty
and other indirect costs.
O Gross Profit = Gross Margin – Other Cost of Goods Sold

Chapter 1 - Page 16
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 1 - Page 17
Management Reporting
m y
d e
ca
Management Reporting
e A
Profitability reporting
c l
• Gross margin or gross profit
r a
• Product-line profitability
• Pricing reviews O ly
• Variance analysis
l & On
• Overhead absorption
n a e
t e r
• Purchase price variance and invoice price variance
s
• Manufacturing variances and scrap
U
I n
Operational reporting
• Inventory balances
l e
• Excess and obsolete inventory
c
• Comparisons of actual production to planned levels
r a
• Input/output analysis
O

Chapter 1 - Page 18
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 1 - Page 19
Budgeting and Planning
m y
d e
ca
Budgeting and Planning
e A
Budgeting
c l
• Departmental operating budgets
r a
• Indirect production expenses
• Cash forecasting for inventory O ly
Planning Production
l & On
a e
• Use revenue forecast to determine required production levels.
n
t e r
• Factor in desired inventory levels to modify production level.
s
• Determine standard resource and overhead rates using planned production levels.
U
I n
• Set standard costs for the period.
Forecasting Profitability
l e
• Forecast cost of goods sold (multiply forecast unit sales of an item by the pending
c
standard cost).
r a
• Forecast gross margin (revenue forecast less the cost of goods sold forecast).
O

Chapter 1 - Page 20
• Forecast variances and indirect production expenses (the difference between budgeted
spending and planned production value).
• Forecast gross profit (forecast gross margin minus forecast variances and indirect
production costs).
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 1 - Page 21
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 1 - Page 22
Cost Management Business Flow
m y
d e
ca
e A
c l
• In Oracle Order Management, you enter customer orders and shipments.
r a
• In Oracle Receivables, you enter product sales information.
O ly
• In Oracle Purchasing, you open purchase orders, establish purchase order unit prices,
receive material, and handle outside processing charges.
l & On
• In Oracle Bills of Material/Oracle Engineering, you create product structures, routings,
resources, standard operations, and departments used in product costing.
n a e
• In Oracle Inventory, you define the organizational structure/cost environment where you
t e r U
standard or average costing. s
process material transactions and maintain perpetual inventory values using either
I n
• In Oracle WIP, you enter WIP transactions and maintain perpetual WIP inventory values
using either standard or average costing.
l e
• In Accounts Payable, you pay actual invoice unit prices on purchase order fulfillment.
c
r a
• In Payroll, you set up employees that work in your organization.
O

Chapter 1 - Page 23
• In Oracle Cost Management, you cost products, value inventory in stores and in work-in-
process, and run simulation reports to analyze costs and profits. You pass cost information
to many applications and transfer accounting activity to your general ledger at any time.
Application-Information Business Flow
• Order Management: Orders and shipments
• Receivables: Product sales
• Purchasing: Purchase orders, prices, receipts, and outside processing
• Bills of Material/Engineering: Product structures, routings, resources, standard operations,
and departments
• Inventory: Organization structure, cost environment transactions, inventory valuation at
standard or at average
• WIP: Transactions, WIP valuation at standard or at average
• Accounts Payable: Actual invoice unit prices on purchase order fulfillment
• Payroll: Employees
• Cost Management: Product costs, valuation of stores and work-in-process, simulation
reports to analyze costs and profits, cost information passed to many applications,
accounting activity transferred to the general ledger at any time
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 1 - Page 24
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 1 - Page 25
Oracle Cost Management Integration
m y
d e
ca
Integrated Application Suite
e A
c l
• Together, all Oracle Manufacturing and Oracle Financials comprise an integrated suite of
transactions. r a
business applications that provide accurate financial analysis and reporting of cost
O ly
• Oracle Cost Management is a sophisticated product costing, inventory valuation, WIP
l & On
valuation, and margin analysis tool that you can use to control, manage, and analyze the
profitability of your business.
a e
• Oracle Cost Management is fully integrated with other Oracle applications and provides a
n
t e r
comprehensive cost accounting solution to your business needs.
U s
Oracle Cost Management supports flexible inventory costing with advanced options. You can
I n
• Maintain perpetual inventory values using either standard or average costing.
• Maintain, edit, and change your costs at any time.
l e
• Process material transactions or move inventory, and accounting entries are automatically
c
created.
r a• Automatically interface inventory and WIP transactions with your general ledger.
O • Transfer accounting activity to your general ledger at any time.

Chapter 1 - Page 26
Application-Function Integration
• Manufacturing and Financials
- Integrated suite of business applications.
- Provide accurate financial analysis and reporting of cost transactions
• Cost Management
- Product costing, inventory valuation, WIP valuation, margin analysis.
- Use to control, manage and analyze the profitability of your business.
- Perform flexible inventory costing
- Maintain perpetual inventory values at standard or average
- Maintain, edit, and change costs at any time
- Process material transactions or move inventory, and generate accounting entries
automatically
- Automatically interface inventory and WIP transactions with the general ledger
- Transfer accounting activity to the general ledger at any time
- Supports costing for Oracle Flow Manufacturing at standard or average
- Supports costing for Oracle Project Manufacturing
- Cost all project related manufacturing transactions
- Capture manufacturing costs by project or by project and task and transfer them to
Oracle Projects
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 1 - Page 27
Summary
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 1 - Page 28
Overview of Setup and
Implementation of Cost
Management
m y
Chapter 2
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Overview of Setup and Implementation of Cost Management

Chapter 2 - Page 1
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 2 - Page 2
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 2 - Page 3
Objectives
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 2 - Page 4
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 2 - Page 5
Overview
m y
d e
ca
Overview
e A
c l
Setting Up System Controls for Oracle Cost Management
r a
• Inventory organization controls and cost control level
• Costing method
• General ledger transfer option O ly
l & On
• Organization-level default and system accounts
a e
• Interorganization transfer information
n
t e r
• Subinventory accounts and controls
• Receiving options and controls
U s
• Units of measure
I n
• Categories for product-line costing
l e
• Account aliases
c
• Cost security profiles
r a
Setting Up WIP Controls for Oracle Cost Management
O • WIP parameters

Chapter 2 - Page 6
• Default WIP accounting classes
• Recognition of repetitive variances and scrap account required
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 2 - Page 7
m y
d e
ca
Integrated Business Application Suite
e A
c l
Oracle Manufacturing and Financial Applications comprise an integrated suite of business
applications.
r a
Oracle Cost Management (OCM) provides financial analysis and reporting of cost transactions.
O ly
In OCM, you cost products, value inventory in stores and in work-in-process, and run
l & On
simulation reports to analyze costs and profits. You pass cost information to many applications
and transfer accounting activity to your general ledger at any time.
a e
In Oracle Bills of Material/Oracle Engineering, you create product structures, routings,
n
e r
resources, standard operations, and departments used in product costing. In Oracle Inventory,
s
you define the organizational structure/cost environment where you process material
t U
transactions and maintain perpetual inventory values using either standard or average costing.
I n
In Oracle WIP, you enter WIP transactions and maintain perceptual WIP inventory values
c l e
In Order Management, you enter customer orders and shipments. In Oracle Receivables, you
r a
enter product sales information. In Oracle Purchasing, you open purchase orders, establish
purchase order unit prices, receive material, and handle outside processing charges. In
O Accounts Payable, you pay actual invoice unit prices on purchases.

Chapter 2 - Page 8
Integration
m y
d e
ca
Integration
e A
Oracle Inventory Integration
c l
r a
• Oracle Cost Management values material transactions that are processed in Oracle
Inventory.
Oracle Work in Process Integration O ly
l & On
• Oracle Cost Management values resource, overhead, and outside processing transactions
that are processed in Oracle Work in Process.
n a e
t e r U s
I n
c l e
r a
O

Chapter 2 - Page 9
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 2 - Page 10
Describing General Ledger
Cost Controls
Chapter 3
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Describing General Ledger Cost Controls

Chapter 3 - Page 1
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 2
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 3
Objectives
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 4
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 5
Overview of Fiscal Period and Controls for Oracle Inventory
m y
d e
ca
Setting Up Fiscal Period and Inventory Controls
e A
c l
• Functional currency and currency controls
• General ledger chart of accounts
r a
• Accounting periods
• Exchange rates O ly
• Set of books
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 6
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 7
Functional Currency and Currency Controls
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 8
Methods of Functional Currency and Currency Controls
m y
d e
ca
Functional Currency and Currency Controls
e A
Precision
c l
r a
• Decimal precision: When you define your functional currency, you control the decimal
precision for your accounting entries and for your unit cost information
O ly
• Standard precision: Standard precision sets the number of decimal places for accounting
transactions
l & On
• Extended precision: Extended precision sets the number of decimal places for the
following,
n a e
- Unit costs
t e r U s
- Stored values in the database
I n
- All cost processes, reports and inquiries
c l e
Financial products and Purchasing do not use extended precision. However, Oracle Cost
Management does use extended precision. For example, if you enter a material cost of
r a 1.123456 on the Item Cost window and the extended precision is set to 5, the material
cost is rounded to 1.12346. The extended precision must be greater than or equal to
O the standard precision.

Chapter 3 - Page 9
Minimum Accountable Unit
• The minimum accountable unit sets the rounding level for your accounting transactions
and determines the level of interest in accounting entries. If you leave the Minimum
Accountable Unit field blank, all accounting passes to GL at the standard precision. You
can leave this field blank.
• For example, if you want your accounting transaction to round to the nearest whole unit
of your functional currency, you enter 1.00.
- Transactions with a value of less than .5 do not generate any accounting transactions.
- Transactions with a value of greater than or equal to .5 are rounded up to 1.
Predefined Currencies
• All International Standards Organization (ISO) currencies have been predefined in Oracle
Applications. You must enable all currencies that you want to use when entering currency
values.
Enabling Currencies or Defining Non-ISO Currencies
• Use the Currencies window to enter Currencies.
• Manufacturing and Distribution Manager Responsibility
(N) CST Setup > Financials > Currencies > Currencies General Ledger, Vision
Operations (USA) Responsibility (N) GL Setup > Currencies > Define
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 10
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 11
General Ledger Chart of Accounts
m y
d e
ca
General Ledger Chart of Accounts
e A
c l
Oracle Cost Management uses the chart of accounts defined in Oracle General Ledger. If you
Oracle Cost Management r a

do not use Oracle General Ledger, you define your chart of accounts in Oracle Inventory or in
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 12
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 13
Accounting Periods
m y
d e
ca
Accounting Periods
e A
c l
Oracle Cost Management used the same accounting periods as Oracle General Ledger. If you
Management. r a
do not use Oracle General Ledger, you define your periods in Oracle Inventory or Oracle Cost
Period types O ly
l & On
Define period types before defining an accounting calendar. Period types control the number of
accounting periods per fiscal year. For example, a period type of month has 12 accounting
a e
periods per year. Predefined period types include month, quarter, and year.
n
Adjusting periods
t e r U s
• Adjusting periods are usually for special manual General Ledger closing entries only. An
I n
example is the thirteenth period for posting year-end audit adjustments.
• Adjusting periods may overlap other accounting periods. Non-adjusting periods must not
l e
overlap other periods of the same type. They should run in succession with no gaps
c
between periods.
r a
• Feeder systems, such as Oracle Inventory, Oracle Purchasing, and Oracle Work in
Process, never use adjusting periods.
O

Chapter 3 - Page 14
Accounting Calendar
m y
d e
ca
Accounting Calendar
e A
c l
Use the accounting calendar to enter: Periods
r a
Manufacturing and Distribution Manager Responsibility
O ly
(N) CST Setup > Financials > Accounting Calendar > Accounting
(N) INV Setup > Financials > Accounting Calendar > Accounting
l & On
General Ledger, Vision Operations (USA) Responsibility
a e
(N) GL Setup > Financials > Calendar > Accounting
n
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 15
Open Accounting Periods
m y
d e
ca
Open Accounting Periods
e A
c l
An accounting period must be open for you to complete a transaction; that is, the transaction
period. r a
date that you enter must fall within the beginning and ending dates that you define for the
• Multiple open periods O ly

l & On
You can have multiple open periods, and each period has a separate open/close status.
You can open only the accounting periods associated with your set of books. Even
a e
though the calendar and periods are shared with GL, you open and close periods in
n
sequentially.
t e r
Inventory separate from GL. In Inventory, periods must be opened or closed
U s
• Transaction Dates
I n
The transaction date that you enter must fall within the beginning and ending dates that
c l e
you define for the open period. You cannot enter a transaction date for a closed
period. You cannot forward date a transaction with a future date.
r a
• Use the Inventory Accounting Periods window to open, Periods
O

Chapter 3 - Page 16
(N) CST Accounting Close Cycle > Inventory Accounting Periods
(N) INV Accounting Close Cycle > Inventory Accounting Periods
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 17
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 18
Exchange Rates
m y
d e
ca
Exchange Rates: Daily Versus Period
e A
c l
• Maintain daily exchange rates for foreign currency conversion. When you perform a
r a
transaction in a currency other than your functional currency, the rate that you define is
used in converting the amounts on the transactions into the functional currency.
O ly
• Use period rates for running reports on inventory, work in process, and margin analysis in
l & On
different currencies. When you run reports in a currency other than your functional
currency, the rate that you specify is used in converting the amounts.
Types of Exchange Rates
n a e
t e r U s
• Spot: You enter the spot exchange rate to perform conversion based on the rate on a
specific date. The exchange rate applies to the immediate delivery of a currency.
I n
• Corporate: You define a corporate exchange rate to standardize rates for your company.
The corporate exchange rate is generally a standard market rate determined by senior
l e
financial management for use throughout the organization.
c
• User: You specify a user exchange rate when you enter a foreign currency that does not
r a have a daily exchange rate.

Daily rates
O

Chapter 3 - Page 19
• Use the Daily Rates window to enter, Daily rates
• Manufacturing and Distribution Manager Responsibility,
(N) CST Setup > Financials > Currencies > Daily Rates
(N) GL Setup > Currencies > Rates > Daily
Period rates
• Use the Period Rates window to enter, Period rates
(N) CST Setup > Financials > Currencies > Period Rates
(N) GL Setup > Currencies > Rates > Period
Personal Profiles
• Choose the type of rate to use for your direct inter-organization transfers. Use the Personal
Profiles Values window to enter type of rate.
(N) CST Setup > Profiles
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 20
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 21
Set of Books
m y
d e
ca
Set of Books
e A
Define a set of books
c l
r a
• Define a set of books by defining and grouping an accounting flexfield structure, an
accounting calendar, and a currency.
O ly
- Define a chart of accounts with proprietary accounts to record asset, liability, owners’
l & On
equity, revenue, and expense transactions.
- Define an accounting calendar that has the sequence and duration of accounting
periods.
n a e
t e r U s
- Select a functional currency, or base currency, for each set of books.
• If inter-company balancing is allowed, Journal Import automatically balances your
I n
inventory and work-in-process entries by balancing account segments and by creating a
balancing entry in Oracle General Ledger.
l e
• Every inventory organization needs a set of books, which may be shared by many
c
organizations.
r a
• Use the Set of Books window to enter, A Set of Books
O • Manufacturing and Distribution Manager Responsibility

Chapter 3 - Page 22
(N) CST Setup > Financials > Books
(N) INV Setup > Financials > Books
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 23
Inter-organization Transfers with Multiple SOBs
m y
d e
ca
e
Inter-organization Transfers with Multiple Set of Books
A
c l
• The inter-organization direct transfer supports transfers from any set of books, even if the
r a
currency is different, as long as the chart of accounts is the same. However, you cannot
use the in-transit inter-organization transfer or internal requisition. These transactions use
O ly
receiving functionality from Oracle Purchasing, and Purchasing supports only one set of
books at a time.
l & On
• To perform an in-transit inter-organization transfer from one set of books to another, you
transfer.
n a e
need to perform a combination of two transactions: a direct transfer and an in-transit
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 24
Customization of Set of Books
m y
d e
ca
Customization of Set of Books
e A
c l
Customization is required to perform transfers across installations.
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 25
Summary
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 3 - Page 26
Describing Organizational
Cost Controls
Chapter 4
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Describing Organizational Cost Controls

Chapter 4 - Page 1
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 2
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 3
Objectives
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 4
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 5
Overview
m y
d e
ca
Setting Up System Controls for Costing
e A
Overview
c l
• Inventory organization controls
r a
• Cost control level
• Costing method O ly
• General ledger transfer option
l & On
a e
• Organization-level default and system accounts
n
t e r
• Inter-organization transfer information
U s
I n
c l e
r a
O

Chapter 4 - Page 6
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 7
Inventory Organization Controls
m y
d e
ca
Inventory Organization Controls
e A
c l
Use the Organization window to assign the set of books to your inventory organization
r a
O ly
(N) Inventory > Setup > Organizations > Organization
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 8
Multi-Organization Access Control (MOAC)
m y
d e
ca
Multi-Organization Access Control (MOAC)
e A
c l
You can access multiple operating units within a single responsibility, letting you to enter and
r a
inquire on transactions for different operating units.
Multi-Organization Access Control architecture lets you process business transactions and
O ly
generate reports on data that spans all of the operating units of the enterprise from within a
single application responsibility.
l & On
Use the profile option MO: Security Profile to associate a predefined security profile to a user
a e
responsibility and attach the operating units that a responsibility should have access to. You
n
t e
to a specific responsibility.r
can select any operating unit from the list of values which is based on the security profile tied
U s
I n
You can also set up a default operating unit value. Use the profile option MO: Default
Operating Unit to define the default operating unit. You can set this profile option at the
c l e
responsibility and user levels. The operating unit that you define in this profile option must be
a valid value within your security profile. Setting this option is useful when you process
r a
transactions in multiple operating units, but the majority of transactions are within one
operating unit. An operating unit value also defaults when a user security profile contains
O access to one operating unit only.

Chapter 4 - Page 9
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 10
Cost Control Level
m y
d e
ca
Cost Control Level
e A
c l
The item cost attribute control level is determined by the costing organization that you enter in
r a
the costing tab of the organization parameters window. If the name of the organization is
entered (i.e. Seattle Mfg for Seattle Mfg), then all item cost attributes are controlled at the
O ly
functional organization level. If the name of the master organization is entered (i.e. Vision
organization level.
l & On
Operations for Seattle Mfg), then all item cost attributes are controlled at the master
a e
• Set the cost organization level by choosing it in Organization Parameters.
n
t e r
• If you enter the master organization as the costing organization, then all costs are stored in
s
the master organization and none in the functional organization.
U
organization.
I n
• If you enter the functional organization, then all costs will be stored within that
c l e
r a
O

Chapter 4 - Page 11
Cost Control Level
m y
d e
ca
Changing Cost Control Level
e A
c l
It is possible to change the control level for item attributes Costing Enabled and Inventory
with extreme caution. r a

Asset. Because this is a difficult and dangerous procedure, it is recommended that you proceed
O ly
To be shared, the costs in your organization have to equal the costs in the new cost
one organization to another.

l & On
organization. Use the mass edit “item costs across organizations” to copy your item costs from
a e
After you perform a standard cost update, the frozen costs are the same and you can change the
n
costing organization.
Accounts
t e r U s
I n
• The Sales Account is an Invoicing attribute.
• The Expense Account is a Purchasing attribute.
c l e
r a
O

Chapter 4 - Page 12
Cost Control Parameters
m y
d e
ca
Attribute Names
e A
Costing Enabled
c l
r a
• Checked means the item may have undergone costing and is visible on all reports and
inquiries.
O ly
• Unchecked means the item is not used for any costing purpose. It does not appear on any
- Inventory Value report l & On

cost inquiry or report, including the following:
- Item Cost reports

n a e
- Item Cost inquiries
t e r U s
• You cannot change this item attribute if there is a quantity on hand.
Inventory Asset Value
I n
c l e
• Checked means the item is an asset and can have a cost.
• Unchecked means the item is an inventory expense item and cannot have a cost.
r a
• Each item may have a different valuation status by cost type. Do not confuse inventory
expense items with expense destination types in Oracle Purchasing.
O Cost of Goods Sold Account

Chapter 4 - Page 13
• The profit and loss (income statement) account that defines the item’s default COGS
account.
Include in Rollup
• Checked means the item is included in the cost rollup for the parent assembly.
• Unchecked means the item is not included in the parent assembly’s cost.
• This control is defaulted to the bill of materials.
Standard Lot Size
• The standard lot size is used when calculating unit costs for sub-elements with a lot basis
type. Do not confuse the Costing Standard Lot Size with the Lead Time Lot Size. The
Lead Time Lot Size defaults from the Standard Lot Size, but they may be different.
Defining Item Attribute Controls
Use the Item Attribute Controls window to set:
• A control level for an attribute which applies to all items
• A status control option for each status attribute
• Manufacturing and Distribution Manager Responsibility: (N) INV Setup > Items >
Attribute Controls
If the control level is set to master organization, then use:
• The Master Item window to enter the attribute values for all organizations.
• Manufacturing and Distribution Manager Responsibility: (N) INV Items > Master Item >
(B) Find > OK > (T) Costing
If the costing organization is the functional organization, then use:
m y
• The Organization Item window to enter or update organization-level attribute values for
d e
items within the organization.
• Manufacturing and Distribution Manager Responsibility: (N) INV Items > Organization
ca
Item > (B) Find > OK > (T) Costing
e A
c l
Organization Parameters: Entering a Master Organization
r a
• Entering a Master Organization to Create the Organization Hierarchy
- Enter the master organization for your items in the Inventory Parameters tab.
O ly
- Oracle Inventory allows only a single-level master organization hierarchy. If you use
organization.
l & On
only a single organization, the master organization is the same as the current
n a e
• Use the Organization Parameters window to enter: A master organization
t e r U s
- (N) CST Setup > Account Assignments >
I n
Organization Parameters > (T) Inventory Parameters
l e
- (N) INV Setup > Organization > Parameters >
(T) Inventory Parameters
c
r a
Organization Parameters: Costing Information
Parameters
O

Chapter 4 - Page 14
• The costing organization displayed in the Costing Information tab of Organization
Parameters determines the control level of the costing attributes in the Item windows.
• When the master organization is displayed, all standard cost organizations use the costs
from the item master organization.
• When the current organization is displayed, all organizations maintain their own item
costs.
• Average cost organizations always maintain item costs at the organization level.
Use the Organization Parameters window to:
• View costing information
• Choose a costing method
• Enter a General Ledger Transfer Option
• Enter a default material sub-element for faster cost entry
• Enter default valuation accounts
• (N) CST Setup > Account Assignments > Organization Parameters > (T) Costing
Information
• (N) INV Setup > Organization > Parameters >
(T) Costing Information
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 15
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 16
Costing Method
m y
d e
ca
Costing Method
e A
Standard costing
c l
r a
• Values your inventory using predefined item costs that are fixed for a specified period of
time.
O ly
• Component costs (material costs) are defined using the projected average acquisition costs
l & On
and associated indirect costs (material overhead) over the specified period of time.
• Assembly costs are rolled up using bills of material and routings. Bills of material are used
a e
to determine the component cost of an assembly.
n
t e r U s
• Routings are used to apply both internal (resource) and external (outside processing)
Average costing
I n
• Values your inventory using weighted average item costs derived from transaction costs.
l e
• Component costs (material costs) are defined as you receive items into inventory, re-
c
r a weighting the average unit cost with the transaction value. In certain instances, you also
re-weight the average unit cost when you issue from inventory.
O • Assembly costs are a weighted average of the cost of all resources and material used.

Chapter 4 - Page 17
• Routings are used to apply both internal (resource) and external (outside processing)
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 18
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 19
General Ledger Transfer Options
m y
d e
ca
General Ledger Transfer Options
e A
Transfer Detail to GL
c l
r a
• This option governs how you transfer your inventory and work-in-process accounting
entries to the Oracle General Ledger interface table.
O ly
• If you do not select the Transfer Detail to GL check box, entries are summarized by
l & On
transfer date, GL batch, account, and journal category.
• If you select the Transfer Detail to GL check box, entries are not summarized and
transferred in detail.
n a e
GL.
t e r U s
• Transfer Detail to GL is not usually selected. Selecting it may produce too much detail in
I n
c l e
r a
O

Chapter 4 - Page 20
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 21
Organization-Level Default and System Accounts
m y
d e
ca
Speed Item Cost Entry
e A
Defining Default Material Sub-element
c l
r a
• For faster cost entry, define a default material sub-element in the Costing Information tab
in the Organization Parameters window. Oracle Inventory uses the default information in
O ly
the Item Costs window. You need enter only the sub-element amount and your item cost is
defined.
l & On
a e
Define your default valuation accounts
n
t e r U s
• Default Accounts: The valuation accounts and expense account are used as default
accounts when you define your sub-inventories.
I n
• Material Account: The material account is required for all organizations. Material costs
are the raw material component costs at the lowest level of the assembly.
l e
• For asset items, the material account is used as the default requisition account when you
c
create purchase requisitions from MRP, min-max, or organization-level reorder point
r a planning. When you receive the purchase order, however, you use the appropriate
valuation or expense account.
O

Chapter 4 - Page 22
• Outside Processing Account: Outside processing costs represent work performed by a
supplier on a discrete job or repetitive schedule.
• Material Overhead Account: Material overhead or burden costs are the costs required to
bring items into or out of inventory locations.
• Overhead Account: Overhead costs are resource or department overhead.
• Resource Account: Resource costs are direct service costs required to manufacture
products.
• Expense Account: Used to record the value of items issued to a non-tracked and/or
expense sub-inventory.
Define your default receiving, profit and loss, and average cost accounts
• Purchase Price Variance (PPV) Account: PPV is calculated only for inventory purchases
(destination type equals inventory). PPV is used only with standard costing and is
recognized as a period expense on your income statement. PPV = (PO Price – Standard
Cost) * Quantity Received
• Invoice Currency Variance: You set up the invoice currency variance accounts in the
Oracle Payables Financials Options window, Accounting option, Exchange Rate Gains
and Losses fields.
• Invoice Currency Variance = (Invoice Exchange Rate – PO Exchange Rate) * Quantity
Invoiced
• Invoice Price Variance (IPV) Account: Oracle Payables supports system-generated
accounting entries for invoice price variance, for both invoice currency variance and
invoice price variance.
m y
• Invoice Price Variance = (Invoice Price – PO Price in Functional Currency) * Quantity
Invoiced
d e
ca
IPV is calculated only for inventory purchases (destination type equals inventory). Flex-
the organization account as the source.

e A
builder creates the purchase order distribution invoice price variance account and uses
c l
• The Inventory AP Accrual Account: This account is the liability account for inventory
purchase order receipts that have not been matched in Payables.
r a
• Encumbrance Account: This account is used to record the reservation of funds at the time
O ly
you create purchase requisitions or approve purchase orders. Government agencies use
encumbrance accounting.
l & On
• Sales Account: When you define your items without a template, this account is defaulted
n a e
to the sales account of the item.
• Cost of Goods Sold Account: This account is defaulted to the item cost of goods sold
t e r U s
account if no template is used when defining the item.
• Cost Variance Account: If you use average costing and allow negative inventory balances,
I n
this account represents the cumulative errors caused by issuing inventory before
performing receipts. When your inventory balances are negative, the next transaction uses
l e
this account to balance the debits and credits until the on-hand balance is greater than zero.
c
Interorganization Information
r a
Default Accounts
O

Chapter 4 - Page 23
• Simplify your interorganization setup and specify default accounts in the Organization
Parameters window.
Interorganization Information
• These transfer charge options are defaults for your specific organization-to-organization
transfer parameters on the Shipping Networks window.
Interorganization Transfer Charge
• You may record intercompany profit and other transfer charges.
Default Accounts for the Shipping Organization
• Transfer credit: This account is credited for intercompany profit and other transfer
charges. It represents a reduction of expense.
• Receivable: This is an asset account that represents charges due from the receiving
organization. This account should balance to the interorganization payable account of the
receiving organization.
Default Accounts for the Receiving Organization
• Payable: This is a liability account that represents charges due to the shipping
organization. This account should balance to the interorganization receivable account of
the shipping organization.
• Purchase price variance (for standard cost organizations only): This is an expense account
used to record the difference between the standard cost or the receiving organization and
the standard or average cost of the sending organization.
Intransit Inventory
m y
• This asset account is used for intransit relationships only. When an average cost
organization owns the inventory, this account defaults from the material account of the
d e
organization.
Use the Organization Parameters window to enter:
ca
• Default inter-organization transfer charges
e A
c l
• Optional default inter-organization transfer accounts
r a
• (N) CST Setup > Account Assignments > Organization Parameters > (T) Inter-org
Information
O ly
• (N) INV Setup > Organization > Parameters > (T) Inter-org Information
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 24
Example: Average Costing and Sub-inventory
m y
d e
ca
Average Costing
e A
c l
If you use average costing, the material account at the organization level is always used for all
r a
inventory transactions and the GL inventory balance.
Average costs are maintained at the organization level, not the sub-inventory level; therefore,
O ly
all inventory flows in and out of a single material account.
l & On
If the sub-inventory accounts were used for posting, your GL account balances would not equal
your perpetual inventory as shown in the example on the previous page.
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 25
m y
d e
ca
e
A
• Other accounts
c l
r a
O ly
• (N) CST Setup > Account Assignments >
Organization Parameters > (T) Other Accounts
& On
• (N) INV Setup > Organization > Parameters > (T) Other Accounts
l
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 26
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 27
Interorganization Transfer Information
m y
d e
ca
Inter-organization Transfer Information
e A
Unique Relationship
c l
r a
• Define a relationship between organizations. Each relationship is unique to the From and
To organizations.
Transfer Type O ly
receiving organization. l & On
• Direct transfer means that items move directly from the shipping organization to the
n a e
• Intransit transfer means that items move to intransit inventory first.
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 28
Interorganization Transfer Information
m y
d e
ca
FOB
e A
FOB Point
c l
r a
• The FOB point is used for intransit inventory shipments and determines the ownership of
the intransit goods.
O ly
• A receipt FOB point indicates that the item belongs to the shipping organization until it is
received.
l & On
• A shipment FOB point indicates that the item belongs to the receiving organization as
soon as it is shipped.
n a e
Shipping Network
t e r U s
Interorganization Transfer Organization
I n
• These accounts default from the interorganization accounts that you defined for your
organization parameters.
l e
• The transfer credit and receivable accounts default from the shipping organization
c
r a parameters. The payable and purchase price variance accounts default from the receiving
organization parameters.
O

Chapter 4 - Page 29
• If FOB point is set to receipt, the intransit account defaults from the shipping organization
parameters. If FOB point is set to shipment, the intransit account defaults from the
receiving organization parameters.
• Use the Shipping Network window to enter:
- The From and To organizations and to see the unique relationship between them
- (N) CST Setup > Account Assignments > Shipping Network > (B) Open
- (N) INV Setup > Organizations > Shipping Network > (B) Open
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 30
Summary
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 31
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 4 - Page 32
Describing Financial Cost
Controls
Chapter 5
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Describing Financial Cost Controls

Chapter 5 - Page 1
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 2
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 3
Objectives
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 4
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 5
Overview
m y
d e
ca
Setting Up System Controls for Costing
e A
• Subinventory accounts and controls
c l
• Receiving options and controls
r a
• Units of measure
O ly
• Categories for product-line costing
• Account aliases
l & On
• Cost security profiles
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 6
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 7
Subinventory Accounts and Controls
m y
d e
ca
Subinventory Accounts and Controls
e A
Quantity Tracked
c l
r a
• Specify if you want to maintain quantity information for the subinventory. Typically, you
do not track onhand quantities for low-value items. If you do not want to track quantities,
O ly
do not select the check boxes for Quantity Tracked, Reservable, Nettable, Include in ATP,
and Asset Subinventory.
Asset Inventory
l & On
a e
• Specify if you want the value of asset items maintained in the subinventory to be carried
n
t e r U s
on your balance sheet as an asset. Non-asset subinventories are not valued. If an asset item
is transferred into an expense subinventory, its value is immediately charged to expense.
I n
Expense Tracked Subinventories
• You can use expense-tracked subinventories to expense items that you do not want to
l e
value in inventory but do want to track onhand quantities.
c
• You can receive various items into an expense subinventory, and over time the cost of the
r a items may change. Therefore, for most transactions, Oracle Inventory does not create any
accounting entries for movement out of expense-tracked subinventories.
O

Chapter 5 - Page 8
• You can use expense subinventories for replenishment subinventory and sales office
demonstration inventory and to hold consignment inventory owned by another company.
• For consignment inventory, you can create a PO for the item at zero price, receive into a
non-asset subinventory, and then do a miscellaneous issue to an expense account when
consumed.
Subinventory Valuation Accounts
• If you use different accounts for each cost element, you increase the number of accounting
entries.
• If you use the same account for each cost element, your accounting entries are combined
by account, and you minimize the number of accounting entries. For example, the same
miscellaneous receipt to Subinventory2 creates the following accounting entry:
Dr. 01-000-1300 270.00
Cr. 01-700-7100 270.00
• If you use different accounts for each cost element, you increase the number of accounting
entries. For example, you perform a miscellaneous receipt from an expense account (01-
700-7100) to Subinventory1. You receive a quantity of one. The elemental cost
breakdown of the item and accounting entries follow:
Material 100.00 Dr. 01-000-1400 100.00
Material overhead 10.00 Dr. 01-000-1401 10.00
Resource 50.00 Dr. 01-000-1402 50.00
Outside processing 10.00 Dr. 01-000-1404 10.00, Cr. 01-700-7100 270.00
m y
Default Valuation Accounts
• Oracle Inventory displays the accounts you defined in the Organization Parameters
d e
window as the default valuation accounts.
Encumbrance Account ca
• If you use encumbrance controls in Oracle Purchasing, the subinventory encumbrance
e A
Expense Account
c l
account is used by Purchasing for the purchase order distributions.
r a
• When you receive an asset item to an expense subinventory or an expense item to an asset
O ly
subinventory, the following hierarchy is used to determine the charge account:
- The subinventory expense account is charged, if one exists.
l & On
- If the subinventory does not have an expense account defined, the item expense
account is charged.
n a e
- If the item does not have an expense account, the organization-level expense account
is charged.
t e r U s
Use the Subinventories window to enter
I
• Subinventory namesn
l e
• Parameters
c
• Accounts
r a
Manufacturing and Distribution Manager Responsibility: (N) CST Setup > Account
Assignments > Subinventories > (B) New
O (N) INV Setup > Organizations > Subinventories > (B) New

Chapter 5 - Page 9
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 10
Receiving Options and Controls
m y
d e
ca
Receiving Options and Controls
e A
Accruals
c l
r a
An accrual is an accounting entry that is made to recognize liability for the value of items
received, but the invoice has not yet been matched and approved in AP.
Accrue Expense Items O ly
l & On
You may choose to accrue non-inventory expense items at period end or upon receipt. Most
commercial (non-government) installations accrue non-inventory expense items (expense
a e
destinations) at period end. Reasons to accrue at receipt include using encumbrances or
n
Accrue Inventory Items
t e r
budgetary control with encumbrances.
U s
I n
Inventory items are always accrued upon receipt.
Expense AP Accrual Account
l e
Enter the liability account to use as the offset account for noninventory expense items.
c
r a
Issues with Accruing Expense Items upon Receipt
• You have more entries to reconcile in your AP accrual accounts. You should reclassify the
O expense portion of your Receiving Inspection account balance at period end.

Chapter 5 - Page 11
• Use the Receiving Value Report by Destination Account to do this.
• Avoid this step by receiving all noninventory expense items as direct receipts.
Use the Purchasing Options window to enter:
• Accrual of noninventory expense items at period end or upon receipt
• Accrual of inventory items upon receipt
• Liability account
(N) CST Setup > Account Assignments > Purchasing Options > (T) Accrual
(N) PUR Setup > Purchasing > Purchasing Options > (T) Accrual
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 12
Noninventory Versus Inventory Items
m y
d e
ca
Noninventory Versus Inventory Items
e A
c l
With Oracle Purchasing, you can purchase items for noninventory items such as office supplies
r a
or capital equipment. These items use an expense destination type for the purchase order
distribution information. You can inspect these purchasing items in receiving, but you cannot
deliver these items into inventory.
O ly
l & On
If you accrue your expenses at time of receipt, all accounting entries for the receipt and
delivery of these expense items occur within Purchasing. Unless you use encumbrance
n a e
accounting, however, it is not recommended that you accrue expense purchases when you
receive. You normally accrue your expense receipts at month end, using the Receipt Accruals
e r s
process within Oracle Purchasing or Oracle Payables.
t U
You also have inventory expense items. These are items you can stock in a subinventory
I n
without any value. Examples include lubricants, consumables, and other types of free stock.
l e
Inventory expense items, like noninventory expense items, do not hold a unit cost in Oracle
Cost Management.
c
r a
Inventory expense items use an inventory destination type for the purchase order distribution
information. You can deliver these inventory expense items from Receiving into either expense
O or asset subinventories.

Chapter 5 - Page 13
You always accrue these types of inventory expense items when you receive. The Accrual
Reconciliation Report reconciles your perpetual accruals with the corresponding Oracle
Payables accounting entries.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 14
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 15
Units of Measure
m y
d e
ca
Units of Measure
e A
Costing Implications
c l
r a
• Item costs are based on the item’s primary unit of measure.
O ly
• Units of measure are used to define your resources on your routing steps.
• You can move or count items in units of measure other than their primary unit of measure.
& On
Oracle Inventory converts the transaction value to the primary unit of measure.
l
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 16
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 17
Categories for Product-Line Costing
m y
d e
ca
e A
Reporting
c l
r a
You can sort or select most inventory cost reports by category:
• Inventory Value Report
• Intransit Value Report O ly
• Receiving Value Report
l & On
a e
• Elemental Inventory Value Report
n
t e r
• Standard Cost Adjustment reports
• Transaction Distribution reports
U s
• Item Cost reportsI n
• Transaction Historical Summary
l e
Cost processes
c
All major cost processes use category as a selection criterion:
r a
• Cost Rollup
O • Cost Update

Chapter 5 - Page 18
• Mass Edits
• Copy Cost Type
Relationships
Each category can exist in many category sets. Each item can exist in many categories. Each
item/category/category set combination is unique.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 19
m y
d e
ca
Category sets
e A
c l
Use the Categories window to enter: Categories
r a
O ly
(N) CST Setup > Categories > Category codes
(N) INV Setup > Items > Categories > Category codes
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 20
m y
d e
ca
Categories
e A
Defining Category Accounts
c l
r a
• You can use the Category Accounts Summary window to define, query, and update
category valuation and expense accounts.
O ly
• If your current organization is a standard costing organization, you can define category
l & On
accounts at the category and optionally subinventory level.
• If your current organization is an average costing organization you must define category
a e
accounts at the cost group or category level.
n
t e r U s
• You can only define category accounts for categories that belong to the default category
set for the product line functional area.
I n
• Use the Category Accounts window to enter: Category accounts
l e
(N) CST Setup > Account Assignments > Category Accounts
c
r a
Defining Default Category Sets
• You have to define a default category set for each functional area. Oracle Inventory has
O seven predefined functional areas, including one for costing.

Chapter 5 - Page 21
• By defining categories by product line for the default costing category set, you can
associate your items with product lines.
• Oracle Inventory displays the default category sets throughout the appropriate application
as the default in the category set fields.
• Use the Default Category Sets window to:
Select the category set to use as the default for the functional area
(N) CST Setup > Categories > Default Category Sets
(N) INV Setup > Items > Categories > Default Category Sets
Group Categories into Category Sets
• When you enable an item in a functional area, the item is assigned to the default
(mandatory) category set of the functional area.
• You can override the default category of the category set. In addition, you can manually
assign your item to an unlimited number of category sets.
• You can assign an item to one category within each category set.
• Use the Category Sets window to:
- Enter category sets
- Assign items to categories
(N) CST Setup > Categories > Category Set
• Use the Category Assignment window to: m y
Assign an item to multiple categories
d e
(N) INV Items > Master Items > (B) Find > (M) Tools > Categories ca
Caution
e A
c l
The category accounts defined in this window are only used if product line accounting has
been set up and implemented. If product line accounting is implemented, then the category
r a
accounts, not the item subinventory accounts are used when transactions are entered.
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 22
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 23
Account Aliases
m y
d e
ca
Account Aliases
e A
c l
Account Alias is an easily recognizable name or label. You can view, report, and reserve
account number to refer to the account.r a

against an account alias. During a transaction, you can use the account alias instead of an
Avoiding Accounting Mistakes O ly

account number. Examples:
l & On
During miscellaneous issue and receipt transactions, you can use an account alias instead of an
• Scrap
n a e
• Engineering expense
Reporting
t e r U s
I n
You can request material distribution reports by account alias.
c l e
Use the Account Aliases window to enter: Account aliases
r a
(N) CST Setup > Account Assignments > Account Aliases
(N) INV Setup > Account Aliases
O

Chapter 5 - Page 24
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 25
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 26
Cost Security Profiles
m y
d e
ca
Cost Security Profiles
e A
Update System Profile Options Window
c l
• CST: Average Costing Option
r a
O ly
Use this profile to gain access to average costs if you use average costing.
• CST: Maintain Cost Privilege and CST: View Cost Privilege
l & On
The function security feature in AOL is used to control access to windows that change
n a e
or view item, resource, and overhead unit costs. For viewing, access to reports with
cost accounting data are controlled by user responsibility.
t e r U s
• CST: Cost Rollup—Wait for Table Locks
Use this profile to control whether the cost rollup waits for another user or program to
I n
free the information that needs to be modified by the cost rollup.
c l e
- No means the Cost Rollup errors out after ten attempts to access the information.
- Yes means the Cost Rollup waits until the desired information is available.
r a
• CST: Cost Update Debug Level
Use this profile to control the number of messages and the amount of debug information
O that the Cost Update program writes to the log file.

Chapter 5 - Page 27
Site-Level Profile for Exchange Rate Conversions
• CST: Exchange Rate Type
Use this profile to control the exchange rate type used for the Margin Analysis Report.
The two period rate choices are period average rate and period end rate.
When using a foreign currency for the Margin Analysis Report, you need to specify the
exchange rate type. For reporting P&L results, different countries use different
financial standards. For example, U.S. companies convert using the period average
rate, and Australian companies use the period end rate.
• Use the Update Systems Profiles Options window to:
Enter cost security profiles
• Use the Personal Profile Values window to:
View cost security profiles
(N) CST Setup > Profiles
(N) INV Setup > Profile > Personal
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 28
Summary
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 29
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 5 - Page 30
Describing WIP Cost
Controls
Chapter 6
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Describing WIP Cost Controls

Chapter 6 - Page 1
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 6 - Page 2
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 6 - Page 3
Objectives
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 6 - Page 4
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 6 - Page 5
Overview
m y
d e
ca
Overview of Setting Up WIP Controls for Costing
e A
Setting up WIP controls for costing
c l
• WIP parameters
r a
• Default WIP accounting classes
O ly
• Recognition of repetitive variances and scrap account required
WIP costing
l & On
your accounting balances.
n a e
• WIP valuation is maintained on a perpetual basis with job and schedule balances equal to
e r s
Job Costing versus Period-Based Costing
t U
Tracking Costs: You have two methods to track costs in WIP:
• Job costing
I n
l e
• Period-based costing
c
Job costing
r a
• Job costing is a method of collecting and reporting costs for each discrete job. This
O method includes costs in due to material, resource, and overhead transactions, and costs

Chapter 6 - Page 6
out due to completions, scrap, and variances. It is used for standard and nonstandard asset
discrete jobs.
Period-based costing
• Period-based costing is a method of collecting and reporting costs by period rather than by
some other method such as by discrete jobs. This method is used primarily in costing
repetitive schedules and nonstandard expense discrete (for example, prototype) jobs.
Differences
• Job costing maintains values across periods and recognizes variances at job close.
• Period-based costing zeros out value at the end of each period.
This-Level and Previous-Level Costing
Charges to Work in Process
• All charges to work in process are recorded as this-level or previous-level costs.
This-Level Costs = Routing Costs
• This-level costs are the costs incurred to convert the components into the finished
assembly. These costs are charged through resource, outside processing, and overhead
transactions.
• Standard this-level costs are the routing costs of the assembly. These costs are relieved
from work in process when an assembly is completed to inventory.
Previous-Level Costs = Bill of Material Costs
• Incurred previous-level costs (actual quantity at standard cost) represent the total cost of
the components issued, including the component’s resource, outside processing, and
m y
overhead cost elements.
d e
• Standard previous-level costs (standard quantity at standard cost) are the bill of material
cost of the assembly, including the component’s resource, outside processing, and
overhead cost elements. ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 6 - Page 7
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 6 - Page 8
WIP Parameters
m y
d e
ca
WIP Parameters
e A
Repetitive Variance Timing
c l
r a
• Work-in-process parameters determine when variances are recognized for repetitive
schedules.
O ly
• You choose when to recognize repetitive variances.
- All Schedules Option
l & On
• All Schedules Option
n a e
- Completed—No Charges/Cancelled Schedules Option
e r s
- This option zeros out the balances of all repetitive schedules at the end of a period. It
t U
expenses all value remaining in the schedule, including the cost of any assemblies
I n
that may be in process but not yet complete.
c l e
• Completed—No Charges/Cancelled Schedules Option
- This option recognizes variances for schedules with a status of Complete—No
r a Charges Allowed or Cancelled. It is identical to the method used for Discrete

Standard and Non-Standard asset jobs. It leaves total value in all other schedules,
O including any variances that may have occurred to date.

Chapter 6 - Page 9
Assembly Scrap Costing
• WIP parameters also determine when assembly scrap transactions are undergoing costing.
• You choose when to cost assembly scrap transactions:
- Require Scrap Account—Checked
- Require Scrap Account—Unchecked
• Require Scrap Account—Checked
- This option relieves discrete jobs and schedules for the value of scrapped assemblies.
You are required to enter a scrap account when you move an assembly into the Scrap
intra-operation step. This option provides the most visibility to your scrap
transactions.
• Require Scrap Account—Unchecked
- A scrap account is not required when you move an assembly into the Scrap intra-
operation step. The cost of the scrap remains in the job and is treated as a variance at
job close.
• Use the WIP Parameters window to enter when to:
- Recognize repetitive variances
- Cost assembly scrap transactions
- (N) WIP Setup > Parameters > (M) Repetitive
- (N) WIP Setup > Parameters > (M) Move Transaction
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 6 - Page 10
WIP Parameters: Repetitive Variance Timing
m y
d e
ca
e
Example of Recognize Period Variances using the All Schedules Option
A
c l
Assumptions: Scheduled to build 100 of Assy1 in period 1.
Item Op Std. Cost
r a
Assy1
Comp1 10
$40.00
$15.00 O ly
Comp2 20 $25.00
l & On
Transactions
n a e
t e r
• Complete 100 of Assy1 from Op10—Pulls 100 Comp1 at $15.00.
s
U
I n
• Issue additional Comp2—Quantity of 4 at $25.00.
• Complete 90 of Assy1 from Op30 to Finished Goods.
l e
• Close period 1—Zeros out balance of schedule.
c
• Complete 10 of Assy 1 from Op30 to Finished Goods.
r a
O

Chapter 6 - Page 11
WIP Parameters: Repetitive Variance Timing
m y
d e
ca
e
Example of Recognize Period Variances using the Completed—No
A
Charges/Cancelled Schedules Option
c l
Item Op Std. Cost
a
Assumptions: Scheduled to build 100 of Assy1 in period 1.
r
Assy1 $40.00 O ly
Comp1 10 $15.00
l & On
Comp2
Transactions
20 $25.00
n a e
e r s
• Complete 100 of Assy1 from Op10—Pulls 100
Comp1 at $15.00.
t U
I n
c l e
• Issue additional Comp2—Quantity of 4 at $25.00.
• Complete 90 of Assy1 from Op30 to Finished Goods.
r a
• Close period 1—No accounting entries because schedule is not complete.
O • Complete 10 of Assy 1 from Op30 to Finished Goods (Status=Complete)

Chapter 6 - Page 12
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 6 - Page 13
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 6 - Page 14
WIP Accounting Class
m y
d e
ca
Valuation and Variance Accounts
e A
WIP Accounting Class
c l
r a
• Each job must reference a WIP accounting class.
O ly
• Each WIP accounting class includes the elemental valuation and variance accounts you
use to cost production.
l & On
• Valuation accounts are charged when material is issued to, or when resources, outside
processing, or overhead is earned by, a job or schedule. They are also relieved when
a e
assemblies are completed from a job or schedule.
n
t e r U s
Separate Accounts Versus Grouping Cost Elements by Account
• All cost elements can be assigned the same account, or each cost element can be assigned
I n
a separate account. You can also group cost elements by using a combination of accounts.
• By grouping cost elements together, you reduce the number of accounting entries
l e
generated by each transaction, because the accounting entries are summarized by a unique
c
cost element account.
r a
Charges to Jobs and Schedules
O

Chapter 6 - Page 15
• All elemental accounts are charged when material is issued to a job or schedule,
depending on the elemental cost structure of the item being issued.
• The resource account is charged when resources are earned by jobs or schedules.
• The outside processing account is charged when outside processing resources are earned
by jobs or schedules.
• The overhead account is charged when overhead is earned by jobs or schedules.
Standard Relief from Jobs and Schedules
• All elemental accounts are relieved when assemblies are completed from a job or
schedule, depending on the elemental cost structure of the assembly.
• There are two types of variance accounts: the production variance accounts and the
standard cost variance account.
Production Variance Accounts
• For standard discrete or asset nonstandard jobs, the variance accounts are used to expense
the residual value when you close the job.
• For repetitive schedules, the variance accounts are used to expense the residual value
depending on your Recognize Period Variances parameter.
• All variances for previous level costs are recognized as material usage variance.
• All material overhead in work in process is a previous level cost.
• There is no material overhead variance account.
Standard Cost Variance Account
m
• The standard cost variance account is used as the offset account by the cost update when it
y
revalues standard discrete and asset nonstandard jobs.
d
• You cannot define a standard cost variance account for repetitive schedules and expense
e
nonstandard jobs because they are not revalued by the cost update.
ca
WIP accounting classes for each of the three types of discrete production
Standard Discrete
e A
• Use for your standard production.
c l
r a
• The net value of the job is carried across accounting periods.
• Recognize variances when the job status is changed to closed, no charges allowed.
O ly
• This-level material overhead is never charged into or relieved from the job but is earned as
Asset Nonstandard
l & On
part of the completion transaction.
n a e
• Use for nonstandard production, such as reworking or upgrading assemblies or prototype
production.
t e r U s
• The net value of the job is carried across accounting periods.
I n
• Recognize variances when the job status is changed to closed, no charges allowed.
l e
• This-level material overhead is relieved from the job when an assembly is completed from
a job. This-level material overhead is never earned as part of the completion transaction.
c
r a
Expense Nonstandard
• Use to expense the net value in the job when you close the period.
O

Chapter 6 - Page 16
• This-level material overhead is relieved from the job when an assembly is completed from
a job. This-level material overhead is never earned as part of the completion
Repetitive Assembly
• Use for your standard repetitive production lines.
• The net value of the schedule is either carried across accounting periods or it is charged to
the variance accounts when you close the period, depending on the Recognize Period
Variances parameter.
• This level material overhead is never charged into or relieved from the schedule but is
earned as part of the completion transaction.
Use the WIP Accounting Classes window to enter:
• Discrete WIP accounting classes
• Repetitive WIP accounting classes
• (N) CST Setup > Account Assignments > WIP Accounting Classes
• (N) WIP Setup > WIP Accounting Classes
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 6 - Page 17
Practice 1 - Setting Up The Default WIP Accounting Class
Overview
In this practice, you will:
• Create a Value Set for Item Categories
• Create a Category Code for WIP
• Create a WIP Accounting Class
• Define the Default WIP Accounting Class
Assumptions
• You must have access to an Oracle Application Vision database or comparable training
or test instance at your site on which to complete this practice.
• Students log in to Oracle with User Name mfg and Password welcome. Your instructor
might have a different User Name and Password for you to use.
• Each student should replace XX with a unique student identifier.

m y
Tasks
d e
Create a Value Set for Item Categories
ca
1. Enter the following in the Find Value Set window:
e A
− Name = ITEM CATEGORIES c l
− Select the Value Set indicator button
2. r a
Enter the following in the Segment Values window:
O ly
− Select the first line in the Values, Effective tab.
− Value = XX
l & On
− Select New from the File menu, or click the New icon on the toolbar.
− Translated Value = XX
n a e
t e r
− Description = XX Value
U s
n
Create a Category Code for WIP
I
3.
l e
Enter the following in the Categories window:
− Structure Name = Item Categories
c
r a − Category = XX.MISC
− Description = XX-CATEGORY FOR WIP
O

Chapter 6 - Page 18
Create a WIP Accounting Class
4. Enter the following in the WIP Accounting Classes window:

− Class = XX-WIP-ACC
− Description = XX-WIP ACCOUNTING CLASS
5. Select the Material Valuation field.
6. Press <Shift F5>. The application copies the valuation accounts from the Discrete Class.
7. Repeat for the remaining fields.
Define the Default WIP Accounting Class
8. Enter the following in the Default WIP Accounting Classes for Categories window:
− Category = XX.MISC
− Standard Discrete = XX-WIP-ACC
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 6 - Page 19
Solution – Setting Up The Default WIP Accounting Class
Create a Value Set for Item Categories
Responsibility = Manufacturing and Distribution Manager
1. Navigate to the Find Value Set window.
• (N) Cost > Setup > Flexfields > Key: Values
2. Enter the following:

− Select the Value Set indicator button
− Name = ITEM CATEGORIES
m y
d e
ca
e A
c l
r a
3. O ly
(B) Find. The Segment Values window appears.
l & On
n a e
− Select the first line in the Values, Effective tab.
− Value = XX
t e r U s
− Select New from the File menu, or click the New icon on the toolbar.
I n
− Translated Value = XX
− Description = XX Value
c l e
r a
O

Chapter 6 - Page 20
m y
5. Save your work.
d e
6. Close the windows.
ca
Create a Category Code for WIP
e A
7. Navigate to the Categories window.
c l
•
r a
(N) Cost > Setup > Categories > Category Codes (B) New

O ly
− Structure Name = Item Categories
l & On
a e
− Description = XX-CATEGORY FOR WIP
n
t e r U s
I n
c l e
r a
O

Chapter 6 - Page 21
9. Save your work.
10. Close the window.
Create a WIP Accounting Class
• (N) Cost > Setup > Account Assignments > WIP Accounting Classes
m y
Use M1 Seattle as your working Organization.
d e
11. Select Find from the View menu.
ca
12. Choose Discrete and click OK.
e A
c l
13. Select New from the File menu, or click (I) New on the toolbar.
14. Enter the following: r a

− Class = XX-WIP-ACC
O ly
& On
− Description = XX-WIP ACCOUNTING CLASS
l
a e
15. Select the Material Valuation field.
n
t e r U s
16. Press <Shift F5>. The application copies the valuation accounts from the Discrete Class.
n
17. Repeat for the remaining fields.
I
c l e
r a
O

Chapter 6 - Page 22
18. Save your work.
Define the Default WIP Accounting Class

m y
20. Navigate to the Default WIP Accounting Classes for Categories window.
d e
• (N) Cost > Setup > Account Assignments > Category Default WIP Classes (B) New
ca
e A
c l
− Standard Discrete = XX-WIP-ACC
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 6 - Page 23
22. Save your work.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 6 - Page 24
Work-in-Process Costing Differences
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 6 - Page 25
Summary
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 6 - Page 26
Summary of Implementing
and Setup for Cost
Management
m y
Chapter 7
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Summary of Implementing and Setup for Cost Management

Chapter 7 - Page 1
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 7 - Page 2
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 7 - Page 3
Objectives
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 7 - Page 4
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 7 - Page 5
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 7 - Page 6
Overview of Costing
Information
Chapter 8
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Overview of Costing Information

Chapter 8 - Page 1
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 8 - Page 2
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 8 - Page 3
Objectives
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 8 - Page 4
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 8 - Page 5
Overview
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 8 - Page 6
m y
d e
ca
Integrated Application Suite
e A
c l
All Oracle Manufacturing and Financial Applications comprise an integrated suite of business
applications.
r a
Oracle Cost Management (OCM) provides financial analysis and reporting of cost transactions.
O ly
In OCM, you cost products, value inventory in stores and in work-in-process, and run
l & On
simulation reports to analyze costs and profits. You pass cost information to many applications
and transfer accounting activity to your general ledger at any time.
a e
In Oracle Bills of Material/Oracle Engineering, you create product structures, routings,
n
e r
resources, standard operations, and departments used in product costing. In Oracle Inventory,
s
you define the organizational structure/cost environment where you process material
t U
transactions and maintain perpetual inventory values using either standard or average costing.
I n
In Oracle WIP, you enter WIP transactions and maintain perceptual WIP inventory values
c l e
In Oracle Order Management, you enter customer orders and shipments. In Oracle
r a
Receivables, you enter product sales information. In Oracle Purchasing, you open purchase
orders, establish purchase order unit prices, receive material, and handle outside processing
O

Chapter 8 - Page 7
charges. In Accounts Payable, you pay actual invoice unit prices on purchase order fulfillment.
In Payroll, you set up employees that work in your organization.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 8 - Page 8
Unit Integration
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 8 - Page 9
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 8 - Page 10
Defining Cost Types
Chapter 9
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 1
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 2
Defining Cost Types
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 3
Objectives
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 4
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 5
Overview
m y
d e
ca
Defining Cost Types
e A
Use the Cost Types window to enter:
c l
• Cost types
r a
O ly
• (N) CST Setup > Cost Types
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 6
Overview
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 7
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 8
Cost Types
m y
d e
ca
Unlimited Cost Types
e A
c l
OCM supports an unlimited number of cost types.
r a
• Cost types give you the ability to create unlimited sets of costs.
O ly
• Use cost types for simulation and budgeting purposes by creating unlimited sets of product
costs. Each cost type has its own items and specific cost controls for the items.
l & On
• Run item cost and comparison reports by cost type. Copy from one cost type to another,
and mass edit a cost type. Change the name of any cost type.
n a e
• Frozen, Average, and Pending cost types are seeded when you install; you can define as
many others as you wish.
Predefined Cost Types
t e r U s
Frozen Standard Costs
I n
l e
• This cost type is used to value transactions and inventory balances for organizations that
use standard costing. This cost type is not available for organizations using average
c
r a costing.
Average Costs
O
Defining Cost Types

Chapter 9 - Page 9
• This cost type is used to value transactions and inventory balances for organizations that
use average costing. This cost type is not available for organizations using standard
costing.
• User-Defined Cost Types
• Use all other cost types for any purpose: cost history, product cost simulation, or
development of future frozen costs. These costs are not implemented (not frozen) costs.
Transfer costs from all other cost types to update the Frozen cost type.
Available Cost Types
Cost types available for Standard Costing
• Under standard costing you can roll up costs and update costs from any cost type, except
the Average cost type.
Cost types available for Average Costing
• Under average costing you can use any cost type, except Frozen.
• Use the Average cost type for inventory valuation and transaction costing. The Average
cost type holds the current average unit cost of items onhand in inventory and is used to
value transactions such as issues and transfers out.
• In addition, in your inventory organization parameters, you designate one of your user-
defined cost types as your average rates cost type. Initially define resource and overhead
rates and material overhead rates/amounts in the average rates cost type. These rates will
be used to cost transactions from that point in time forward until you change or update
them.
• Update costs in the average cost type only by using the average cost update routine. A
m y
history is kept of all such update transactions.
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 10
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 11
Cost Type Controls for Inventory and Manufacturing
m y
d e
ca
e
Cost Type Controls for Inventory and Manufacturing
A
c l
For maximum flexibility, each cost type has its own set of cost controls.
r a
• Default Cost Type: Assign a default cost type to each cost type that you define. You can
have a cost type default to itself.
O ly
• In standard costing, the default cost type is the source of cost for items required by the
l & On
cost rollup where costs do not currently exist for the cost type being rolled up. If you
select to roll up Pending and the default cost type is Frozen, for items without a Pending
a e
cost, the Frozen costs will be used.
n
Analysis reports.
t e r U s
• The default cost type is also used for the Inventory Value, Receiving Value, and Margin
I n
Controls to Limit Access to Your Cost Information
• Select the Multi-Org check box when you want to share the cost type name across
l e
inventory organizations. (Costs cannot be shared across organizations in any case.)
c
• Clear the Allow Updates check box when you do not want to allow changes to the cost
r a information in a cost type.
O
Defining Cost Types

Chapter 9 - Page 12
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 13
Cost Type Controls with Bills of Material
m y
d e
ca
Cost Type Controls
e A
Rollup Options
c l
r a
• Component Yield: This control determines whether component yield is included in
assembly costs.
O ly
• Snapshot Bills and Alternate: This feature allows you to save bill information so that you
l & On
can report your frozen indented costs later.
• Select the Snapshot Bills check box, and select a defined alternate name.
n a e
- The cost rollup saves the current bills of material structure information into a
t e r
specified alternate bill.
U s
- You need to keep the cost type used for the rollup.
I n
• Select the Snapshot Bills check box for those cost types that you plan to use to update
your frozen standards.
l e
• Do not select the Snapshot Bills check box for all other cost types to minimize the impact
c
r a on data storage.
Previous-Level Rollup Options: Use the previous-level rollup options to limit the amount of
O cost information generated from a cost rollup.
Defining Cost Types

Chapter 9 - Page 14
• If you do not select the element option, all previous-level costs are stored in the material
cost element.
• If you do not select other previous-level options, you obtain only summary information for
that particular option.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 15
Practice 2 - Defining Items
Overview
LMS Biking has designed a new Mountain Bike. To begin manufacturing, the design engineers
must load the part numbers for the new mountain bike and its components.
• Define items in the Item Master
• Assign items to organizations
Assumptions
• You must have access to an Oracle Application Vision database, or a comparable
training or test instance at your site on which to complete this practice.
m y
Tasks
d e
Use the following table to create your items. You will assign each item to a number of
organizations.
ca
A
Note: XX represents your student identifier. Initially, complete your work in M1 Seattle
e
Manufacturing.
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 16
Item Description Template WIP Build List Receipt
Number Type Supply in Price $ Routing
Type WIP
XX-MB2XR Extreme Mountain Finished Push Yes
Bike Good
XX-COMP Components Kit Phantom Phantom No
XX-BARS Titanium Handlebars Purchased Push No 40.00 Direct
Item
XX- Front/Rear V-brakes Purchased Operation No 80.00 Direct
BRAKES Item Pull
XX-DERAIL Front/Rear Purchased Operation No 60.00 Direct
Derailleurs Item Pull
XX-FORKS Front Suspension Purchased Assembly No 110.00 Direct
Fork Item Pull
XX-FRAME 6061 Aluminum Purchased Operation No 250.00 Direct
Frame Item Pull
XX- Padded Gel Seat Purchased Operation No 45.00 Direct
SADDLE
XX-TIRES Kevlar Tires
Item
Purchased
Pull
Push No 30.00
m y
Direct
Item
d e
c a
Define the item in the Item Master
e A
1.
l
Enter the following in the Master Item window:
− Item = XX-MB2XR
c
r a
− Description = EXTREME MOUNTAIN BIKE
2. Apply a template. O ly
− Template = Finished Goods
l & On
− Select Copy From… from the Tools menu.
n a e
3.

t e r
Select the Work In Process tab (hint: it’s in the horizontal pull-down list).
U s
I n
− Supply Type = Push
− Build in WIP = Yes
c l e
Overcompletion Region
r a − Tolerance Type = Percent

− Tolerance Value = 10
O
Defining Cost Types

Chapter 9 - Page 17
Assign Item to Organizations
5. Assign your part number to the M1 Seattle, M2 Boston, M3 Dallas, M6 Phoenix, and M7
New Orleans organizations.
Repeat for item XX-COMP

− Item = XX-COMP
− Description = Components Kit
7. Apply a template:
− Template = Phantom
Repeat for item XX-BARS

m y
− Item = XX-BARS
− Description = Titanium Handlebars d e
10. Apply a template: ca
e A
− Template = Purchased Item
c l
− List Price = 40 r a
11. Select the Purchasing tab and enter the following:
O ly
12. Select the Receiving tab and enter the following:
l & On
− Receipt Routing = Direct (assign this value to all items)
n a e
13. Select the Work In Process tab and enter the following:
t
− Build In WIP = No
e r U s
− Supply Type = as shown in table
I n
c l e
r a
Repeat for the remaining Purchased Items using the List Price and Supply Type as shown in the
table.
O
Defining Cost Types

Chapter 9 - Page 18
Solution – Defining Items
Overview
LMS Biking has designed a new Mountain Bike. To begin manufacturing, the design engineers
must load the part numbers for the new mountain bike and its components.
Use the following table to create your items. You will assign each item to a number of
organizations.
Note: XX represents your student identifier. Initially, complete your work in M1 Seattle
Manufacturing.
Item Description Template WIP Build List Receipt

Number Type Supply in Price $ Routing
Type WIP
XX-MB2XR Extreme Mountain Finished Push Yes
Bike Good
XX-COMP Components Kit Phantom Phantom No
XX-BARS Titanium Handlebars Purchased
Item
Push No 40.00
y
Direct
m
de
XX- Front/Rear V-brakes Purchased Operation No 80.00 Direct
BRAKES Item Pull
XX-DERAIL Front/Rear Purchased Operation No
c a
60.00 Direct
XX-FORKS
Derailleurs
Front Suspension
e
Item
Purchased
Pull
Assembly No A 110.00 Direct
Fork
c l Item Pull
XX-FRAME 6061 Aluminum
Frame
r a Purchased
Item
Operation
Pull
No 250.00 Direct
XX- Padded Gel Seat

O ly Purchased Operation No 45.00 Direct
SADDLE
XX-TIRES Kevlar Tires
l & On Item
Purchased
Pull
Push No 30.00 Direct
n a e Item
t e r U s
I n
Define the item in the Item Master
l e
c
1.
r a Navigate to the Master Item window.
O • (N) Inventory > Items > Master Items
Defining Cost Types

Chapter 9 - Page 19
2. Enter the following in the Master Item window:
− Item = XX-MB2XR
− Description = EXTREME MOUNTAIN BIKE
3. Apply a template.
− Template = Finished Goods
4. Click Apply (B). When Template implemented appears on the message line, click Done
(B).
m y
d e
ca
e A
c l
r a
O ly
5.
l & On
Select the Work In Process tab (hint: it’s in the horizontal pull-down list).

n a e
− Supply Type = Push
t e
− Build in WIP = Yes
r U s
I n
Overcompletion Region
l e
− Tolerance Type = Percent
c
− Tolerance Value = 10
r a
O
Defining Cost Types

Chapter 9 - Page 20
7. Save your work.
Assign Item to Organizations

m y
Assign your part number to the M1 Seattle, M2 Boston, M3 Dallas, M6 Phoenix, and M7 New
Orleans organizations.
d e
8. Select Organization Assignment from the Tools menu.
ca
9.
e
Select the Assigned indicator for each of the above organizations. A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 21
m y
10. Save your work.
d e
11. Verify that the M1 record is selected and assign the XX-MB2XR item to the XX.MISC
Category at the organization level. ca
12. Click Org Attributes (B)
e A
c l
13. From the Tools menu, select Categories
r a
− Category Set = Inventory O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 22
15. Save your work.
m y
d e
ca
Repeat for item XX-COMP
e A
• c
(N) Inventory > Items > Master Items
l
17. Enter the following: r a
− Item = XX-COMP O ly
& On
− Description = Components Kit
l
n a e
− Template = Phantom
t e r
U s
I n
19. Click Apply. When Template implemented appears on the message line, click Done (B).
l e
20. Save your work.
c
r a
O
Defining Cost Types

Chapter 9 - Page 23
23. Select the Assigned indicator for each of the above organizations.
24. Save your work.
Repeat for item XX-BARS
• (N) Inventory > Items > Master Items

− Item = XX-BARS
− Description = Titanium Handlebars

− Template = Purchased Item
27. Click Apply (B). When Template implemented appears on the message line, click Done
(B).
28. Select the Purchasing tab and enter the following:

− List Price = 40
m y
29. Select the Receiving tab and enter the following:
d e
− Receipt Routing = Direct (assign this value to all items)
ca
30. Select the Work In Process tab and enter the following:
e A
− Supply Type = as shown in table
− Build In WIP = No
c l
31. Save your work.
r a
O ly
l & On
a e
n
e r s
34. Select the Assigned indicator for each of the above organizations.
t U
35. Save your work.
I n
l e
Repeat for the remaining Purchased Items using the List Price and Supply Type as shown in the
table.
c
r a
O
Defining Cost Types

Chapter 9 - Page 24
Practice 3 - Defining Cost Types
Overview
In this practice, you will define a working Cost Type. Use the working Cost Type to enter
Purchased Item Costs and run a cost rollup for the items. Since we will be taking snapshots of
the bills, for reference, we will first define Alternate names.
Assumptions
Tasks
Define the Alternates
1. Define the following Alternates:

m y
− XX-UN-CH This is where the phantom BOM parameters are Unchecked, Checked.
− XX-UN-UN This is where the phantom BOM parameters are Unchecked,
d e
Unchecked.
− XX-CH-CH This is where the phantom BOM parameters are Checked, Checked. ca
e A
Define Cost Type and Alternate Combinations c l
r a
2.
O ly
Define the Cost Type and Alternate combinations listed in the following table.
Cost Type
l & On
Alternate
XX-CST-1
n a eXX-UN-CH
XX-CST-2
t e r U s
XX-UN-UN
XX-CST-3
I n XX-CH-CH
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 25
3. Enter the following data in the Cost Types window:
Field Value
Name XX-CST-1
Description COST TYPE FOR MOUNTAIN BIKE
4. Accept all window defaults except for the following:

− Snapshot Bill is checked
− Alternate = XX-UN-CH
− Select all Previous Level Rollup Options
− Verify the the default cost type is Frozen
5. Repeat for the remaining Cost Types.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 26
Solution – Defining Cost Types
Define the Alternates
1. Navigate to the Alternates window.
• (N) Cost > Setup > Alternates
2. Define the following Alternates:

− XX-UN-CH This is where the phantom BOM parameters are Unchecked, Checked.
− XX-UN-UN This is where the phantom BOM parameters are Unchecked,
Unchecked.
− XX-CH-CH This is where the phantom BOM parameters are Checked, Checked.
m y
d e
ca
e A
c l
r a
O ly
3. Save your work.
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 27
Define Cost Type and Alternate Combinations
4. Define the Cost Type and Alternate combinations listed in the following table:
Cost Type Alternate

XX-CST-1 XX-UN-CH
XX-CST-2 XX-UN-UN
XX-CST-3 XX-CH-CH
5. Navigate to the Cost Types window.
• (N) Cost > Setup > Cost Types
6. Enter the following data in the Cost Types window:
Field Value
Name
Description
XX-CST-1
COST TYPE FOR MOUNTAIN BIKE
m y
d e
7. Accept all window defaults except for the following: ca
− Snapshot Bill is checked
e A
− Alternate = XX-UN-CH
c l
− Select all Previous Level Rollup Options
r a
− Verify the the default cost type is Frozen
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 28
8. Save your work.
9. Repeat for the remaining Cost Types.
m y
• Click New Record (Icon) or click in the Cost Type Field and down arrow.
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 29
Summary
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Cost Types

Chapter 9 - Page 30
Describing Cost Elements
Chapter 10
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 10 - Page 1
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 10 - Page 2
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 10 - Page 3
Objectives
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 10 - Page 4
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 10 - Page 5
Overview
m y
d e
ca
Overview of Common Cost Setup
e A
Common Cost Setup
c l
• Cost elements
r a
• Subelements
• Basis types O ly
• Cost types
l & On
Inventory Cost Setup
n a e
t e r
• Material and material overhead subelements
• Material overhead defaults
U s
• Item cost controls
• Item costs I n
l e
Manufacturing Cost Setup
c
• Resource subelements and costs
r a
• Overhead subelements
O • Defining departments and associate resources

Chapter 10 - Page 6
• Defining overhead rates by department
• Associating overheads with resources
• Defining routings
• Defining bills of material
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 10 - Page 7
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 10 - Page 8
Cost Elements
m y
d e
ca
Cost Elements
e A
c l
There are five predefined cost elements. The number available for use depends on whether you
r a
use Oracle Inventory or Oracle Bills of Material.
• Cost elements available with Oracle Inventory used in
- Standard costing O ly
- Average costing
l & On
- Standard costing
n a e
• Cost elements available with Oracle Bills of Material used in
- Average costing
t e r U s
Available Cost Elements: If you use average costing or standard costing, you can use all five of
I n
the predefined cost elements and as many subelements as necessary to satisfy your business
needs.
c l e
• If you use Oracle Bills of Material, use all five cost elements.
r a
• If you do not use Oracle Bills of Material, use two cost elements.
Elements of Cost
O • Material: Typically, this is the raw material/component cost of a product.

Chapter 10 - Page 9
• Material Overhead: This is the overhead cost of material, calculated as a percentage of the
material cost or as a fixed charge per item, lot, or activity.
• Resource: This is the direct cost of what is required to manufacture products. Resources
are people (labor), machines, space, or miscellaneous things.
• Resource Overhead: This is the overhead cost of resource and outside processing.
Overhead is used as a means to allocate indirect production costs.
• Outside Processing: This is the cost of the supplier resource.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 10 - Page 10
Subelements
m y
d e
ca
Subelements
e A
c l
Assign subelements in Organization Parameters.
Cost subelements
r a
O ly
• For each cost element, define as many subelements as necessary to satisfy your business
needs. Subelements are a smaller classification of the cost elements.
& On
• Decide how to analyze and track costs and to what detail.
l
n a e
- For the five cost elements, you may have an unlimited number of subelements.
- Multiple subelements give you greater item cost visibility and flexibility.
e r s
• Define an unlimited number of cost subelements.
t U
- The system supports an unlimited number of user-defined cost subelements to capture
I n
costs at a level of granularity that you want.
c l e
- Delineate cost subelements so that you can analyze performance in terms of labor,
overhead, material, or other direct costs.
r a
O

Basis Types
m y
d e
ca
Basic Types
e A
c l
Cost Allocation Basis: Associate each subelement with a basis type that is used to determine
the subelement cost per item.
r a
Item: You use the Item basis type to assign a fixed cost per item.
O ly
• For material and material overhead subelements, you define a fixed amount per item.
l & On
• For resource, outside processing, and overhead subelements, you define a fixed amount
per item moved through an operation.
n a e
Lot: You use the Lot basis type to assign a lot charge per item or operation.
t e r
each cost type as follows:
U s
• For material and material overhead subelements, the cost per item is calculated within
I n
Cost per item = Rate or amount / Item’s costing lot size
• For resource, outside processing, and overhead subelements, the cost per item is calculated
l e
within each cost type as follows:
c
Cost per item = Routing usage * Rate or amount * 1 / Item’s costing lot size
r a
Resource Units: You use the Resource Units basis type to allocate overhead to an item based
O on the number of resource units.

• For material overhead and overhead subelements, the cost per item is calculated within
Cost per item = Overhead rate * No. of resource units earned in routing operation
• An example is overhead based on the number of direct labor hours. Although you can
develop an item cost for material overhead subelements based on resource units, it is not
earned in WIP.
Resource Value: You use the Resource Value basis type to allocate overhead to an item based
on a percentage of the resource value.
• For material overhead and overhead subelements, the cost per item is calculated within
Cost per item = Overhead rate * Resource value earned in the routing operation
• An example is overhead based on the number of direct labor dollars. Although you can
develop an item cost for material overhead subelements based on resource value, it is not
earned in WIP.
Total Value: You use the Total Value basis type to allocate overhead to an item based on a
percentage of the total value.
• For material overhead subelements, the cost per item is calculated within each cost type as
follows:
Cost per item = Total cost – Material overhead earned at this level * Material overhead
rate
• The material overheads based on total value can be earned when you receive purchase
orders or when you perform WIP completion transactions.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Summary
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Defining Item Costs
Chapter 11
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Item Costs

Chapter 11 - Page 1
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Item Costs

Chapter 11 - Page 2
Defining Item Costs
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Item Costs

Chapter 11 - Page 3
Objectives
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Item Costs

Chapter 11 - Page 4
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Item Costs

Chapter 11 - Page 5
Overview
m y
d e
ca
Inventory Cost Setup
e A
Overview
c l
r a
• Material and material overhead subelements
• Material overhead defaults
• Item cost controls O ly
• Item costs
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Item Costs

Chapter 11 - Page 6
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Item Costs

Chapter 11 - Page 7
Material Subelements
m y
d e
ca
Material Subelements
e A
c l
Use the Material Subelements window to enter: Material subelements
r a
O ly
• (N) CST Setup > Subelements > Material
• (N) INV Setup > Costs > Subelements > Material
Prerequisites
l & On
n a e
To define, update, or delete cost information, the Material Subelements: Maintain security
function must be included as part of the responsibility.
e
Material Overhead Subelements
t r U s
You define any number of material overhead subelements such as freight, purchasing, or
I n
customs, to classify your material overhead costs.
c l e
• The system charges each one when you receive the item into inventory.
• If you use Oracle Work in Process, you can also charge material overheads when you
r a complete your assemblies.

Material overhead is available for average costing and for standard costing.
O You use a separate absorption account for each material overhead subelement, if necessary.
Defining Item Costs

Chapter 11 - Page 8
Default Basis for Material Overhead Subelements
• The system defaults the basis type when you define item costs to speed data entry.
• You assign any basis type to the material overhead subelement.
• If you use Resource Units or Resource Value basis types for material overhead, be aware
that they are used to determine your cost. You cannot earn material overhead in WIP
because the resource is charged, resulting in work order variances.
Use the Overheads window to enter: Material overhead subelements
• (N) CST Setup > Subelements > Overheads
• (N) INV Setup > Costs > Subelements > Overheads
Material Overehad Defaults
Default costs speed data entry when defining items.
• You define and update default material overhead subelements and rates.
• When you define your items, these material overheads are defaulted into your frozen
costs.
- For buy items, enter material costs.
- For make items, roll up costs.
• You define category-level and organization-level defaults for make, buy, and for all items.
• When you select category defaults, the material overhead default applies to items
associated with that category for the costing category set.
Define as Many or Few Defaults as You Need: m y
d e
• Define a default material overhead for all items at the organization-level to use the same
material overhead for all items.
• You can use a material overhead subelement to define many defaults.
ca
A
• You can define multiple defaults for each organization or category make item, buy item,
e
and all items.
c l
• You must be in the master cost organization to define material overhead defaults.
r a
Default Material Overhead Hierarchy with the Same Subelement
O ly
• When you define a subelement as a default at more than one level, the system uses the
following hierarchy to determine which value you defined for the subelement to use:
& On
• Category-level defaults override the organization-level defaults.
l
n a e
• Within a category or organization default, a default that matches the item’s planning
make/buy code overrides the All Items default.
e r s
The system assigns an item to all defaults that it matches. For example:
t U
• You have specific defaults at the category-level for buy items for a subelement
I n
“inspection” and a general “admin” subelement defined at the organization-level for all
items.
c l e
• If you have an item with a planning code of “buy” with the same category as the
r a subelement “inspection,” the item gets two default subelements, “inspection” and
“admin.”
O Use the Material Overhead Defaults window to enter: Material overhead subelement defaults
Defining Item Costs

Chapter 11 - Page 9
• (N) CST Setup > Subelements > Defaults
• (N) INV Setup > Costs > Subelements > Defaults
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Item Costs

Practice 4 - Material Overhead
Overview
• Verify that your sub-element is Material
• Set up a sub-element for material overhead
Assumptions
Tasks
1. Verify that your sub-element is Material
m y
2. Set Up a Sub-Element For Material Overhead using the following data:
d e
ca
Field Name Value
e A
Overhead
Cost Element
XX-MTBOH
c l
Material Overhead
Description
r a
OVERHEAD FOR MOUNTAIN BIKE
Absorption Account
O ly
01-000-1420-0000-000
Default Basis
Default Activity
l & On
Total Value
<blank>
Inactive On
n a e<blank>
t e r U s
I n
c l e
r a
O
Defining Item Costs

Solution – Material Overhead
Verify That Your Sub-Element is Material
1. Navigate to the Material Subelements window.
• (N) Cost > Setup > Sub-Elements > Material
2. Check to make sure that your sub-element refers to Material.
m y
d e
ca
e A
c l
r
Set Up a Sub-Element For Material Overheada
4. Navigate to the Overheads window. O ly
l & On
(N) Cost > Setup > Sub-Elements > Overheads
•
n a e
t e r U s
I n
c l e
r a
O
Defining Item Costs

5. Enter the following data:
Field Name Value

Overhead XX-MTBOH
Cost Element Material Overhead
Description OVERHEAD FOR MOUNTAIN BIKE
Absorption Account 01-000-1420-0000-000
Default Basis Total Value
Default Activity <blank>
Inactive On <blank>
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
6. Save your work.
t e r U s
I n
c l e
r a
O
Defining Item Costs

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Item Costs

Item Cost Controls
m y
d e
ca
Item Cost Controls
e A
Cost Controls by Cost Type
c l
r a
• Each item has separate cost controls by cost type. Under average costing, only the
inventory asset control is used.
Selecting the Cost Type O ly
l & On
• The Item Costs Summary window is multi record by cost type. You select from the
available cost types or choose a new cost type using the list of values.
n a e
The Default Cost Controls Check Box
t e r U s
• This check box controls whether the cost rollup uses the information from the default cost
type or existing rolled-up costs.
I n
• When checked, the cost rollup replaces any previously rolled-up costs and uses
information from the default cost type and you cannot change your item controls or costs
l e
in this form.
c
r a
• When not checked, the cost rollup still replaces any previously rolled-up costs, but it uses
only information from the rolled-up cost type. This information includes any assembly
O material overheads and other user-entered costs.
Defining Item Costs

The Inventory Asset Check Box
• This check box controls the valuation status for the item. If Inventory Asset is selected, the
item is an asset and can have a cost. If the check box is not selected, the item is an
inventory expense item and cannot have a cost.
• Under standard costing, you can change the inventory asset control for your frozen costs
when you perform a standard cost update.
• Under average costing, you can change the inventory asset control for your average costs
in the Items window, but only when the on hand quantity is zero.
Lot Size
• The lot size is the costing lot size for the item. Under standard costing, you change the
frozen lot size using the standard cost update. Lot size does not apply to average costing.
• The Based On Rollup Check Box
• This check box controls the cost rollup bills of material explosion. If you choose to have
cost controls based-on-rollup, the item’s structure is exploded during the cost rollup
process. Otherwise, the cost rollup does not explode the structure. Based On Rollup is
usually not selected for purchased items.
MFG Shrinkage Rate
• Manufacturing shrinkage is used to calculate the shrinkage factor for the item. Used only
in the cost rollup, this control does not apply to items that you purchase.
• The shrink factor is a derived number, representing the effect that the manufacturing
shrinkage rate has on the cost of the item. The formula is 1 / (1 – Mfg shrinkage rate).
Entering Assembly Costs Manually m y
• You must first clear the Use Default Cost Controls check box. You can then enter
d e
additional costs while maintaining existing rolled-up costs.
ca
• To manually enter resource or outside processing costs, you must ensure that the resource
Currency in the Resources window.

e A
uses the organization’s currency as its UOM. To do this, you set the resource type to
Avoiding Rolling Up Obsolete Items

c l
r a
• If you have obsolete items, clear the Use Default Cost Controls and the Based On Rollup
check boxes (so the cost rollup then ignores the assembly).
O ly
Use the Item Costs Details window to view:
• Item costs
• Item cost control information l & On
n a e
t e r U s
• (N) CST Item Costs > Item Costs Summary > Item Costs Details (B) Open
• (N) INV Costs > Item Costs Summary > Item Costs Details (B) Open
I n
c l e
r a
O
Defining Item Costs

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Item Costs

Item Costs
m y
d e
ca
Item Costs
e A
c l
Material Cost Input: You use the Organization Parameters window to define a default material
Rate/Amount field. r a
subelement. When you enter the material cost element, the cursor automatically moves to the
O ly
Material Overhead Cost Input: Use the Material Overhead Defaults window to define default
the frozen cost type.

l & On
material overhead rates. When you define item costs, the material overheads will default for
a e
Negative Costs: For maximum flexibility, you can enter a negative item cost.
n
t e r U s
I n
c l e
r a
O
Defining Item Costs

Practice 5 - Purchased Item Costs
Overview
You will now define item costs for your purchased items and the assembled item’s material
overhead. The buyers have told you that the purchased standard costs are:
Item Price
XX-BARS $40.00
XX-BRAKES $80.00
XX-DERAIL $60.00
XX-FORKS $110.00
XX-FRAME $250.00
XX-SADDLE $45.00
XX-TIRES $30.00

m y
• Enter item costs
d e
• Assign a Cost Type to your manufacturing items
ca
• Verify your item costs
e A
• Copy costs between cost types
c l
Assumptions r a
O ly
•
l & On
You must have access to an Oracle Application Vision database, or a comparable
•
n a e
Students log in to Oracle with User Name mfg and Password welcome. Your instructor
t e r U s
•
I n
Each student should replace XX with a unique student identifier.
c l e
r a
O
Defining Item Costs

Tasks
Enter Item Costs
1. Enter the following data in the Item Costs Summary window:
Field Name Value

Item XX-BARS
Cost Type XX-CST-1
Based On Rollup No (for purchased items)
2. Enter the following data in the Item Costs window:
Note: You must enter each of the parts separately.

Field Name Value
Cost Element Material
Sub-Element MATERIAL
Activity
Basis
<blank>
Item
m y
Rate or Amount 40.00
d e
ca
3. On the next line enter the following data:
e A
c l
Field Name
Cost Element
r a
Value
Material Overhead
Sub-Element O ly
XX-MTBOH
Activity
l & On
<blank>
Basis
n a e Total Value
Rate or Amount
t e r U s .05
4. Save your work.

I n
5.
l e
Close the window.
c
r
6.
a Repeat this process for the other purchased items listed in the table.
O
Defining Item Costs

Assign a Cost Type To Your Manufacturing Items
7. Enter the following data in the Item Costs Summary window:
Field Name Value

Item XX-MB2XR
Cost Type XX-CST-1
Based On Rollup Yes (for manufactured item)
8. Save your work.
9. Repeat this process for the item XX-COMP.
Verify Your Item Costs
10. Navigate to the Item Costs Summary window.
• (N) Cost > Item Costs > Item Costs (M) View > Query By Example
Hint: Use as search criteria XX% in the item field and XX-CST-1 in the Cost Type
field.
11. Press <Ctrl> F11 to execute the query

m y
12. Review your item costs.
d e
13. Close the window. ca
Copy Costs between Cost Types
e A
c l
From the Copy Cost Information concurrent request, copy the costs from cost type XX-CST-1 to
cost type XX-CST-2
r a
14. Enter the following Parameters: O ly
l & On
Field Name
n a e Value
Copy Option
From Cost Type
t e r U s New cost information only
XX-CST-1
To Cost Type
I n XX-CST-2
Range
c l e All items
r a
15. Repeat this process to copy from cost type XX-CST-1 to cost type XX-CST-3
O
Defining Item Costs

Solution – Purchased Item Costs
Enter Item Costs
• (N) Cost > Item Costs > Item Costs
2. Click New (B)
Field Name Value

Item XX-BARS
Cost Type XX-CST-1
Based On Rollup No (for purchased items)
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Item Costs

4. Click Costs (B)
Note: You must enter each of the parts separately.
Field Name Value

Cost Element Material
Sub-Element MATERIAL
Activity <blank>
Basis Item
Rate or Amount 40.00
6. On the next line enter the following data:
Field Name Value

Cost Element Material Overhead
Sub-Element XX-MTBOH
m y
Activity
Basis
<blank>
Total Value
d e
Rate or Amount .05
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Item Costs

m y
7. Save your work.
d e
ca
9. Add a new record.
e A
•
c l
New Record (Icon) or click in the Cost Type field and press down arrow
a
10. Repeat this process for the other purchased items listed in the table.
r
O ly
11. Assign a Cost Type To Your Manufacturing Items
•
l & On
(N) Cost > Item Costs > Item Costs > (B) New

n a e
t e r U s
Field Name
Item I n Value
XX-MB2XR
l e
Cost Type
c
XX-CST-1
r a Based on Rollup Yes (for manufactured item)
O
Defining Item Costs

m y
13. Save your work.
d e
14. Repeat this process for XX-COMP
ca
e A
Verify Your Item Costs
c l
a
r
•
O ly
(N) Cost > Item Costs > Item Costs (M) View > Query By Example
& On
Hint: Use search criteria XX% in the item field and XX-CST-1 in the Cost Type field.
l
a e
16. Press <Ctrl> F11 to run the query
n
t e r U s
I n
c l e
r a
O
Defining Item Costs

Copy Costs between Cost Types

m y
Copy the costs from the cost type XX-CST-1 to the cost type XX-CST-2
d e
18. Navigate to the Copy Cost Information window.
ca
• (N) Cost > Cast Mass Edits > Copy Cost Information
e A
c l
The concurrent request window appears.
19. Select Single Request

r a
O ly
20. Select Copy Item Costs from the Name list of values (LOV)
21. Enter the following Parameters:

l & On
n a e
Field Name
t e r U s
Value
Copy Option
I n New cost information only
c l e
From Cost Type
To Cost Type
XX-CST-1
XX-CST-2
O ra Range All items
Defining Item Costs

22. Click (B) OK
23. Click (B) Submit
24. Click Yes for new request and repeat this process to copy from cost type XX-CST-1 to cost
type XX-CST-3
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Item Costs

Summary
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Item Costs

Defining Resource and
Overhead Costs
Chapter 12
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Defining Resource and Overhead Costs

Chapter 12 - Page 1
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 12 - Page 2
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 12 - Page 3
Objectives
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 12 - Page 4
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 12 - Page 5
Overview of Manufacturing Cost Setup
m y
d e
ca
Manufacturing Cost Setup
e A
Overview
c l
r a
• Defining bills-of-material parameters
• Resource subelements and costs
• Overhead subelements O ly
l & On
• Defining departments and associate resources
a e
• Defining overhead rates by department
n
• Defining routings
t e r
• Associating overheads with resources
U s
n
• Defining bills of material
I
c l e
r a
O

Chapter 12 - Page 6
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 12 - Page 7
BOM Parameters
m y
d e
ca
BOM Parameters
e A
Window Dependencies
c l
r a
• The list of values for subelement on the Item Costs window is automatically reduced to
material and material overhead if you do not define BOM parameters. In addition, you can
O ly
define only material overheads on the Overheads window, not routing-based overheads.
• (N) BOM Setup > Parameters l & On

n a e
t e r U s
I n
c l e
r a
O

Chapter 12 - Page 8
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 12 - Page 9
Resource Subelements and Costs
m y
d e
ca
e A
Use the Resources window to enter:
c l
• Resources
r a
O ly
• (N) CST Setup > Subelements > Resources
l
Unlimited Cost Types for Resources & On
a e
You can enter a fixed resource cost in two ways.
n
e r
• Enter a fixed charge on the routing operation.
s
- Use this method when the resource cost varies by item. Set the resource type to
t U
currency and the UOM to your set of books currency. Enter 1 for the resource unit
I n
cost. Enter the currency amount in the routing operation. If you need to schedule the
c l e
outside processing step, use another resource in the operation and set it to uncosted.
- Fixed charge on routing = Resource unit cost (1) * Resource amount on routing
r a - Example 1: Item1 = 1 x .10 = .10 per unit; Example 2: Item2 = 1 x .20 = .20 per unit
• Enter a fixed charge for the resource unit cost.
O

- Use this method when the resource cost is always the same, regardless of the item.
Set the resource type to a type other than currency. Set the UOM to any UOM (the
UOM does not matter). Enter the fixed amount in the resource unit cost. Enter 1 for
the resource rate/amount in the routing operation
- Fixed charge on resource = Resource unit cost x Resource amount on routing (1)
- Example 1: Item1 = .15 x 1 = .15 per unit; Example 2: Item2 = .15 x 1 = .15 per unit
- The plating charge is fixed, regardless of the item being plated.
Use the Resource Costs window to enter:
• Resource costs by cost type
• (N) CST Setup > Subelements > Resources (B) Rates
• (N) BOM Routings > Resources (B) Rates
Overhead Subelements
Overview
• In standard costing and in average costing, you can use material overhead and overhead
cost subelements to add indirect costs to item costs as either a percentage or a fixed
amount.
• Each overhead subelement has a default basis, a default activity, and an absorption
account.
• The overhead absorption account offsets the corresponding overhead cost pool in the
general ledger.
m y
• You can base the overhead charge on the number of resource units or on the percentage of
resource value earned in the routing operation. Or you can set up move-based overheads
d e
the Item or Lot basis types. ca
where the rate or amount is charged for each item moved in an operation. To do this, use
• You can base the material overhead charge on the number of resource units or on the
e A
c l
percentage of resource value. However, the material overhead charge is not earned in
WIP. You can also base material overhead on a percentage of the total value, which is
r a
earned when you receive purchase orders or perform WIP completion transactions. Or you
can use the Item or Lot basis types.
O ly
• You can apply each of these subelements using different basis types for increased
l & On
flexibility. Material overhead is earned when an item is received into inventory or
completed from work in process. Overhead, based on resources, is earned as the assembly
a e
moves through operations in work in process.
n
r s
• Note: If you use Oracle Bills of Materials, you must first define the bill of material
e
parameters to use the overhead cost element in the Overhead window. If the bills of
t U
material parameters are not set up, you only have access to material overhead cost
element.
I n
c l e
• Basis types for move-based (fixed) overheads: Use the Item or Lot basis types for move-
based overheads.
r a - For Item basis, the overhead amount is charged for each item moved out of an
operation
O

- Overhead amount charged to WIP = Overhead amount * Number of items moved out
of operation
- Example: Item basis, overhead amount: 15.00, items moved: 100. Overhead amount
charged to WIP = 15.00 * 100 = 1,500.00
• Basis types for move-based (fixed) overheads: Use the Item or Lot basis types for move-
based overheads.
- For Lot basis, the overhead amount is charged when the first item is moved into the
operation.
- Overhead amount charged to WIP = Overhead amount * 1 lot
- Example: Lot basis, overhead amount: 15.00, items moved: 100. Overhead amount
charged to WIP = 15.00 * 1 = 15.00
• Basis types for resource-based (variable) overheads:
- Use the Resource Value or Resource Units basis types for resource-based overheads.
- For Resource Value basis, the overhead rate is multiplied by the resource value
earned in the operation
- Overhead amount charged to WIP = Overhead rate * Resource value
- Example: Resource value basis, overhead rate: 1.50, resource value: 50.00. Overhead
amount charged to WIP = 1.50 x 50.00 = 75.00
• Basis types for resource-based (variable) overheads:
- Use the Resource Value or Resource Units basis types for resource-based overheads.
- For Resource Units basis, the overhead amount is multiplied by the number of
m y
resource units earned in the operation
- Overhead amount charged to WIP = Overhead amount * Resource units
d e
c
- Example: Resource units basis, overhead amount: 15.00, resource units: 2. Overhead
amount charged to WIP = 15.00 x 2 = 30.00
a
Use the Overheads window to enter:
e A
• Overhead
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Practice 6 - Defining Resources
Overview
The manufacturing process is a new one. The decision has been made to create new resources
specifically for the manufacture of the MB2XR.
In this practice, you will create resources from the following table:
Resource Description Type Cost

XXAssemblr Bike Assembler Person 10.00
XXTester Test Rider / Inspector Person 15.00
XXPicker Parts Puller Person 10.00
XXSpec Spec Check Computer Machine 40.00
Assumptions
m y
d e
ca
e A
c l
Tasks r a
O ly
& On
Use the Resources window to enter the data.
l
n a e
t e r U s
I n
c l e
r a
O

Solution – Defining Resources
Define Your Resources
1. Navigate to the Resources window.
• (N) Bills Of Material > Routings > Resources
Field Name Value

Resource XXASSMBLER
Description BIKE ASSEMBLER
Type Person
UOM HR
Charge Type WIP Move
Basis
Costed
Item
Yes (box checked)
m y
Standard Rate Yes (box checked)
d e
ca
Variance Account 01-520-5380-0000-000
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

m y
d e
3. Click the Rates button.
ca
4. Enter the following data in the Resource Costs window:
e A
c l
Field Name
Cost Type
r a
Value
XX-CST-1
Resource Unit Cost
O ly
10.00
5.
l & On
Select New Record from the File menu and repeat this process for XX-CST-2 and XX-
CST-3 cost types.
n a e
t e r U s
I n
c l e
r a
O

6. Save your work.
7. Add a new record
• (M) File > New Record

m y
Repeat the process for the remaining items in the table.
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Defining Departments and Associating Resources
m y
d e
ca
e A
Resource Association
c l
r a
• Each resource must be associated with a department. Assign each resource to one or more
departments.
O ly
• The resource has to be associated with a department so it can appear on the routing list of
l & On
values. In the Routing window, you can go to the Department window and add the
resource to the routing list of values.
Use the Department window to:
n a e
t e r U s
• Create departments and assign resources to each department
I n
• (N) BOM Routings > Departments (B) Resources
c l e
r a
O

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Three-Way Association
m y
d e
ca
Defining Overhead Rates by Department
e A
Three-way Association
c l
type is Resource Value.
r a
• Specify, for each cost type, an overhead rate or amount by department. Enter an overhead rate if the basis
O ly
• For example, an overhead rate of 1.5 equals 150%.
• Enter an overhead amount if the basis type is Item, Lot, or Resource Units.
Use the Overhead Rates window to:
l & On
n a e
• Associate overhead rates by department with a cost type
t e r U s
• (N) CST Setup > Subelements > Overheads (B) Rates
• (N) INV Setup > Costs > Subelements > Overheads (B) Rates
I n
Associating Overheads with Resources
Use the Resource Overhead Associations window to:
l e
• Enter a cost type for which to associate resources to overhead.
c
r a• (N) CST Setup > Subelements > Overheads (B) Resources
O • (N) INV Setup > Costs > Subelements > Overheads (B) Resources

Practice 7 - Overheads
Overview
In this practice, you will enter the overheads that will be recovered by your resources. One of the
overheads will be used to absorb any costs associated with the payroll costs. The other overhead
is used to recover the cost of utilities absorbed by the machine.
Assumptions
Tasks
Set Up a Sub-Element For Material Overhead
1. Enter the following data in the Overheads window:

m y
d e
Field Name Value
ca
Overhead
Cost Element
XX-BENEFIT
Overhead
e A
Description
c l
OVERHEAD FOR PERSONNEL
Absorption Account
r a
01-000-1420-0000-000
Default Basis
Default Activity O ly
Resource Value
<blank>
Inactive On
l & On
<blank>
n a e
2.
t e r U s
Add a new record and enter the following data:
I n
c l
Overhead
e
Field Name Value
XX-UTILITY
r a Cost Element Overhead
O Description OVERHEAD FOR MACHINE

Default Basis Resource Unit
Inactive On <blank>
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Solution - Overheads
Setting Up a Sub-Element For Material Overhead
1. Navigate to the Overheads window.
• (N) Cost > Setup > Sub-Elements > Overheads
2. Enter the following data in the Overheads window:
Field Name Value

Overhead XX-BENEFIT
Cost Element Overhead
Description OVERHEAD FOR PERSONNEL
Default Basis Resource Value
Default Activity
Inactive On
<blank>
<blank>
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
3.
c l e
Save your work.
r a
O

4. Add a new record
Field Name Value

Overhead XX-UTILITY
Cost Element Overhead
Description OVERHEAD FOR MACHINE
Default Basis Resource Unit
Inactive On <blank>
6. Save your work.

m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Practice 8 - Defining Departments
Overview
In this practice you will:
• Create departments
• Connect the overheads to the resources
Assumptions
Tasks
1. Create departments using data from the following table:
m y
d e
Department Description Resource
a
Capacity Units
c
XX-Mfg
XX-Kit
Manufacturing Dept.
Kitting Dept.
e
XXASSMBLR
XXPICKER A 8
8
XX-Qlty Quality Dept.
c l XXSPEC 8
XX-Pick r a
Picking Dept.
XXTESTER
XXPICKER
8
8
O ly
l & On
2.
a e
Enter the following data in the Departments window:
n
Field Name
t e r U s Value
Department
I n XX-MFG
c
Class l e
Description MANUFACTURING DEPARTMENT
<blank>
r a
O

3. Click the Resources button and enter the following data:
Field Name Value

Resource XXASSMBLR
Available 24 hours Yes (box checked)
Share No
Units 8
4. Click the Rates button and enter the following data:
Field Name Value

Cost Type XX-CST-1
Overhead XX-BENEFIT
Activity <blank>
Basis <default>
Rate .05
m y
d e
5. Click on the next line below the Overhead and enter the following data:
ca
e A
Field Name
Overhead
Value
c l
XX-UTILITY
Activity
r a
<blank>
Basis
O ly
<default>
Rate
l & On10
n a e
6.
e r s
Repeat this process for cost types XX-CST-2 and XX-CST-3
t U
7.
I n
Repeat the process for the remaining Departments and Resources in the table.
c l e
r a
O

Connecting Overheads To Resources
8. From the Resources Overhead Associations window click the Overheads button and enter
the following data for your XXASSMBLR resource:
Field Name Value

Cost Type XX-CST-1
Overhead XX-BENEFIT
9. Repeat step 8 for cost types XX-CST-2 and XX-CST-3
10. Repeat this process for XXTESTER and XXPICKER resources.
11. Click the Flashlight icon on the toolbar and select your XX-SPEC resource.
12. Click the Overheads button and enter the following data:
Field Name
Cost Type
Value
XX-CST-1
m y
Overhead XX-UTILITY
d e
13. Repeat this process for cost types XX-CST-2 and XX-CST-3
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Solution – Defining Departments
Defining Departments
1. Navigate to the Departments window.
• (N) Bills Of Material > Routings > Departments
2. Create departments using data from the following table:
Department Description Resource Capacity Units

XX-MFG Manufacturing Dept. XXASSMBLR 8
XX-KIT Kitting Dept. XXPICKER 8
XX-QLTY Quality Dept. XXSPEC 8
XXTESTER 8
XX-PICK Picking Dept. XXPICKER 8
m y
3. Enter the following data in the departments window:
d e
c a
Field Name
Department
Value
XX-MFG
e A
Description
c l
MANUFACTURING DEPARTMENT
Class
r a
<blank>
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

4. Click the Resources button and enter the following data:
Field Name Value

Resource XXASSMBLR
Available 24 hours
Share
Yes (box checked)
No
m y
Units 8
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
5. Save your work.I n
6.
c l e
Close the window.
r
7. a Click the Rates button and enter the following data:
O

Field Name Value
Cost Type XX-CST-1
Overhead XX-BENEFIT
Activity <blank>
Basis <default>
Rate .05
8. Click on the next line below the Overhead and enter the following data:
Field Name Value

Overhead XX-UTILITY
Activity <blank>
Basis <default>
Rate 10

m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
10. Save your work.
O11. Close the window.

12. Add a new record:
13. Repeat the process for the remaining Departments and Resources in the table.
Connecting Overheads To Resources
14. Navigate to the Resources Overhead Associations window.
• (N) Bill Of Materials > Routings > Resources
15. Click the Flashlight icon on the toolbar and then select your XXASSMBLR resource.
Field Name Value

Cost Type XX-CST-1
Overhead XX-BENEFIT
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

18. Save your work.
19. Repeat steps 14 through 18 for XXTESTER and XXPICKER resources.
20. Close the window
21. Click the Flashlight icon on the toolbar and select your XX-SPEC resource.
Field Name Value

Cost Type XX-CST-1
Overhead XX-UTILITY
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
24. Save your work.
t e r U s
I
25. Close the window. n
c l e
r a
O

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Defining Routings
m y
d e
ca
Defining Routings
e A
c l
A routing represents a sequence of operations that are performed to manufacture an assembly.
r a
For each routing, define the operations, the sequence in which to perform them, and the
resources required at each operation. You can define either a primary or an alternate routing.
O ly
You can create a routing manually, copy an existing routing, or reference a common routing.
l & On
Note: You cannot create routings for planning or pick-to-order items. Use attachments, such as
detailed operation instructions, for routing operations.
Prerequisites
n a e
t e r U s
• You must define at least one department before you can create a routing.
• You must set BOM Allowed to Yes to create a routing for an item.
I n
Defining Routings and Operation Resources
• Use the Routings window to:
l e
- Enter a routing for your manufacturing item
c
r a
- (N) BOM Routings > Routings
O • Use the Operation Resources window to:

- Enter operation resources on a routing
- (N) BOM Routings > Routings (B) Operation Resources
Defining Routings: Routing Cost Example
The example in the previous slide shows how the resource, overhead, department, and routing
information is used to develop costs, using the following steps:
• Define your resources and resource costs.
• Define your overheads.
• Define departments and associate resources.
• Define overhead rates by department.
• Associate overheads with resources.
• Define routings and resource usage rates or amounts.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Practice 9 - Defining Routings
Overview
The design drawings are set. LMS is now ready to create routings for the MB2XR. These should
give people on the shop floor an idea of what they are building.
In this practice you will create routings for item XX-MB2XR.
Assumptions
Tasks
Create a Routing
m y
1. Define a routing for item XX-MB2XR using the following tables:
d e
Operation Seq. Department Description
ca
100 XX-MFG
e
Assemble the Mountain Bike A
200 XX-KIT
c l Kit the components

300 XX-QLTY
r a Test the mountain Bike
Operation Seq. Resource Seq.O ly Name Usage / Amount

100 10
l & On XXASSMBLR 0.5
200 10
n a e XXPICKER 0.1
300 10
t
20e r U s XXSPEC
XXTESTER
0.5
1.0
I n
c l e
r a
O

2. Enter the following data in the Routings window:
Field Name Value

Item XX-MB2XR
3. Enter the following data in the Operations region:
Field Name Value

Seq. 100
Department XX-MFG
Description Assemble the Mountain Bike
4. Enter the following data in the Operation Resources window:
Field Name Value

m y
Resource Seq. 10
d e
Name XXASSMBLR
ca
Usage Rate or Amount
Standard Rate
0.5
Yes
e A
Schedule Yes
c l
Accept all other defaults.
r a
5. O ly
Repeat for the remaining operation sequences and operation resources.
6.
l & On
Repeat the above to create a routing for item XX-COMP using the following tables:
n a e
Operation Seq.
t e r
Department
U s Description
100
I nXX-PICK Pick Components for Mountain Bike
c l e
Operation Seq. Resource Seq. Name Usage / Amount
r a 100 10 XXPICKER 0.5
O

7. Enter the following data in the Routings window:
Field Name Value

Item XX-COMP
8. Enter the following data in the Operations region:
Field Name Value

Seq. 100
Department XX-PICK
Description Pick Components for Mountain Bike
9. Enter the following data in the Operation Resources window:
Field Name Value

m y
Resource Seq.
Name
10
XXPICKER
d e
Usage Rate or Amount 0.5
ca
Standard Rate Yes
e A
Schedule Yes
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Solution – Defining Routings
Define Routings
1. Define a routing for item XX-MB2XR using the following tables:
Operation Seq. Department Description

100 XX-MFG Assemble the Mountain Bike
200 XX-KIT Kit the components
300 XX-QLTY Test the mountain Bike
Operation Seq. Resource Seq. Name Usage / Amount

100 10 XXASSMBLR 0.5
200 10 XXPICKER 0.1
300 10
20
XXSPEC
XXTESTER
0.5
1.0
m y
d e
2. Navigate to the Routings window.
ca
• (N) Bills Of Materials > Routings > Routings
e A
c l
r a
Field Name
O ly Value
Item
l & On
XX-MB2XR
n a e
4.
e r s
Press <tab> or click in the Operations region and enter the following data:
t U
I n
Field Name Value
Seq.
c l e 100
O ra
Department
Description
XX-MFG
Assemble the Mountain Bike

m y
d e
5. Click Operation Resources (B) and enter the following data:
ca
Field Name
e Value A
Resource Seq. 10
c l
Name
Usage Rate or Amount r a
XXASSMBLR
0.5
Standard Rate O ly
Yes
Schedule
l & On
Yes

n a e
t e r U s
I n
c l e
r a
O

m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
6.
r a Save your work.
O7. Repeat for the remaining operation sequences and operation resources.

Hint for sequence 300:
m y
d e
8. Repeat the above to create a routing for item XX-COMP using the following tables:
ca
Operation Seq. Department
e
Description A
100 XX-PICK
c l Pick Components for Mountain Bike
r a
Operation Seq. Resource Seq.
O ly Name Usage / Amount
100 10
l & On XXPICKER 0.5
9. a e
Navigate to the Routings window
n
•
e r s
(N) Bills Of Materials > Routings > Routings
t U
I n
c l e
Field Name Value
r a Item XX-COMP
O

11. Press <tab> or click in the Operations region and enter the following data:
Field Name Value

Seq. 100
Department XX-PICK
Description Pick Components for Mountain Bike
12. Click Operation Resources (B) and enter the following data:
Field Name Value

Resource Seq. 10
Name XXPICKER
Usage Rate or Amount 0.5
Standard Rate Yes
Schedule Yes

m y
13. Save your work.
d e
14. Close windows.
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Bills of Material
m y
d e
ca
Bills of Material
e A
Physical Structure of a Product
c l
r a
• A bill of material describes the physical structure of a product and identifies the material
(and material overhead) cost of the product.
O ly
• A bill of material contains information on the parent item, components, attachments, and
l & On
descriptive elements. Each standard component on a bill can have multiple reference
designators and substitute components.
a e
• You can create either an engineering or a manufacturing bill, copy an existing bill, or
n
t e r
reference a common bill.
U s
• When you create a bill, it exists only in the current organization. To use a bill in another
Prerequisites I n
organization, you must either copy it or reference it as a common bill.
l e
• Define the parent item and all components as inventory items and set the BOM Allowed
c
attribute to Yes and the BOM Item Type to model, option class, planning, or standard.
r a
Use the Bills of Material window to:
O • Enter a bill of material

• (N) BOM Bills > Bills
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Practice 10 - Defining Bills Of Material
Overview
In this practice you will define your Bills of Material. After you define routings, you must define
your Bills of Material. Routings are not useful if the people on the shop floor don’t know what
materials to use.
Assumptions
Tasks
1. Create the bills of material for your XX-COMP item.
2. Navigate to the Bills of Material window.

m y
• (N) Bills of Materials > Bills > Bills
d e
3. Enter the parts for the BOM and its components from the following tables:
ca
e A
Field Name Value
c l
Item
Item Seq. r
10a
XX-COMP
Operation Seq O ly
100
Component
l & On
XX-DERAIL
Quantity
n a e 2
Supply Type
Subinventory
t e r U s Operation Pull
Stores
I
Include in Rollup
n Yes
c l e
r a
O

Field Name Value
Item Seq. 20
Operation Seq 100
Component XX-BRAKES
Quantity 2
Supply Type Operation Pull
Subinventory Stores
Include in Rollup Yes
Field Name Value

Item Seq. 30
Operation Seq 100
Component XX-SADDLE
Quantity 1
Supply Type
Subinventory
Operation Pull
Stores
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Solution – Defining Bills Of Material
1. Create the bills of material for your XX-COMP item.
2. Navigate to the Bills of Material window.
• (N) Bills of Materials > Bills > Bills
3. Enter the parts for the BOM and its components from the following tables:
Field Name Value

Item XX-COMP
Item Seq. 10
Operation Seq 100
Component XX-DERAIL
Quantity 2
Supply Type
Subinventory
Operation Pull
Stores
m y
d e
ca
Field Name Value
e A
Item Seq.
Operation Seq
20
100
c l
Component
r a
XX-BRAKES
Quantity
O ly
2
Supply Type
l & On
Operation Pull
Subinventory
Include in Rollup
n a e Stores
Yes
t e r U s
I n
c l e
r a
O

Field Name Value
Item Seq. 30
Operation Seq 100
Component XX-SADDLE
Quantity 1
Supply Type Operation Pull
Subinventory Stores
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

4. Save your work.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Summary
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Summary of Costing
Information
Chapter 13
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Summary of Costing Information

Chapter 13 - Page 1
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 13 - Page 2
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 13 - Page 3
Objectives
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 13 - Page 4
Agenda Summary
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 13 - Page 5
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 13 - Page 6
Rolling Up and Updating
Costs
Chapter 14
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Rolling Up and Updating Costs

Chapter 14 - Page 1
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 14 - Page 2
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 14 - Page 3
Objectives
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 14 - Page 4
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 14 - Page 5
m y
d e
ca
e A
This-Level Costs
c l
r a
• The outside processing, resource, and overhead costs at the current level of an assembly
O ly
• Any material overheads earned upon completion of an assembly
Previous-Level Costs
l & On
• The material, material overhead, outside processing, resource, and overhead costs of the
n a e
components used in the manufacture of an assembly
Items Not Based on Cost Rollup (Purchased)
e r s
• For purchased items, this-level costs are the material and material overhead costs for the
t U
item. Purchased items do not have previous-level costs.
I n
c l e
r a
O

Chapter 14 - Page 6
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 14 - Page 7
Supply Chain Cost Rollup
m y
d e
ca
Single-Level Versus Full Cost Rollup
e A
Full Cost Rollup
c l
r a
• A full cost rollup first performs a bill of material explosion for the assemblies to determine
the structure to the lowest level. It then builds the cost of the assemblies starting with the
O ly
lowest level and works up the structure to the top-level assembly.
l & On
• This method gives you the most current costs for your assemblies because it reflects the
most current bill of material structure and component costs for your assemblies.
a e
• You cannot rollup costs in the frozen or average cost types.
n
Single-Level Cost Rollup
t e r U s
• Use a single-level rollup to avoid rolling up costs at lower levels. A single-level rollup
I n
looks only at the first level of the bill structure of each assembly being rolled and then
rolls the cost for the items at this-level into the parent.
l e
• This method does not reflect structure or cost changes that have occurred at levels below
c
the first level of your assemblies.
r a
• Use single-level rollups to assign costs to new assemblies when you do not want to roll up
O the lower levels and potentially revalue the lower levels when you perform a cost update.

Chapter 14 - Page 8
Report Options
The cost rollup process includes the option to print reports. You can select:
• Detail Indented
• Consolidated
• You can submit both of these reports when reporting item costs. You also have the option
to print a temporary rollup report, which enables you to review the rollup results before
changing the cost information.
Report Type
• The Detail Indented Report displays the cost structure by level.
• The Consolidated Report displays the quantities of each component used in the parent
assembly regardless of level.
Number of Levels
• You can select the number of levels to display on the report. For example, if your
assembly has 20 levels and you choose to report 10 levels, the costs for levels 1 through
10 are detailed and the costs for levels 11 through 20 are summarized as previous-level
costs.
Material, Material Overhead, and Routing Detail
• Select the amount of reported subelement detail:
• Yes for the material option to display the material subelements
• Yes for the material overhead option to display the material overhead subelements
• Yes for the routing option to display the resource, outside processing, and overhead
m y
subelements
d e
• If you select No, the costs are reported on the item. Select No when you want to limit the
report size.
ca
Flexibility
e A
• You have the flexibility to select exactly which items to roll up. You can roll up all items,
l
a range of items, a specific item, a category of items, or zero cost items only.
c
Effective Date
r a
• The effective date determines the structure to be used in the cost rollup. Using this option
O ly
you can roll up historical or future structures using current rates and component costs.
Include Unimplemented ECOs
l & On
• You have the option to include unimplemented ECOs when you run a cost rollup.
a e
Alternate Bill, Alternate Routing, and Engineering Bills
n
t e r U s
• You have the option to perform a cost rollup using alternate bills and routings. You also
have the option to perform cost rollups using engineering bills.
I n
• (N) Cost > Supply Chain Costing > Supply Chain Cost Rollup (B) Submit a new request >
OK
c l e
Viewing Indented Cost Rollup Results Online
r a
Selecting the Cost Type
O • See your indented rollup results by item by cost type.

Chapter 14 - Page 9
• If you sum the unit costs for Level 1 items on the Indented Bills of Material window, the
total will not equal the total unit cost for the assembly item because this window does not
show the this-level costs for the assembly item. It shows only the previous-level costs.
Use the Indented Bills of Material window to view:
• The cost rollup results
• (N) Cost > Item Costs > Item Costs > View Costed Indented Bills (B) Find > OK
Viewing Item Costs by Cost Type
Use the Item Costs window to:
• View details by cost type.
• View elemental costs for all cost types.
• Select Views to view many windows that show a variety of costing information for a
specific cost type.
• Select Open to view Item Cost Details, including elemental cost information and extended
value.
• Select Costs to view user-defined and rolled-up item costs by cost element and
subelement.
• (N) Cost > Item Costs > Item Costs (B) Find > Views or Open or Costs
• (N) Inventory > Costs > Item Costs (B) Find > Views or Open or Costs
Use the Item Costs Summary window to:
m y
• Easily view your item costs and inventory value for all cost types.
d e
ca
• Select an item/cost type association. To define or view item cost information, you must
first select an item/cost type association since item costs are always associated with a cost
type.
e
A
c l
• (N) Cost > Item Costs > Item Costs (B) Find > Folder and format columns
r a
• (N) Inventory > Cost > Item Costs (B) Find > Folder and format columns
Reporting Rolled-Up Structures
Reports to Analyze Cost Changes O ly
& On
• Indented Bills of Material Cost Report: Report detail cost information for your items using
l
this report.
n a e
• Cost Type Comparison Report: Compare the new rolled-up costs to your frozen costs
using this report.
t e r U s
Reports to Analyze Rolled-Up costs and Compare Cost Changes
I n
• Inventory Standard Cost Adjustment Report
c l e
• Intransit Standard Cost Adjustment Report
• WIP Standard Cost Adjustment Report
r a
• Item Cost reports and Detailed Item Cost Report
Use the Indented Bills of Material Cost Report to:
O

• Report detail cost information for your items
• (N) Cost > Report > Cost > Item (B) Submit a new request > OK > Supply Chain
Indented Bills of Material Cost Report
Use the Cost Type Comparison Report to:
• Compare the new rolled-up costs to your frozen costs
• (N) Cost > Report > Cost > Item (B) Submit a new request > OK > Cost Type Comparison
Report
Cost Rollup Checklist
Use this checklist as a guide for the cost rollup
• Set up Oracle Bills of Material and Oracle Inventory Parameters.
• Enter your items and item costs.
• Enter your resource and overhead rates.
• Check your resource and overhead associations.
• Enter and review your bills and routings.
• Run a summary audit to validate your structures and information.
• Roll up your costs by cost type.
• Review your rolled-up costs using cost inquiries and reports.
- Bills of Material Cost Reports: Indented and Consolidated
m y
- Cost Type Comparison reports
- Standard Cost Adjustment Reports: Inventory, WIP and Intransit
d e
- Item Cost reports and Detailed Item Cost reports
ca
e
If needed, rerun your cost rollup and review the results until you are satisfied. A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Phantom Costing
m y
d e
ca
Phantom Costing
e A
Phantoms may be used
c l
r a
• To create component kits for easy data entry.
O ly
• To streamline the production process so that individual work orders are not necessary for
each phantom. If phantoms are used as service parts which are stocked, you can create
l & On
work orders for service parts with phantom routings that can be costed.
You can include phantom resource and overhead costs as well as material cost in each of the
following environments
n a e
t e r U s
• Average costing or standard costing
• Discrete manufacturing, repetitive manufacturing or flow manufacturing
I n
• Work order less completion
l e
Just like costs for any assembly, phantom costs can include resource and overhead costs and
can be included in cost rollups. However, phantom resources and overheads are rolled up and
c
r a
charged as this level cost.
You can see the behavior of phantoms in discrete jobs, repetitive schedules, flow schedules,
O new work orders, engineering change orders, or any BOM explosion.

Resources in Phantom Routings
• You can see resources in phantom routings in the WIP Operation Resources window.
Use the View Resource Requirements window to:
• View resource requirements for a specific discrete job or repetitive line and assembly.
• (N) Cost Operational Analysis > Work in Process > Resource
Requirements (T) Main > Quantities > Scheduling > Costing >Job or Schedule > Type,
Description
Resources in phantoms
• Keep all original department and overhead costs when charged
• Cannot be scheduled because the start date, completion date, and any other data are
derived from parent operations in the main routing
• Are listed each time they are used in any of the phantom operations to maintain more
visibility and are not consolidated
Transacting Resources
• You can transact resources in phantom routings in WIP and charge the following:
- Resources and department-based overhead
- Outside processing resources that are assigned to phantom routing operations
- Visibility
- You can view resource charges in the Pending Resource Transactions window and the
View Resource Transactions window. You can view phantom resources and overhead
m y
on reports but the original department information is not displayed.
d e
Setting Up Phantom Costing
Defining Bills of Material (BOM) Parameters
ca
rollup.
e A
• You decide at the organizational level whether to include phantom routings in your cost
c l
• When you install or upgrade your system, you set the two BOM parameters that control
r a
phantom costing, Use Phantom Routings and Inherit Phantom Operation Sequence, to
determine whether or not to include phantom costs.
O ly
• You can use BOM parameters to control inheritance of the operation sequence of the
for capacity-planning.
l & On
parent and the recognition of resources and overheads on phantom routings for costing and
a e
• The Use Phantom Routings parameter determines whether resources and overheads on
n
phantom
t e r
routings are recognized.
U s
I n
• The Inherit Phantom Operation Sequence parameter determines whether the components
on a phantom operation sequence are inherited to the parent routing or maintain their own
c l e
operation sequence.
Use the Parameters window to check the:
r a
• Use Phantom Routings parameter
• Inherit Phantom Operation Sequence parameter
O Manufacturing and Distribution Manager Responsibility

• (N) Bills Of Material > Setup > Parameters
Phantom Costing Reports
Job Value Reports and Performance Reports
• With these reports, you can print detailed cost information including phantom costs.
Discrete Job Value Report
• This report prints account information and detailed cost transaction information for
discrete and nonstandard asset jobs, including material, resources, resource- and move-
based overheads, scrap, completions, and variances.
Repetitive Schedule Value Report
• This report prints detailed repetitive schedule information, including material, resources,
resource- and move-based overheads, scrap, completions, and variances.
Expense Job Value Report
• This report prints detailed cost transaction information for nonstandard expense jobs.
Resource Performance Report
• This report compares actual resource units that you charge to a job or schedule to the
standard resource units; the report groups information by resource for job and schedules,
and by department for resources.
Data Reports and Routing Sheets
• The following reports list phantom resources, excluding their departments, because
department information is shown together with operations.
Discrete Job Data Report
m y
• This report prints complete details for each job, including operations, resources,
requirements, accounting information, instructions, schedule dates, and quantities. d e
Repetitive Schedule Data Report
ca
e
component information, operation information, and resources. A
• This report includes complete details for each repetitive schedule, such as production line,
Discrete Job Routing Sheet Report

c l
attachments. r a
• This report prints all operations for jobs, as well as operation resources, materials, and
O ly
Repetitive Schedule Routing Sheet Report
materials, and attachments.

l & On
• This report prints all operations for repetitive schedules, as well as operation resources,
a e
In BOM parameters we will demonstrate how to change parameters for phantom costing in
n
Seattle, M1.
t e r U s
• Navigate to the Parameters window
I n
- (N) Bills Of Material > Setup > Parameters
l e
• Check Use Phantom Routings and Inherit Phantom Op Sequence and save.
c
r a
• Uncheck Use Phantom Routings and uncheck Inherit Phantom Op Sequence and save.
• Check Use Phantom Routings. A message appears stating that the field is protected
O against update.

• Check Inherit Phantom Op Sequence and save.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Practice 11 - Supply Chain Cost Rollup
Overview
You have completed the setup work and want to roll up the costs that you created for this bill of
materials.
Assumptions
Tasks
Rolling Up Your Supply Chain Costs
1. Navigate to the Submit Request window and submit a Supply Chain Cost Rollup.
m y
• (N) Cost > Requests > (B) Submit a New Request > (B) OK
d e
2. In the Name field, select Supply Chain Cost Rollup – Print Report.
ca
3. Press <tab> or click in the Parameters field. The Parameters window appears.
e A
4.
l
Enter the parameters from the following table:
c
Field Name r
Value
a
Cost Type O ly
XX-CST-1
Conversion Type
l & On
Corporate
Rollup Option
n a e
Full cost rollup
Range
Report Type
t e r U s
Specific Item
Detailed Indented
Material Detail
I n Yes
c l e
Material Overhead Detail
Routing Detail
Yes
Yes
O ra
Report Number of Levels
Effective Date
10
Today (DD-MMM-YYYY)

Include Unimplemented ECOs No
Alternate Bill <blank>
Alternate Routing <blank>
Engineering Bills No
Lot Size Option Use Existing Lot Size
Lot Size Setting <blank>
Specific Item XX-MB2XR
Specific Items (Range) Click the Cancel button
5. Click OK in the Parameters window.
6. Click Submit in the Submit Request window. Request number ________________
When you submit the request, the Find Requests window appears.
7. Click (B) Find and verify that your request completed normally.
8. When the status is completed as normal, navigate to the view costs window.
9. Select the Cost Type: XX-CST-1
10. Click Find and view the costs of your items.

m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Solution – Supply Chain Cost Rollup
Please wait until told to proceed
The instructor will set the parameters
Use Phantom Routings
√ Inherit Phantom Op Seq
• (N) Bills Of Materials > Setup > Parameters
Students Continue From Here
1. Navigate to the Submit Request window and submit a Supply Chain Cost Rollup.
• (N) Cost > Requests > (B) Submit a New Request > (B) OK
2. In the Name field, select Supply Chain Cost Rollup – Print Report.
3. Press <tab> or click in the Parameters field. The Parameters window appears.
m y
4. Enter the parameters from the following table:
d e
Field Name Value ca
Cost Type XX-CST-1
e A
Conversion Type
l
Corporate
c
Rollup Option
Range r a
Full cost rollup
Specific Item
Report Type O ly
Detailed Indented
Material Detail
l & On
Yes
Material Overhead Detail
n a e Yes
Routing Detail
t
Report Number of Levels e r U s Yes
10
Effective Date
I n Today (DD-MMM-YYYY)
c l e
Include Unimplemented ECOs
Alternate Bill
No
<blank>
r a Alternate Routing <blank>
O Engineering Bills No

Lot Size Option Use Existing Lot Size
Lot Size Setting <blank>
Specific Item XX-MB2XR
Specific Items (Range) Click the Cancel button
5. Click OK in the Parameters window.
6. Click Submit in the Submit Request window. Request number ________________
7. Click Find and verify that your request completes normally.
8. When the status is completed as normal, navigate to the view costs window.
9. Select the Cost Type: XX-CST-1
10. Click Find and view the costs of your items.

m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

√ Use Phantom Routings
m y
d e
Inherit Phantom Op Seq
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Practice 12 - Supply Chain Cost Rollup Analysis
Overview
In this practice you will analyze the item costs for item XX-MB2XR.
Assumptions
Tasks
Analyzing Item Costs
2. Close the Find Item/Cost Type window.

m y
3. Press <F11> to begin a query and enter the following:
d e
− Item = XX%
− Cost Type = XX%.
ca
4. Press <Ctrl> <F11> to run the query.
e A
5. Select the item XX-MB2XR.
c l
6. Click Views (B). r a
O ly
7. Select Element by sub-element.
l & On
8.
n a e
Select the Material cost element line.
9. Click Details (B)
t e r U s
I n
c l e
11. Repeat this process for Material Overhead, Overhead, and Resource cost elements.
r a
O

Solution – Supply Chain Cost Rollup Analysis
Analyzing Item Costs
1. Navigate to the Item Costs Summary window:
2. Close the Find Item/Cost Type window.
3. Press <F11> to begin a query and enter the following:

− Item = XX%
− Cost Type = XX%.
4. Press <Ctrl> <F11> to run the query.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

5. Select the item XX-MB2XR.
6. Click Views (B).
7. Select Element by sub-element.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

8. Select the Material cost element line.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

11. Select the Material Overhead cost element line.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

14. Select the Overhead cost element and XX-BENEFIT Sub-Element line.
15. Click Details (B).
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

17. Select the Overhead cost element and XX-UTILITY Sub-Element line.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

20. Select the Resource cost element and XXASSMBLR Sub-Element line.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

23. Select the Resource cost element and XXSPEC Sub-Element line.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

26. Select the Resource cost element and XXTESTER Sub-Element line.
m y
d e
ca
e A
c l
28. Close all windows.
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

How the Standard Cost Update Works
m y
d e
ca
Cost Update
e A
How the Standard Cost Update Works
c l
r a
• Copies the specified cost type to the Frozen cost type.
• Creates item cost history.
O ly
• Submits standard cost adjustment reports.
l & On
• Inventory Standard Cost Adjustment Report
a e
• Intransit Standard Cost Adjustment Report
n
t e r
• WIP Standard Cost Adjustment Report
s
• Automatically creates accounting transactions.
U
I n
Updating Standard Costs
• If you have performed transactions, you need to implement your costs by performing a
l e
standard cost update.
c
• If you have performed a cost roll up, then you use this function to update cost type
r a “frozen” whether you have transactions or not.
O Updating Your Costs by Cost Type: Update your frozen standard costs from any cost type you
select.

• Adjustment Account
- You specify the account to use as an offset to the inventory valuation change.
- Oracle Cost Management (OCM) automatically revalues any onhand and intransit
items whose
costs have changed during the update.
• Work in Process
- OCM automatically revalues open discrete and asset nonstandard jobs. You define an
offset account for each WIP accounting class.
• Revalued in the Cost Update
- Onhand inventory
- Intransit inventory
- Discrete jobs (with statuses of charges allowed)
- Asset nonstandard jobs (with statuses of charges allowed)
• Not Revalued in the Cost Update
- Repetitive schedules
- Nonstandard expense jobs
Based-on-Rollup Items
• You can manually maintain the “based on rollup” flag which determines if the cost is
based on the BOM or not.
- A based-on-rollup item is an item whose structure is exploded during the cost rollup
m
process. If the “based on rollup” flag on the item cost record is checked, the system
y
uses the roll up to derive the item cost.
d e
ca
- A not based-on-rollup item means the cost rollup does not explode the structure. If
the “based on rollup” flag on the item cost record is not checked, the system does not
use the roll up to derive the item cost.
e
- Purchased items usually are not based-on-rollup items. A
Incompatible Processes
c l
r a
• The standard cost update does not execute during the performance of an interim GL
transfer, period close, or job close across all organizations (and vice versa).
O ly
• If a standard cost update is submitted and another standard cost update is already running
• Update Option
l & On
in the same organization, it waits in the concurrent manager until the initial one finishes.
a e
- You can select to update not only your item costs but also your activity, resource, and
n
t e r
- Running the Cost Update
U s
overhead rates from the cost type you select at the time of the cost update.
I n
- You can perform a cost update at any time.
• Saving Details
l e
- You can select to save the details of your cost updates and use them to rerun your cost
c adjustment reports.
r a
Use the Launch Cost Update window to:
O • Update frozen standard costs from any cost type you select

• (N) Cost > Item Costs > Standard Cost Update > Update Costs
• (N) Inventory > Costs > Standard Cost Update > Update Costs
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Practice 13 - Cost Update
Overview
You will now update from your costs to the frozen cost. For expediency, we will only update one
cost type (XX-CST-1). Please note that you will be doing this for each item.
• Examine the window you will be updating.
• Process transactions to revalue inventory.
• Update the costs.
• View item cost information to verify that costs were updated properly.
• Review the cost history.
Assumptions
m y
d e
ca
e A
Tasks
c l
Examining Frozen Costs
r a
1.
O ly
View the Frozen costs of your items in the Item Costs Summary window. These are the
& On
costs that you are about to update.
l
Revalue Inventory
n a e
t e r U s
During the Cost Update process, Oracle runs the following reports to revalue inventory:
− Inventory Standard Cost Adjustment Report
I n
− Intransit Standard Cost Adjustment Report
− Wip Standard Cost Adjustment Report
c l e
r a
O

To see the results of these reports, you will process four transactions:
− Miscellaneous receipt of 100 XX-BARS
− Intransit shipment of 10 XX-BARS
− A discrete job for 100 XX-MB2XR
− A move transaction for the discrete job
Miscellaneous Receipt
Process a miscellaneous receipt transaction for 100 XX-BARS.
2. Enter the following data in the Miscellaneous Transaction window:
Field Name Value

Date Today’s Date
Type Miscellaneous Receipt
Source <blank>
Account Miscellaneous or (01-520-5390-0000-000)
3. Click (B) Transaction Lines.

m y
d e
ca
Field Name Value
e A
Item
Subinventory
XX-BARS
c
Stores
l
Quantity
r
100a
O ly
l & On
Intransit Shipment
n a e
5. t r U s
Process an intransit shipment of 10 XX-BARS.
e
Enter the following data in the Inter-organization Transfer window:
I n
c l e
Field Name Value
O ra
Date
To Org
Today’s Date
M3-Dallas Manufacturing

Type Intransit Shipment
Number XX-1234
6. Click (B) Transaction Lines
7. Enter the following data in the Intransit Shipment window:
Field Name Value

Item XX-BARS
Subinventory Stores
To Subinventory Stores
Create a Discrete Job
Create a discrete job for XX-MB2XR
8. Enter the following data in the Discrete Jobs window:
Field Name Value

m y
Job XX-PRE-UPDATE
d e
Assembly XX-MB2XR
ca
Status
Quantities Start
Released
100
e A
Dates Start
c l
Today’s Date
r a
Move Your Discrete Job O ly
Move your discrete job for XX-MB2XR
l & On
n a e
9.
t e r
Enter the following data in the Move Transactions window:
U s
Field Name
I n Value
Job
c
From Seql e XX-PRE-UPDATE
100
r a From Step Queue
O To Seq 300

To Step To Move
Quantity 100
Update The Costs
10. Enter the following parameters in the Requests window:
Field Name Value

Cost Type XX-CST-1
Adjustment Acct Std Cost Var (or use 01-520-5390-0000-000)
Description Update MB2XR Costs
Item Range All Items
Sort Option Accept default
Update Option Overhead, Resource, and Item Costs
System Items <tab through>
Low/High Items <tab through>
11. Request number ___________________________
m y
d e
Note: The completion of the Cost Update started three reports: ca
e A
c l
− WIP Standard Cost Adjustment Report
r a
View the Adjustment reports by clicking on the respective line and clicking (B) View
Output.
O ly
updated properly. l & On
View the item cost information in the Cost Summary window to verify that the costs were
n a e
t e r s
13. Review a sampling of your items in the Standard Cost History window and verify that the
costs have updated from XX-CST-1 to Frozen.
U
I n
14. Enter one of your items and click (B) Find to view your item. Use the query functionality to
c l e
retrieve all of your items.
15. Select the Cost Update tab.
r a
16. Select the Cost Element tab.
O

Solution – Cost Update
Examining Frozen Costs
2. Enter the following search criteria:

− Item = XX%
− Cost Type = Frozen
3. Click Find (B).
4. You can also run a query from the Item Costs Summary window:
− Close the Find Item/Cost Type window
− Press <F11> to enter a query
− Item = XX%
− Cost Type = Frozen
− Press <Ctrl> <F11> to run the query, or <F4> to cancel.
m y
5. View the Frozen costs of your items. These are the costs that you are about to update.
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

m y
d e
Revalue Inventory
During the Cost Update process, Oracle runs the following reports to revalue inventory: ca
e A
c
− Wip Standard Cost Adjustment Reportl
r a
To see the results of these reports, you will process four transactions:
O ly
− Miscellaneous receipt of 100 XX-BARS
l & On
− Intransit shipment of 10 XX-BARS
− A discrete job for 100 XX-MB2XR
a e
− A move transaction for the discrete job
n
t e r U s
Miscellaneous Receipt
I n
l e
Process a miscellaneous receipt transaction for 100 XX-BARS.
c
6.
r a Navigate to the Miscellaneous Transaction window.
O • (N) Inventory > Transactions > Miscellaneous Transaction

Field Name Value

Date Today’s Date
Type Miscellaneous Receipt
Source <blank>
Account Miscellaneous or (01-520-5390-0000-000)
m y
d e
ca
e A
c l
r a
Field Name
O ly
Value
Item
l & On
XX-BARS
Subinventory
Quantity
n a e Stores
100
t e r U s
I n
c l e
r a
O

10. Save your work.
Intransit Shipment
Process an intransit shipment of 10 XX-BARS.
11. Navigate to the Inter-organization Transfer window.
• (N) Inventory > Transactions > Inter Organization Transfer

m y
d e
Field Name Value
ca
Date
To Org
Today’s Date
M3-Dallas Manufacturing
e A
Type
c l
Intransit Shipment
Number
r a
XX-1234
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

m y
13. Click (B) Transaction Lines
d e
ca
e A
Field Name Value
c l
Item
Subinventory r a
XX-BARS
Stores
To Subinventory O ly
Stores
l & On
n a e
t e r U s
I n
c l e
r a
O15. Save your work.

Create a Discrete Job
Create a discrete job for XX-MB2XR
16. Navigate to the Discrete Jobs window.
• (N) Work in Process > Discrete > Discrete Jobs
17. Click (B) New and enter the following data:
Field Name Value

Job XX-PRE-UPDATE
Assembly XX-MB2XR
Status Released
Quantities Start 100
Dates Start Today’s Date
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
18. Save your work.
O

Move Your Discrete Job
Move your discrete job for XX-MB2XR
19. Navigate to the Move Transactions window.
• (N) Work in Process > Move Transactions > Move Transactions
Field Name Value

Job XX-PRE-UPDATE
From Seq 100
From Step Queue
To Seq 300
To Step To Move
Quantity 100
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O21. Save your work.

Update The Costs
22. Navigate to the Requests window.
• (N) Cost > Item Costs > Standard Cost Update > Update Costs
• Select the request name Update Standard Costs
23. Enter the following parameters:
Field Name Value

Cost Type XX-CST-1
Adjustment Acct Std Cost Var (or use 01-520-5390-0000-000)
Description Update MB2XR Costs
Item Range All Items
Sort Option Accept default
Update Option Overhead, Resource, and Item Costs
System Items <tab through>
Low/High Items <tab through>
m y
24. Click (B) OK.
d e
25. Click (B) Submit. Request number ___________________________
When you submit the request, the Find Requests window appears. ca
e A
l
c
r a
Note: The completion of the Cost Update started three reports:
O ly
& On
− WIP Standard Cost Adjustment Report
l
n a e
t e r U s
I n
c l e
r a
O

View the Adjustment reports by clicking on the respective line and clicking (B) View
Output. m y
View the item cost information to verify that the costs were updated properly. d e
27. Navigate to the Item Cost Summary window. ca
e A
c l
Frozen.
r a
28. Review a sampling of your items and verify that the costs have updated from XX-CST-1 to
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

29. Navigate to the Standard Cost History to view the Cost History.
m y
• (N) Cost > Item Costs > Std Cost Update > View Cost History
d e
30. Enter the Date: Today (DD-MMM-YYYY) or the date of the last cost update.
ca
A
31. Enter one of your items and click (B) Find to view your item. Use the query functionality to
e
retrieve all of your items.
c l
32. Select the Cost Update tab.
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

33. Select the Cost Element tab.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O34. Close the windows.

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Item Cost Inquiries
m y
d e
ca
Item Cost Inquiries
e A
Use the Item Costs Summary window to:
c l
• View costs by cost type.
r a
O ly
• (N) CST Item Costs > Item Costs (B) Find > Views or Open or Costs
l & On
• (N) INV Costs > Item Costs (B) Find > Views or Open or Costs
a e
Viewing Item Standard Cost History
n
e r
• Your updated item costs and adjustment values are saved.
s
• You can view standard cost history and inventory adjustment values and quantities for
your items. t U
I n
• All historical cost information for your items is displayed for each cost update, even if you
c l e
did not select to save cost update details.
• All item costs updated or defined using the Define Item Cost window are also displayed.
r a
• If you share costs and are accessing this window from the costing master organization,
you can select to view the adjustment values for the current organization only or for all
O organizations that share the same standard costs.

• If you access this window from a child organization (non-costing master organization),
you can view only the adjustment values for that organization.
Prerequisites
• To view cost information, the Privilege to View Cost security function must be included
as part of the responsibility.
Use the Standard Cost History window to:
• List item cost updates
• View item standard cost history
• By adjustment values
• By cost elements
• (N) CST Item Costs > Standard Cost Update > View Cost History (B) Find
• (N) INV Costs > Standard Cost Update > View Cost History (B) Find
All Costs are Transferred
• You can update all costs that the update process selects into your frozen costs. You can
view your costs using many item cost inquiries.
• If the window displays values in columns that are underlined, you can perform row-level
drilldown as well as column-level drilldown by selecting the particular column
• Use the Item Costs Summary window to:
- View your item costs and inventory value by cost type.
- Select an item/cost type association. m y
d e
- (N) CST Item Costs > Item Costs (B) Find > Folder and format columns
- (N) INV Costs > Item Costs (B) Find > Folder and format columns ca
Cost Update Checklist
e A
c l
• Review your pending changes before you perform your update.
• Avoid running your cost update while you are closing your inventory accounting period.
r a
• If possible, run your cost update at the beginning of your inventory accounting period
O ly
before any transactions have been processed.
Purging Cost Update Details
l & On
• When you run the cost update, you can save adjustment details. These details include the
n a e
onhand quantities in inventory and work in process. Use the Purge Standard Cost History
window to purge the details when you do not need to rerun the adjustment reports for a
previous cost update.
t e r U s
• Use the Purge Standard Cost History window to:
I n
- Purge details of a standard cost update by date and time
l e
c
- (N) CST Item Costs > Standard Cost Update > Purge Standard Cost History
r a - (N) INV Costs > Standard Cost Update > Purge Standard Cost History
O

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Copying Costs
m y
d e
ca
Copying Costs
e A
Copying Costs from Cost Type to Cost Type
c l
r a
• Copy from one cost type to another and specify an
item or category range.
O ly
• Copy from the Frozen cost type, but you cannot
copy to the Frozen cost type.
l & On
• Under average costing, copy from the Average cost
a e
type, but you cannot copy to the Average cost type.
n
t e r U s
• Copy item costs within an organization or across organizations. Within an organization,
copy resource and overhead costs or associations.
I n
• There are three copying options: Merge and update existing costs, copy over new
information only,
l e
remove and replace all cost information.
c
Copying Item and Other Costs
r a
• Copy your item costs within an organization.
O • Copy your item costs across organizations.

• If you are copying costs across organizations, ensure that both organizations have identical
subelement names, resources, overheads, departments and so on.
• Copy your resource and overhead rates separately.
• Copy your overhead and resource associations separately.
Use the Copy Cost Information window to:
• Copy your item costs
• (N) Cost > Cost Mass Edits > Copy Cost Information
• (N) INV Costs > Cost Mass Edits > Copy Cost Information
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Practice 25 - Copying Costs Across Organizations
Overview
You can copy costs from one manufacturing organization to another. Oracle did not allow this
with earlier releases because the two organizations likely had different sub-elements, especially
for resources and overheads. Copying costs from one Manufacturing Standard Cost organization
to another is possible.
In this practice you will copy your item costs from the M1 Seattle Manufacturing organization
into the M2 Boston Manufacturing organization.
Assumptions
Tasks
m y
Verify Item Costs
d e
ca
M2 Boston Manufacturing is set up as a standard cost organization. View your XX-Item costs in
M2.
e A
1.
l
Change your organization to M2 Boston Manufacturing.
c
2. Navigate to the Item Costs window.
r a
3.
O ly
Close the Find Item/Cost Type window and run a query for item XX%.
l & On
Copying Item Costs
n a e
t e r U s
We will now copy item costs into the M2 organization.
4.
I n
Navigate to the Copy Cost Information window.
5.
l e
Select the request Copy Item Costs Across Organizations.
c
r
6. a Enter the following request parameters:
O

Field Name Value
Copy Option New cost information only
From Organization M1
From Cost Type XX-CST-1
To Cost Type Pending
Range All Items
Sub-Element Summary Option Create Sub-elements
Currency Conversion Type Corporate
Note: The Sub-Element Summary Options are:

− Create sub-elements: When the destination organization is missing a sub-element,
the application will create the sub-element using the absorption account from the
default sub-element for the element.
− Summarize sub-elements: When the destination organization is missing sub-
elements, the application will summarize their values into a user-specified summary
sub-element.
− Summarize non-matching sub-elements: When the destination organization is
missing some sub-elements, the application will summarize the non-matching sub-
element values into a user-specified summary sub-element.
m y
− Matching sub-elements: When the destination organization has defined the sub-
element, the application will use those sub-elements.
d e
7. Verify that your concurrent request has completed.
ca
8. View your XX-Item costs for the Pending cost type.
e A
9.
c l
Close the Find Item/Cost Type window and run a query for item XX%.
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Solution - Copying Costs Across Organizations
Verify Item Costs
M2 Boston Manufacturing is set up as a standard cost organization. View your XX-Item costs in
M2.
1. Change your organization to M2 Boston Manufacturing.
• (N) Inventory > Change Organization
2. Navigate to the Item Costs window.
3. Close the Find Item/Cost Type window and run a query:

− <F11>
− Item = XX%
− <Ctrl> <F11>
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O4. Close the window.

Copying Item Costs
We will now copy item costs into the M2 organization.
5. Navigate to the Copy Cost Information window.
• (N) Cost > Cost Mass Edits > Copy Cost Information
6. Select the request Copy Item Costs Across Organizations.
7. Click (B) Submit.
8. Enter the following request parameters:
Field Name Value

Copy Option New cost information only
From Organization M1
From Cost Type XX-CST-1
To Cost Type
Range
Pending
All Items
m y
Sub-Element Summary Option Create Sub-elements
d e
Currency Conversion Type Corporate
ca
e A
9. Click (B) OK.
c l
10. Click (B) Submit.
r a
O ly
11. Click (B) No to submit another request.
l & On
Note: The Sub-Element Summary Options are:
n a e
− Create sub-elements: When the destination organization is missing a sub-element,
the application will create the sub-element using the absorption account from the
t e r U s
default sub-element for the element.
− Summarize sub-elements: When the destination organization is missing sub-
I n
elements, the application will summarize their values into a user-specified summary
sub-element.
l e
− Summarize non-matching sub-elements: When the destination organization is
c missing some sub-elements, the application will summarize the non-matching sub-
r a element values into a user-specified summary sub-element.

− Matching sub-elements: When the destination organization has defined the sub-
O element, the application will use those sub-elements.

12. Verify that your concurrent request has completed.
• (N) Cost > Requests
• (M) View > Requests
13. Click (B) Find.
15. View your XX-Item costs for the Pending cost type.
16. Close the Find Item/Cost Type window and run a query:
− <F11>
− Item = XX%
− Cost Type = Pending
− <Ctrl> <F11>
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Editing Item Costs Using Mass Edits
m y
d e
ca
Editing Item Costs Using Mass Edits
e A
Mass Edits
c l
r a
• You can edit and change your costs, using mass edits. Each mass edit is a stored
procedure in the Oracle 8i database.
O ly
- Mass edit actual material costs
& On
- Mass edit existing material costs
l
Change Cost Shrinkage Rates
n a e
- Mass edit material overhead costs
e r s
• Edit your item shrinkage rates to a specified rate.
t U
• Edit your item shrinkage to be equal to your planning shrinkage rates.
I n
Mass Edit Actual Material Costs to Simulate Average Costing
l e
• You can create new costs based on a weighted average of open purchase orders, historical
c
purchase order receipts or actual payables invoice cost. Below is an example.
r a
• You can also use the mass edit as you do an item cost copy. Simply do not enter a fixed
rate, percentage, or amount. This is useful when you want to copy only buy (not based on
O rollup) or make (based on rollup) items.

• For consistency, you are limited to a single subelement because subelements may have
different basis types.
• If you change material costs, material overhead subelements with a basis type of Total
Value are also updated.
• There is no audit report available.
• Note: You can copy costs and edit them in one step.
Mass Edit Existing Material Costs
• Use this mass edit to change your material costs to a fixed rate, by a percentage change or
by an amount change.
Mass Edit Material Overhead Costs
• Use this mass edit to change your material overhead costs to a fixed rate, by a percentage
change or by an amount change.
Use the Mass Edit Cost Information window to:
• Edit your item costs using mass edits
• (N) CST Cost Mass Edits > Mass Edit Cost Information
• (N) INV Costs > Cost Mass Edits > Mass Edit Cost Information
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Purging Nonvaluation Cost Types
m y
d e
ca
Purging Nonvaluation Cost Types
e A
Purging Cost Information
c l
r a
• You can purge cost types and all costs within the cost type. Or you can purge only part of
the cost information, such as make or buy items, resource and outside processing costs,
O ly
overhead rates and amounts, or resource and overhead associations.
l & On
• You cannot purge frozen costs in standard costing or average costs in average costing.
• Note: This feature permanently removes the selected cost type information from the
a e
database. These records are not retrievable. You can safeguard selected cost types from
n
t e r U s
inadvertent purging by clearing the Allow Updates check box when defining cost types.
Use the Purge Cost Information window to:
I n
• Purge your item costs for a cost type
l e
• (N) CST Cost Mass Edits > Purge Cost Information
c
r a
• (N) INV Costs > Cost Mass Edits > Purge Cost Information
O

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Editing Item Control Accounts Using Mass Edits
m y
d e
ca
Editing Item Control Accounts Using Mass Edits
e A
Mass Edit Account Assignments
c l
r a
• Edit and change your item accounts the easy way.
O ly
• Mass edit account assignments for selected items. These accounts include Cost of Goods
Sold, Encumbrance, Expense, and Sales. You can edit your account assignments for all
l & On
items, a category of items, or a specific item.
• Item control accounts are item attributes and are maintained at either the master or
Organization level.
n a e
t e r U s
• Note: If you share standard costs, you may or may not share item accounts. If you need to
change your accounts, you must change them in all organizations.
Control Level
I n
• If the control level is set to the master organization, you can update only that account from
l e
the master organization.
c
r a
• If the master control account is maintained at the functional organization level, then you
can update that account for items in the current organization.
O Use the Mass Edit Item Accounts window to:

• Enter the account type to change for an item range
• (N) CST Cost Mass Edits > Mass Edit Item Accounts.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Summary
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Accounting for Inventory
Transactions for Average
Costing
m y
Chapter 15
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Accounting for Inventory Transactions for Average Costing

Chapter 15 - Page 1
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 15 - Page 2
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 15 - Page 3
Objectives
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 15 - Page 4
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 15 - Page 5
Overview of Average Costing
m y
d e
ca
Overview of Average Costing
e A
Recording Quantity Movements
c l
r a
• The system creates accounting entries that correspond to quantity movements.
Minimizing Accounting Entries
O ly
• The system creates accounting entries within an inventory organization. These accounting
& On
entries may be summarized by GL account code.
l
Subinventory Transfer
n a e
• The system records two transactions for the quantity movement, but only one transaction
Accounting Information
t e r
generates accounting entries.
U s
I n
• You can create separate accounting entries for material and material overhead costs.
c l e
Journal Source
• For both inventory and work-in-process entries, the journal source in Oracle General
r a Ledger is Oracle Inventory.

Transaction Types
O • Inventory valuation

Chapter 15 - Page 6
• Account entry
• Overhead absorption
• Resource absorption
• Receiving inspection
• Purchase price or rate variance
• WIP valuation
• WIP variance
• Interorganization payables
• Interorganization receivables
• Interorganization transfer credit
• Interorganization freight charge
• Average cost variance
• Intransit inventory
• Encumbrance reversal
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 15 - Page 7
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 15 - Page 8
Describing Average Costing
m y
d e
ca
Describing Average Costing
e A
Defining Average Costing
c l
r a
• The system uses this same average cost to value transactions. Using this average cost, you
can reconcile your inventory balances to your accounting entries.
O ly
Costing Production at a Perpetual Average Cost
& On
• You can use average costing in lieu of standard costing in a manufacturing environment.
l
n a e
• You can value your manufacturing inventory using a costing method based on actual
purchase prices, actual components and manufacturing resources used.
t e r U s
• You can hold inventory at average cost.
• You can record and accumulate items in inventory at an average cost and then add to, use,
I n
or move these items and have unit costs automatically updated.
c l e
Applying Material Overhead
• The system adds cost to an item or assembly to include material overhead type costs
r a (receiving, stocking, material movement, and handling) in your inventory valuation.

• The system applies predefined material overhead amounts to all items or to a group of
O items.

Chapter 15 - Page 9
• Included in current average cost calculations are:
- Asset items in asset subinventories
- Asset items intransit, where intransit is owned by this organization
Recalculating Costs
• With average costing, Oracle Cost Management:
- Recalculates unit costs on a transaction-based perpetual basis.
- Provides full visibility and control of costs.
- Tracks and reports costs through various stages as you transact.
Moving Average Cost Formula
• Oracle Cost Management uses the following formula to recalculate the average unit cost
of an inventory asset item: New Average Cost = (transaction value + current inventory
value) / (transaction quantity + current on-hand quantity)
• “Current” refers to the quantity and value of the item before the transaction is processed.
The following transactions use the moving average cost formula to update the average unit cost
of an item:
• Purchase order receipt and delivery to inventory
• Return to vendor from inventory
• Interorganization receipt
• Average cost update
• Assembly completion
m y
• Miscellaneous receipt (if user enters a transaction cost)
• Miscellaneous issue (if user enters a transaction cost)
d e
• Invoice price variance (IPV) transfer to inventory
ca
• For every subinventory in an average cost organization:
e A
• In an average cost organization, asset accounts are disabled at the subinventory level.
changed. c l
- Asset valuation accounts default from organization parameters and cannot be
r a
- Expense accounts can be changed.
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Setting Up Average Costing
m y
d e
ca
Setting Up Average Costing
e A
c l
Average Rates Cost Type for Average Costing Only
r a
• You initially define resource rates, overhead rates, material overhead rates or amounts,
and outside processing rates in an average rates cost type.
O ly
• In your inventory organization parameters, you designate one of your user defined cost
l & On
types as your average rates cost type.
• The system uses those rates to cost transactions from that point in time forward until you
a e
change or update them or use a different average rates cost type.
n
t e r
• The costing method as average
U s
I n
• The average rates cost type which is your user defined cost type that holds your average
resource and overhead rates and material overhead rates or amounts
l e
c
r a
• (N) INV Setup > Organizations > Parameters (T) Costing Information
Use the Cost Types window to create:
O

• Your user defined cost type that holds your average resource and overhead rates and
material overhead rates or amounts
• (N) CST Setup > Cost Types
Item Cost Controls
• The control level determines how item costs are maintained within an Inventory
organization.
• The costing organization must be set to the current organization as you cannot share costs.
• (N) INV Setup > Items > Attribute Controls
Elemental Costs During Inter-organization Transfers
• You can choose to transfer costs from the sending organization to the receiving
organization as individual elemental costs or to summarize them into the material element.
• You use the Shipping Network window to set the flag that determines whether costs
transfer elementally or as a summary.
• When you select the Elemental Visibility Enabled check box for a specific shipping
network setup, all the inter-organizational transactions from the shipping organization to
that specific receiving organization will be stored with elemental cost information.
• When this check box is cleared, all the cost will be summed to this level of material cost.
Use the Shipping Network window to:
• Set the flag that determines whether costs transfer elementally or as a summary
m y
d e
• (N) INV Setup > Organizations > Organizations > Shipping Networks
Upgrade in Average Costing
ca
• Both manufacturing and non-manufacturing customers use the same average costing
e
functionality. For example, you can now apply material overhead in inventory-only
A
organizations.
c l
Release 11i r a
Transition to the Inventory and WIP Weighted-Average Cost Processor When Upgrading to
O ly
• You use an update program to upgrade an existing release 11 Inventory-Only
Upgrade Criteria
l & On
manufacturing organization to the new average cost processor.
a e
• You should run the upgrade in average costing program when:
n
is not installed.
t e r U s
• You are operating in a release 11 inventory-only average costing environment, where WIP
I n
• You have costed all inventory transactions.
• You perform all inter-organization transactions using the current shipping networks.
l e
• Your system has no activity.
c
r a
Old Inventory-Only Average Costing
• You have costs that are held in this level material cost element.
O • You cannot earn material overhead.

• The material processor recalculates costs and the cost processor distributes them.
• You revalue average costs perpetually in the organization. Only a single average is
maintained in the organization.
New Inventory and WIP Average Costing
• You have this level and previous level costs. You have elemental (and subelemental)
valuation and elemental distribution of item costs.
• You can earn material overhead.
• The cost manager re-averages and distributes costs.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Average Cost Update
m y
d e
ca
Average Cost Update
e A
You can use the average cost update to
c l
r a
• Adjust your average costs easily. You need to have a non-zero on-hand quantity for the
average cost update to have any effect.
O ly
• Enter additional costs, such as freight or invoice price variances, or correct your average
costs as required.
• To a new average unit cost l & On
n a e
- You enter the new cost by cost element by level in a single update session, and the
t e r U s
new total unit cost will be automatically calculated.
- You enter a new total cost, and the amount of change will automatically be spread
I n
across all cost elements and levels in the same proportion as they existed before the
update.
l e
• By a percentage change:
c
r a - You select cost element(s) and level(s) to adjust up or down, and the new total unit
cost will be automatically calculated.
O

- You adjust the total, and the percentage change will automatically be applied to all
cost elements and levels.
• By a change in inventory value:
- You select cost element(s) and level(s) to be adjusted or adjust the total, and the
system will revalue on-hand inventory by that amount and recalculate the average
cost of the item.
Average cost update affects the cost of:
• Items in all asset subinventories in your organization.
• Inventory intransit that is owned by your organization.
Average cost update will not revalue
• Components and assemblies in WIP
• Expense items
• Items in an expense subinventory
• You post the revaluation offset to Average Cost Adjustment Accounts, which you specify
when you perform the average cost update.
• In an individual update session, you can make changes by cost element, choosing one,
several, or all cost elements.
Note
• Under average costing, the system automatically and perpetually keeps unit costs current.
• You use the average cost update to routinely update your costs to include invoice price
variances.
m y
• Otherwise, you should use the average cost update feature sparingly for corrections.
d e
Use the Update Average Cost window to enter:
• Details about your cost update
ca
• A default to use as the percentage change for individual item costs if you are updating
costs using a percentage change
e A
c
• An item for which to update average cost l
• A new average cost
r a
• A new on-hand inventory value, performed for the item at a summary level or for
O ly
individual cost elements by level.
& On
l
Adjusting Accounting Entry
n a e
• (N) Cost > Item Costs > Average Cost Update > Update Costs
e r s
• This-level costs and previous-level costs are adjusted in the valuation accounts, and the
t U
adjustments are recorded in the average cost adjustment accounts.
I n
c l e
r a
O

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Accounting for Inventory Transactions
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Accounting for Material Transactions
m y
d e
ca
Accounting for Material Transactions
e A
c l
The table below summarizes transactions and distributions in an average cost organization. The
table shows:
• Transactions r a
• Accounting Entries O ly
& On
• Derivation of Transaction Unit Costs
l
• Average Cost Recalculated?
n a e
Transactions and Distributions in an Average Cost Organization
Transaction: PO Receipt t e r U s Transaction Unit Cost:
Accounting Entries:
I n dr. Receiving Inspection PO price
l e cr. A/P Accrual

Average Cost Recalculated? No, same as current.
c
r a
--------------------------------------------------------------------------------------------
Transaction:PO Delivery to subinventory
O Accounting Entries: dr. Subinventory Valuation PO price +MOH

cr. Receiving Inspection PO price
cr. Material OH Absorption calc’d MOH
Average Cost Recalculated? Yes.
--------------------------------------------------------------------------------------------
Transaction: Adjustment to PO Delivery
Accounting Entries: dr./cr.Subinventory Valuation PO price +MOH
cr./dr.Receiving Inspection PO price
cr./Material OH Absorption calc’d MOH
Average Cost Recalculated? No. OK for adjustment to be @ different rate
from original transaction rate
--------------------------------------------------------------------------------------------
Transaction: Return to Receiving from subinventory
Accounting Entries: dr. Receiving Inspection PO price
dr. Material OH Absorption MOH
cr. Subinventory Valuation PO price +MOH
Average Cost Recalculated? Yes, if MOH had changed since receipt, must
use original rate— DOCUMENT.
--------------------------------------------------------------------------------------------
Transaction: Return to Vendor from Receiving Inspection
Accounting Entries: dr. A/P Accrual PO price
Average Cost Recalculated? No.

cr. Receiving Inspection
m y
--------------------------------------------------------------------------------------------
Transaction: Subinventory Transfer—asset subinventory to asset subinventory
d e
Accounting Entries: dr. Subinventory Valuation— receiver Current average
cr. Subinventory Valuation—sender
c a
Average Cost Recalculated? No, in and out of same accounts.
e A
--------------------------------------------------------------------------------------------
c l
Transaction: Subinventory Transfer—expense subinventory to expense subinventory
Accounting Entries:
a
No entries
r
O ly
Average Cost Recalculated? Not applicable, only quantities are impacted.
l & On
--------------------------------------------------------------------------------------------
Transaction: Subinventory Transfer—asset to expense or vice verse
a e
Accounting Entries: dr. Subinventory Valuation or Expense—receiver
n
t e r
cr. Subinventory. Valuation or Expense—sender

U s
I n
--------------------------------------------------------------------------------------------
l e
Transaction: Miscellaneous Receipt
c
Accounting Entries: dr. Subinventory Valuation Current average or U.S.
r a cr. User-specified Account Current average or user-specified (U.S.)

Average Cost Recalculated? Yes, if user overrides, new average is calculated.
O --------------------------------------------------------------------------------------------

Transaction: Miscellaneous Issue
Accounting Entries: dr. User-specified Account Current average or U.S.
cr. Subinventory Valuation
Average Cost Recalculated? Yes, if user overrides, new average is calculated.
--------------------------------------------------------------------------------------------
Transaction: RMA Receipt
Accounting Entries: dr. Subinventory Valuation Average cost of original
shipments on sales order line
cr. Cost of Goods Sold
Average Cost Recalculated? Yes, if reference to sales order line exists.
--------------------------------------------------------------------------------------------
Transaction: RMA Return
Accounting Entries: dr. Cost of Goods Sold Current average
cr. Subinventory Valuation Current average
--------------------------------------------------------------------------------------------
Transaction: Direct Interorg Transfer—expense to expense
Accounting Entries: No entries
Average Cost Recalculated? Not applicable. Applies to both standard and

average organizations.
-------------------------------------------------------------------------------------------
m y
Transaction: Direct Interorg Transfer—
Std org to Average org except expense to expense
d e
Accounting Entries: dr. Subinventory Valuation—receiver Standard
cr. Interorg Payable
ca
dr. Interorg Receivable
e
cr. Subinventory Valuation—sender A
c l
Average Cost Recalculated? Yes, recalculation of average cost is not
applicable if receiving subinventory is expense.
r a
-------------------------------------------------------------------------------------------
O ly
l & On
Average org to Average org excluding exp to expense
Accounting Entries: dr. Subinventory Valuation—receiver Current average
n a e
(sending org)
t e r U s
Average Cost Recalculated? Yes, (receiving org) recalculation of average cost is
I n not applicable if receiving subinventory is expense.

--------------------------------------------------------------------------------------------
l e
c
Average org to Standard org excluding expense to expense
r a
O cr. Interorg Payable

dr./cr.PPV—receiving org
(sending org)

cr. Subinventory Val—sender
Average Cost Recalculated? No, there is no PPV if receiving subinventory is expense.
--------------------------------------------------------------------------------------------
Transaction: Receipt from Intransit (Standard org) into Average org— FOB Receipt
Accounting Entries: dr. Subinventory Valuation—receiver Standard
cr. Intransit Inventory
Average Cost Recalculated? No, same as standard asset to average (intransit is
an asset subinventory).
--------------------------------------------------------------------------------------------
Transaction: Receipt from Intransit (Average org) into Average org— FOB Receipt
cr. Interorg Payable (sending organization)
cr. Intransit Inventory
Average Cost Recalculated? Yes, recalculation of average cost is not applicable if
receiving subinventory is expense.
--------------------------------------------------------------------------------------------
Transaction: Shipment to Intransit from Average org—FOB Receipt
Accounting Entries: dr. Intransit Inventory
cr. Subinventory Valuation or Expense
Current average
m y
Average Cost Recalculated? No, intransit is booked elementally, asset to intransit washes.
d e
--------------------------------------------------------------------------------------------
Transaction: Receipt from Intransit into Average org—FOB Shipment
ca
Accounting Entries: dr. Subinventory Valuation or Expense Current average
e
cr. Intransit Inventory A
l
Average Cost Recalculated? No, intransit to asset in and out of the same accounts.
c
r a
--------------------------------------------------------------------------------------------
Transaction: Shipment to Intransit (Average org ) from Standard org asset subinv—FOB
Shipment
O ly
l & On
Accounting Entries: dr Intransit Inventory
Standard
n a e
t e r
U s
--------------------------------------------------------------------------------------------
I n
Transaction: Shipment to Intransit (Avg org) from Std org expense subinventory—FOB
Shipment
l e
Accounting Entries:dr Intransit Inventory
c cr. Interorg Payable
Standard
r a dr. Interorg Receivable
O cr. Subinventory Valuation—sender


--------------------------------------------------------------------------------------------
Transaction: Shipment to Intransit (Avg) from Avg org—FOB Shipment
Accounting Entries:dr Intransit Inventory Current average
cr. Interorg Payable (sending organization)
Average Cost Recalculated? Yes, unit cost recalculated in receiving organization.
--------------------------------------------------------------------------------------------
Transaction: Inventory Adj— cycle count or physical inv
Accounting Entries: dr./cr.Inventory Adjustments Current average
cr./dr.Subinventory Valuation
Average Cost Recalculated? No, same as current.
--------------------------------------------------------------------------------------------
Transaction: Sales Order Shipment
Accounting Entries: dr. Cost of Goods Sold Current average
--------------------------------------------------------------------------------------------
Transaction: Receipt of Vendor Invoice
Accounting Entries: dr. A/P Accrual PO price
cr. Accounts Payable
dr/cr. IPV
Invoice
m y
Average Cost Recalculated? Not applicable.
--------------------------------------------------------------------------------------------
d e
Transaction: Issue to Job from subinventory
Accounting Entries: dr. Work in Process Inv Current average ca
e A
c l
Average Cost Recalculated? No, expense subinventory to expense job carries no cost.
--------------------------------------------------------------------------------------------
r a
Transaction: Component Return to subinventory
O ly
Accounting Entries: dr. Subinventory Valuation
cr. Work in Process Inv
Current average

l & On
a e
--------------------------------------------------------------------------------------------
n
e r
Transaction: Charge Labor Resource to WIP job
s
Accounting Entries: dr. Work in Process Inv
t U
cr. Resource Absorption
Actual
I n
Average Cost Recalculated? Not applicable. standard rate = No;
charge type = Manual; actual employee rate.
l e
--------------------------------------------------------------------------------------------
c
r a
Transaction: Charge Non-Labor Resource to WIP job
Accounting Entries: dr. Work in Process Inv User-defined
O

cr. Resource Absorption
Average Cost Recalculated? Not applicable. Pre-defined rate or actual rate.
--------------------------------------------------------------------------------------------
Transaction: Charge Overhead to WIP job
Accounting Entries: dr. Work in Process Inv Calculated OH
cr. Overhead Absorption
Average Cost Recalculated? Not applicable.
--------------------------------------------------------------------------------------------
Transaction: Charge Outside Processing to WIP job
Accounting Entries: dr. Work in Process Inv PO price
cr. OSP Resource Absorption
Average Cost Recalculated? Not applicable. standard rate = No.
--------------------------------------------------------------------------------------------
Transaction: Complete Assemblies
Accounting Entries: dr. Subinventory Valuation Calc avg +MOH
cr. Work in Process Inv calc avg
cr. Material OH Absorption calc’d MOH
Average Cost Recalculated? Yes, completion algorithm calculations based on job charges.
--------------------------------------------------------------------------------------------
Transaction: Return Assemblies to WIP
Accounting Entries: dr. Work in Process Inv
dr. Material OH Absorption
Average cost of
job completions
m y
d e
--------------------------------------------------------------------------------------------
Transaction: Scrap Assemblies from WIP ca
Accounting Entries: dr. Scrap
e
Calculated A
c l
Average Cost Recalculated? Not applicable. If checkbox Require Scrap Account is checked,
scrap calcs are based on job charges
r a
--------------------------------------------------------------------------------------------
Transaction: Reverse Scrap O ly
l
cr. Scrap & On
Accounting Entries: dr. Work in Process Inv Average cost of job scrap

n a e
t e
Transaction: Close WIP Jobs r U s
--------------------------------------------------------------------------------------------
I n
Accounting Entries: dr. Variance
l e
Average Cost Recalculated? Not applicable. Entries only if job has a residual
c
--------------------------------------------------------------------------------------------
r a
Transaction: Average Cost Update
Accounting Entries: dr/cr. Subinventory Valuation User-specified
O

cr/dr. Inventory Adjustment
Average Cost Recalculated? Yes, enter % or amount of change, or new unit cost.
--------------------------------------------------------------------------------------------
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Transaction Processing
m y
d e
ca
Transaction Processing
e A
Sequencing Transactions
c l
r a
• Accurate calculation of the average cost relies on the sequence of transactions. If
transactions are processed out of sequence, incorrect values may result. All transactions
O ly
should carry an accurate transaction date and time.
l & On
• To ensure proper sequencing the cost processor should run less often than the material
transactions are processed. If material transactions are imported from external devices or
a e
systems (for example, from bar code devices), the cost processor should run less often
n
Processing Costs
t e r
than the material transaction import process.
U s
I n
• The transaction processor updates on-hand quantities of items. It is set to run either:
• Periodically (in the background)
l e
• Or online (quantities are updated immediately and the system does not allow you to
c
proceed until the update finishes).
r a
• The cost processor only processes transactions that have successfully passed through the
O material transaction processor.

Backdating Transactions
• You can backdate transactions. All transactions are processed in date and time sequence,
based on the date and time recorded on the transaction. Transactions processed previously
are not reprocessed to take account of any transactions that are dated earlier but processed
later. Therefore the timing and frequency of running the cost processor affects the
accuracy of costing.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Viewing Item Cost History
m y
d e
ca
e A
Item Unit Cost History
c l
r a
• In an average cost organization, you need to be able to see how the unit cost of an item
changed over time and what caused those changes.
O ly
• When you look at the display of the item cost history, you see all the transactions for an
- Transaction date. l & On

item occurring in a user-specified date range. You see:
- Type of transaction.
n a e
t e r
- Prior quantity and cost.
U s
- Transaction quantity and cost.
I n
- New quantity and cost.
c l e
• You can select to view only the transactions that changed unit costs.
r a
• Use the Item Cost History window to:
O - View changes in unit costs.

- See a visual picture of the history of the cost of an item over a specified period of
time.
- See a graphic representation of the history of the cost of an item by clicking the graph
button.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Inventory Purchasing Transactions
m y
d e
ca
Inventory Purchasing Transactions
e A
c l
One Step Receiving: Dock to stock in one transaction
r a
• Transaction and entry recorded in purchasing for the receipt (dock) and transaction and
entry recorded in inventory for the delivery (stock). There is not an option to inspect and
O ly
the receipt routing will be derived from the purchase order line as direct.
directly to inventory.
l & On
• To receive material from a vendor in one step, you can use the Receipts window to receive
a e
• The resulting transactions are always a receipt and then a delivery.
n
t e r U s
Two Step Receiving: Dock in one transaction and stock in a separate transaction.
• Transaction and entry recorded in purchasing for the receipt. A separate transaction on a
I n
separate screen records the transaction and entry in inventory for the delivery. There is not
an option to inspect and the receipt routing will be derived from the purchase order line as
l e
standard.
c
• To receive material from a vendor in two steps, you use the Receipts window to receive to
r a receiving and the Receiving Transactions window to move material from receiving to
inventory.
O

• The resulting transactions are always a receipt and then a delivery.
Inspection: Dock in one transaction
• Transaction and entry recorded in purchasing for the receipt.
• Inspection is completed next. After the item is inspected, the delivery into stock occurs
and the transaction and entry is recorded. The receipt routing on the purchase order line
will say inspection.
• There is not an entry recorded during the inspection. It is considered “on the dock”.
Receipts to Receiving and Delivery to Inventory
• Oracle Purchasing uses the quantity received and the purchase order price to update the
Inventory AP Accrual accounts, Receiving Inspection accounts and Subinventory
accounts. These accounting entries always occur, regardless of one- or two-step receiving.
• Oracle Purchasing uses the purchase order cost, converted into functional currency using
either the purchase order exchange rate or the receiving exchange rate (depending on the
matching option recorded on the purchase order shipment line).
Account Definitions
• You define the Inventory AP Accrual in the Organization Parameters window, using Other
Accounts.
• You define the Receiving Inspection account in the Receiving Options window in Oracle
Purchasing or in Oracle Inventory.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Transferring Invoice Price Variance
m y
d e
ca
Transferring Invoice Price Variance
e A
c l
Run the Invoice Price Variance (IPV) Report to:
r a
• Review the IPV adjustments suggested by the system for items in inventory.
O ly
• View the variance by part number so that you can analyze which items may or may not
need adjustment.
& On
l
n a e
- (N) Cost > Item Costs > Average Cost Update > Transfer Invoice Variance
Transfer IPV to Item Cost in Inventory
e r s
• Use the Transfer Invoice Variance window to:
t U
- Transfer invoice price variance directly to inventory rather than to an expense
account.
I n
c l e
- If the quantity is zero or negative, you perform an average cost update and move IPV
to average cost variance.
r a
- (N) Cost > Item Costs > Average Cost Update (T) Transfer Invoice Variance
O Subinventory Transfers

• You use subinventory transfers to move material from one subinventory to another
subinventory in the same inventory organization. An entry is recorded but the same cost is
used. You can move material from:
• Asset Subinventory to Asset Subinventory
• In average costing, there is no accounting impact for such a move because all
subinventories in an inventory organization share the same valuation accounts.
• Expense Subinventory to Expense Subinventory
• In average costing, there is no accounting impact for such a move.
Asset Subinventory to Expense Subinventory
• In average costing, the accounting impact for such a move credits valuation accounts and
debits expense accounts, writing off inventory to expense.
• Expense Subinventory to Asset Subinventory
• In average costing, the accounting impact for such a move credits expense accounts of the
expense subinventory and debits asset accounts at the current average cost of the item. As
a result, inventory valuation increases while the current average cost of the item remains
unchanged.
Miscellaneous Issues and Receipts
• You use miscellaneous transactions to:
- Issue material from a subinventory to a general ledger account or to an account alias.
- Receive material to a subinventory from a general ledger account or from an account
alias.
m y
- Transfer on-hand quantities into Oracle Applications from legacy systems and
establish average costs via the same transactions.
d e
Caution
• The system allows you to enter a transaction unit cost when performing a miscellaneous ca
issue.
e A
c l
• Under average costing, you should not allow the transaction unit cost to be entered
because entering a cost that is significantly different from the current average cost can
r a
cause large swings in the unit cost of remaining on-hand inventory.
O ly
• Because the form used for entering miscellaneous issues is a folder form, the Unit Cost
field is easily hidden, thereby prohibiting its use. If you choose to allow entry of the unit
l & On
cost, impose tight security on its use for the reason stated above.
Under average costing, you can enter a transaction cost for miscellaneous issues and for
miscellaneous receipts.
n a e
t e r U s
• A transaction occurring at a cost other than the current average cost results in a
recalculation of the item’s unit cost.
I n
• A user-entered cost is apportioned to cost elements, based on the elemental breakdown of
the current average cost. If no current cost exists, the entire amount goes to the material
l e
element (applies to receipts only).
c
r a
O

Interorganization Transfers
m y
d e
ca
Interorganization Transfers
e A
Shipping Information
c l
r a
• Accounting flows for interorganization transfers vary depending on whether you transfer
material directly from one organization to another or transfer material through intransit
inventory. O ly
l & On
• You use the Shipping Networks window to define the direct or intransit shipment type for
each shipping and receiving organization relationship.
a e
Direct Interorganization Transfers
n
t e r U s
• Interorganization Transfer Window
- You use the Interorganization Transfer window to move material directly from the
I n
shipping organization to the receiving organization.
• Transfer and Freight Charges
l e
- Transfer and freight charges are always credited to the shipping organization.
c
r a• Expense
- No entries are made for direct interorganization transfers of expense items in both
O standard and average cost organizations.

- There is no recalculation of average cost for direct interorganization transfers
received into expense subinventories of average cost organizations.
Direct interorganization transfers update the current average unit cost.
• For asset items, the total transaction value is used, including transfer and freight charges.
• The current average unit cost is recalculated in the receiving organization, if it is an
average cost organization.
Expense
• No entries are made for direct interorganization transfers of expense items in both
standard and average cost organizations.
• There is no recalculation of average cost for direct interorganization transfers received into
expense subinventories of average cost organizations.
Interorganization Transfers Using Intransit FOB Receipt
FOB Receipt
• FOB Receipt means that the item belongs to the shipping organization until the receiving
organization performs the Receipt transaction. Intransit inventory belongs to the shipping
organization.
Intransit Inventory and Inventory Accounts
• Intransit inventory represents material that has not yet arrived at the receiving
organization.
• You use the Interorganization Transfer window to move material from the shipping
organization to intransit inventory.
m y
• You use the Receipts window to move material from intransit inventory to the receiving
organization.
d e
the same. ca
• If the sending organization uses average costing, the inventory and intransit accounts are
A
• All cost elements from the sending organization plus any freight and transfer charges are
e
Freight Charges: FOB Receipt
c l
charged to the material cost element in the receiving organization.
r a
• If the FOB point is Receipt, the freight charges are credited to the shipping organization.
O ly
Since title has not passed, it is assumed that the shipping organization pays the freight.
• Interorganization Transfer Charges
l & On
• Transfer charges can be added to the cost of the shipment. The credit for transfer charges
n a e
always goes to the shipping organization.
Updating unit cost at time of ownership change for FOB receipt
e r s
• When the receiving organization is under average costing and the FOB point is “receipt,”
t U
the average unit cost in the receiving organization is updated when the receiving
I n
organization performs the Receipt transaction.
c l e
Interorganization Transfers Using Intransit FOB Shipment
FOB Shipment
r a• FOB Shipment means that the item belongs to the receiving organization as soon as the
shipping organization performs the Interorganization Transfer transaction. Intransit
O inventory belongs to the receiving organization.

Freight Charges: FOB Shipment
• If the FOB point is Shipment, the freight charges are credited to the receiving
organization. Since title has passed, it is assumed that the receiving organization pays the
freight.
• Inventory Accounts
• If the receiving organization uses average costing, the inventory and intransit accounts are
the same.
Updating unit cost at time of ownership change
• When the receiving organization is under average costing and the FOB point is
“shipment,” the average unit cost in the receiving organization is updated when the
sending organization performs the Interorganization Transfer transaction.
Customer Shipments and Returns
• Customer shipments are valued at the current average unit cost.
• Customer returns do not have to reference a sales order. In this case the return is valued at
current average cost. Return Material Authorizations
• When items are returned from a customer, you can select to receive them into a
subinventory.
• Currently, this transactions occurs at the current average cost.
Inventory Adjustments
• Cycle count and physical inventory transactions are valued at the current average unit
cost.
m y
• Both the cycle count transaction and the physical inventory transaction update the
inventory valuation accounts of the organization and offset the adjustment account you
d e
specify.
• You can use cycle counting and physical inventory to correct your inventory on-hand ca
balances.
e A
Cost Variance Account
• Negative on-hand Quantity Balances
c l
r a
- Oracle Cost Management (OCM) allows negative on-hand quantity balances which
O ly
occur because transactions are processed out of sequence. For costing purposes
negative balance is calculated across the whole organization, not per subinventory.
l & On
- When your inventory balances become negative and you receive additional material,
OCM uses the average cost variance account to balance the entry and minimize the
n a e
effect of this error in processing.
t e r U s
- This account represents the inventory valuation error caused by issuing your
inventory before receiving it.
I n
Unit Cost Integrity When Inventory Balance Is Negative
• You specify at the organization level whether negative quantities are allowed.
l e
• If negative quantities are not allowed, you are not permitted to make a transaction that
c
r a would result in a negative on-hand balance.
O

• If negative quantities are allowed, when a receipt (or transfer in) transaction occurs for an
item with negative on-hand inventory, the transaction is valued at the current average unit
cost or is valued in two parts.
• If the on-hand quantity is negative before the transaction is processed and will be greater
than zero afterwards:
- The transaction is valued at the current average cost.
- The difference between the transaction valued at the transaction cost and at the
current average cost is written to the Average Cost Variance account.
Balance Accounting Entries
• If the on-hand quantity is negative before the transaction is processed and will be greater
than zero afterwards, the transaction is valued in two parts:
• The quantity required to bring the on-hand balance to zero is valued at the current average
cost (as on the previous page)
• And the remaining quantity is valued at the transaction unit cost.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Summary
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Accounting for WIP
Transactions For Average
Costing
m y
Chapter 16
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O
Accounting for WIP Transactions For Average Costing

Chapter 16 - Page 1
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 16 - Page 2
Accounting for WIP Transactions for Average Costing
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 16 - Page 3
Objectives
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 16 - Page 4
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 16 - Page 5
Overview Cost Follows Quantity
m y
d e
ca
Overview of Average Costing in WIP
e A
c l
If you use average costing in manufacturing, Oracle Cost Management
r a
• Recalculates unit costs on a transaction-based perpetual basis
O ly
• Provides full visibility and control of production costs
• Tracks and reports costs through your various stages of production as you transact
l & On
If you use average costing in manufacturing, Oracle Work in Process
• Collects all costs
n a e
transactions
t e r
• Reports move, issue, resource, overhead, completion, scrap, period close, and job close
U s
I n
c l e
r a
O

Chapter 16 - Page 6
Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Chapter 16 - Page 7
Describing the Relationship Between Oracle WIP Transactions
and OCM
m y
d e
ca
e A
c l
Describing the Relationship Between Oracle WIP Transactions and OCM
r a
Charging Material Transactions at an Average Cost
O ly
• You issue items from inventory to jobs and return components from a job back to
inventory at the item’s current average cost.
& On
Charging WIP Resource Transactions at an Actual Rate
l
changes over time.
n a e
• You can accumulate multiple transactions for the same resource at different rates to reflect
e r s
• The system charges outside processing costs to a job at the purchase order unit cost.
t
Applying Material Overhead U
I n
• The system adds cost to an item or assembly to include material overhead type costs
c l e
(receiving, stocking, material movement, and handling) in your inventory valuation.
• The system applies predefined material overhead amounts to items.
r a
Charging Assembly Completions at an Average Cost
• The system calculates the average cost of completed assemblies.
O

Chapter 16 - Page 8
• When you move completed assemblies from WIP to a subinventory, the system reduces
WIP and charges inventory for the amount of this average assembly cost.
Recalculating Costs
With average costing, Oracle Cost Management
• Recalculates unit costs on a transaction-based perpetual basis.
• Provides full visibility and control of production costs.
• Tracks and reports costs through your various stages of production as you transact.
With average costing, Oracle Work In Progress
• Collects all costs.
• Reports move, issue, resource, overhead, completion, scrap, period close, and job close
transactions.
Moving Average Cost Formula
• Oracle Cost Management uses the following formula to recalculate the average unit cost
of an inventory asset item: New average cost = (transaction value + current inventory
value) / (transaction quantity + current on-hand quantity)
• “Current” refers to the quantity and value of the item before the transaction is processed.
Transactions
• The following transactions use the moving average cost formula to update the average unit
cost of an item:
- WIP assembly completions
- WIP Assembly returns
m y
- WIP Component returns
d e
Cost Control Attributes
• With average costing, Oracle Cost Management uses two item attributes, Costing Enabled
ca
and the Inventory Asset Value, as well as the Asset Subinventory designation on the
e
subinventory to determine how to value the transactions.
A
Costing Enabled Attribute
c l
r a
• Checked means the item may be costed and is visible on all reports and inquiries.
• Unchecked means the item is not used for any costing purpose. It does not appear on any
O ly
cost inquiry or report, including the following:
- Inventory Value report
l & On
- Item Cost reports
n a e
e r s
• You cannot change this item attribute if there is a quantity onhand.
Inventory Asset Value t U
I n
• Checked means the item is an asset and can have a cost.
l e
• Unchecked means the item is an inventory expense item and cannot have a cost.
c
• Each item may have a different asset value flag status by cost type.
r a
• Do not confuse inventory expense items with expense destination types in Oracle
Purchasing.
O

Chapter 16 - Page 9
Asset Inventory
• If checked, and the attributes named above are checked, it means that the item is an asset
item and is carried on the balance sheet as an asset.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Phantom Costing
m y
d e
ca
Phantom Costing
e A
Phantoms may be used
c l
r a
• To create component kits for easy data entry.
O ly
• To streamline the production process so that individual work orders are not necessary for
each phantom. If phantoms are used as service parts which are stocked, you can create
l & On
work orders for service parts with phantom routings that can be costed.
With enhanced phantom costing in release 11i, you can include phantom resource and
a e
overhead costs as well as material cost in each of the following environments:
n
t e r U s
• Average costing or standard costing
• Discrete manufacturing, repetitive manufacturing or flow manufacturing
I n
• Work orderless completion
l e
Just like costs for any assembly, phantom costs can include resource and overhead costs and
can be included in cost rollups. However, phantom resources and overheads are rolled up and
c
r a
charged as this level cost.
You can see the behavior of phantoms in discrete jobs, repetitive schedules, flow schedules,
O new work orders, engineering change orders, or any BOM explosion.

Resources in Phantom Routings
• You can see resources in phantom routings in the WIP Operation Resources window.
• Use the View Resource Requirements window to:
• View resource requirements for a specific discrete job or repetitive line and assembly.
• (N) CST Operational Analysis > Work in Process >Resource Requirements (T) Main >
Quantities > Scheduling > Costing > Job or Schedule > Type, Description
Resources in phantoms
• Keep all original department and overhead costs when charged
• Cannot be scheduled because the start date, completion date, and any other data are
derived from parent operations in the main routing
• Are listed each time they are used in any of the phantom operations to maintain more
visibility and are not consolidated
Transacting Resources
• You can transact resources in phantom routings in WIP and charge the following:
• Resources and department-based overhead
• Outside processing resources that are assigned to phantom routing operations
Visibility
• You can view resource charges in the Pending Resource Transactions window and the
View Resource Transactions window. You can view phantom resources and overhead on
reports but the original department information is not displayed.
m y
Setting Up Phantom Costing
d e
Defining Bills of Material (BOM) Parameters
• You decide at the organizational level whether to include phantom routings in your cost
ca
rollup.
e A
c l
• When you install or upgrade your system, you set the two BOM parameters that control
phantom costing, Use Phantom Routings and Inherit Phantom Operation Sequence, to
r a
determine whether or not to include phantom costs.
You can use BOM parameters to control inheritance of the operation sequence of the parent
O ly
and the recognition of resources and overheads on phantom routings for costing and for
capacity-planning.
l & On
• The Use Phantom Routings parameter determines whether resources and overheads on
phantom
n a e
t e r
routings are recognized.
s
• The Inherit Phantom Operation Sequence parameter determines whether the components
U
I n
on a phantom operation sequence are inherited to the parent routing or maintain their own
operation sequence.
l e
Use the Parameters window to check the:
c
• Use Phantom Routings parameter
r a
• Inherit Phantom Operation Sequence parameter
O Manufacturing and Distribution Manager Responsibility

• (N) BOM Setup > Parameters
Phantom Costing Reports
Job Value Reports and Performance Reports
• Discrete job value report
• Repetitive schedule value report
• Expense job value report
• Resource performance report
Data Reports and Routing Sheets
• Discrete job data report
• Repetitive schedule data report
• Discrete job routing sheet report
• Repetitive schedule routing sheet report
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Review of Manufacturing Cost Setup
m y
d e
ca
BOM Parameters
e A
Window Dependencies
c l
r a
• The list of values for subelement on the Item Costs window is automatically reduced to
material and material overhead if you do not define BOM parameters. In addition, you can
O ly
define only material overheads on the Overheads window, not routing-based overheads.
l & On
Use the BOM Parameters window to enter:
• Maximum number of levels for your bills
• Your configuration options
n a e
t e r U s
• Whether or not to include phantom costs
I n
• (N) BOM Setup > Parameters
c l e
You define resource costs by creating resources, departments, bills, and routings with Oracle
r a
Bills of Material. Resources are labor, machines, and other production services used to make
products.
O Use the Resources window to enter:

• Resources
• (N) CST Setup > Subelements > Resources
Unlimited Cost Types for Resources. You can enter a fixed resource cost in two ways.
• Enter a fixed charge on the routing operation.
- Use this method when the resource cost varies by item. Set the resource type to
currency and the UOM to your set of books currency. Enter 1 for the resource unit
cost. Enter the currency amount in the routing operation. If you need to schedule the
outside processing step, use another resource in the operation and set it to uncosted.
- Fixed charge on routing = Resource unit cost (1) * Resource amount on routing.
Example 1: Item1 = 1 x .10 = .10 per unit. Example 2: Item2 = 1 x .20 = .20 per unit
• Enter a fixed charge for the resource unit cost
- Use this method when the resource cost is always the same, regardless of the item.
Set the resource type to a type other than currency. Set the UOM to any UOM (the
UOM does not matter). Enter the fixed amount in the resource unit cost. Enter 1 for
the resource rate/amount in the routing operation
- Fixed charge on resource = Resource unit cost x Resource amount on routing (1).
Example 1: Item1 = .15 x 1 = .15 per unit. Example 2: Item2 = .15 x 1 = .15 per unit.
The plating charge is fixed, regardless of the item being plated
Use the Resource Costs window to enter:
• Resource costs by cost type
m y
• (N) CST Setup > Subelements > Resources (B) Rates
d e
• (N) BOM Routings > Resources (B) Rates
Overhead Subelements ca
• In average costing, you can use material overhead and overhead cost subelements to add
e A
c l
indirect costs to item costs as either a percentage or a fixed amount.
• Each overhead subelement has a default basis, a default activity, and an absorption
account.
r a
O ly
• The overhead absorption account offsets the corresponding overhead cost pool in the
general ledger.
l & On
You can base the overhead charge on the number of resource units or on the percentage of
n a e
resource value earned in the routing operation. Or you can set up move-based overheads where
the rate or amount is charged for each item moved in an operation. To do this, use the Item or
Lot basis types.
t e r U s
You can base the material overhead charge on the number of resource units or on the
I n
percentage of resource value. However, the material overhead charge is not earned in WIP.
You can also base material overhead on a percentage of the total value, which is earned when
l e
you receive purchase orders or perform WIP completion transactions. Or you can use the Item
c
or Lot basis types.
r a
You can apply each of these subelements using different basis types for increased flexibility.
Material overhead is earned when an item is received into inventory or completed from work in
O

process. Overhead, based on resources, is earned as the assembly moves through operations in
work in process.
Note: If you use Oracle Bills of Materials, you must first define the bill of material parameters
to use the overhead cost element in the Overhead window. If the bills of material parameters
are not set up, you only have access to material overhead cost element.
Basis types for move-based (fixed) overheads: Use the Item or Lot basis types for move-based
overheads.
• For Item basis, the overhead amount is charged for each item moved out of an operation
• Overhead amount charged to WIP = Overhead amount * Number of items moved out of
operation
• Example: Item basis, overhead amount: 15.00, items moved: 100. Overhead amount
charged to WIP = 15.00 * 100 = 1,500.00
Basis types for move-based (fixed) overheads: Use the Item or Lot basis types for move-based
overheads.
• For Lot basis, the overhead amount is charged when the first item is moved into the
operation.
• Overhead amount charged to WIP = Overhead amount * 1 lot
• Example: Lot basis, overhead amount: 15.00, items moved: 100. Overhead amount
charged to WIP = 15.00 * 1 = 15.00
Basis types for resource-based (variable) overheads: Use the Resource Value or Resource
Units basis types for resource-based overheads.
• For Resource Value basis, the overhead rate is multiplied by the resource value earned in m y
the operation
d e
• Overhead amount charged to WIP = Overhead rate * Resource value
• Example: Resource value basis, overhead rate: 1.50, resource value: 50.00. Overhead
ca
amount charged to WIP = 1.50 x 50.00 = 75.00
e A
c l
Basis types for resource-based (variable) overheads: Use the Resource Value or Resource
Units basis types for resource-based overheads.
units earned in the operation r a

• For Resource Units basis, the overhead amount is multiplied by the number of resource
O ly
• Overhead amount charged to WIP = Overhead amount * Resource units
l & On
• Example: Resource units basis, overhead amount: 15.00, resource units: 2. Overhead
amount charged to WIP = 15.00 x 2 = 30.00
n a e
Use the Overheads window to enter:
• Overhead
t e r U s
I n
c l e
r a
Resource Association
• Each resource must be associated with a department. Assign each resource to one or more
O departments.

• The resource has to be associated with a department so it can appear on the routing list of
values. In the Routing window, you can go to the Department window and add the
resource to the routing list of values.
Use the Department window to:
• Create departments and assign resources to each department
• (N) BOM Routings > Departments (B) Resources
Defining Overhead Rates by Department
Specify, for each cost type, an overhead rate or amount by department.
• Enter an overhead rate if the basis type is Resource Value.
• For example, an overhead rate of 1.5 equals 150%.
• Enter an overhead amount if the basis type is Item, Lot, or Resource Units.
Use the Overhead Rates window to:
• Associate overhead rates by department with a cost type
• (N) CST Setup > Subelements > Overheads (B) Rates
• (N) INV Setup > Costs > Subelements > Overheads (B) Rates
Associating Overheads with Resources
Use the Resource Overhead Associations window to:
• Enter a cost type for which to associate resources to overhead.
m y
• (N) CST Setup > Subelements > Overheads (B) Resources
d e
• (N) INV Setup > Costs > Subelements > Overheads (B) Resources
ca
Defining Routings
e A
A routing represents a sequence of operations that are performed to manufacture an assembly.
c l
For each routing, define the operations, the sequence in which to perform them, and the
resources required at each operation. You can define either a primary or an alternate routing.
r a
You can create a routing manually, copy an existing routing, or reference a common routing.
O ly
Note: You cannot create routings for planning or pick-to-order items. Use attachments, such as
detailed operation instructions, for routing operations.
l & On
Defining Routings and Operation Resources
• Use the Routings window to
n a e
t e r
- Enter a routing for your manufacturing item
U s
I n
- (N) BOM Routings > Routings
• Use the Operation Resources window to:
l e
- Enter operation resources on a routing
c
r a• Manufacturing and Distribution Manager Responsibility
- (N) BOM Routings > Routings (B) Operation Resources
OBills of Material

Physical Structure of a Product
• A bill of material describes the physical structure of a product and identifies the material
(and material overhead) cost of the product.
• A bill of material contains information on the parent item, components, attachments, and
descriptive elements. Each standard component on a bill can have multiple reference
designators and substitute components.
• You can create either an engineering or a manufacturing bill, copy an existing bill, or
reference a common bill.
• When you create a bill, it exists only in the current organization. To use a bill in another
organization, you must either copy it or reference it as a common bill.
Prerequisites
• Define the parent item and all components as inventory items and set the BOM Allowed
attribute to Yes and the BOM Item Type to model, option class, planning, or standard.
Use the Bills of Material window to:
• Enter a bill of material
• (N) BOM Bills > Bills
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Accounting Flows: Costs Incurred, Components Issued to WIP
m y
d e
ca
Accounting for Costs Incurred in WIP
e A
Components Issued to WIP
c l
r a
• Components issued to WIP are valued at the inventory average cost in effect at the time
of the transaction. A component charged to a job multiple times may have a different unit
cost for each transaction. O ly
component costs.
l & On
• When component costs are charged to a job, they retain the elemental detail of the
a e
• Note: Entering transactions in a timely manner is important for correct costing.
n
t e r U s
Recording T Accounts for Transactions
1. WIP material transaction (issue all material)
I n
- Push all components into the job.
c l e
- 10 units at current average cost of $250 = $2,500.
2. WIP material transaction (return specific component)
r a • Return two defective units of component 2 to inventory.

• 2 units at current average cost of $33 = $66.
O 3. WIP material transaction (issue specific component)

• Replace defective components with substitute items.
• 2 units at current average cost of $40 = $80.
Material transactions record the component cost of material used in WIP.
1. WIP material transaction (issue all material)
2. WIP material transaction (return specific component)
3. WIP material transaction (issue specific component)
Material Overhead Application
• Define material overheads under average costing.
• Define as many material overhead subelements as you want and base your charging in a
variety of ways: by item, activity, lot, or transaction value.
• In the Item Cost window, associate material overhead(s) to items and define the rate
amount manually using the average rates cost type.
• Optionally define as many material overheads as required and have that additional cost be
included in the average unit cost.
• Associate material overheads to items on an item-by-item basis.
• Define default material overheads to apply to selected categories of items or to all items
in your organization.
• The system charges material overhead when you perform any of the following three
transactions:
• Deliver purchased items to subinventory
• Complete assemblies from WIP to subinventory
m y
• Receive items being transferred from another organization and deliver to subinventory
d e
• The system applies material overhead at the rate or amount in the system at the time of
the transaction and does not revalue onhand balances when the rate or amount of a
ca
material overhead is redefined.
e
• Once defined, the system applies material overhead whenever you transact the relevant
A
item.
c l
r a
• You can change material overheads at any time that affects future transactions and has no
impact on the current unit cost in inventory.
O ly
• With PO receipts and transfers between organizations, you earn material overhead that is
l
it is delivered to inventory.& On
added to the PO cost/transfer cost of the item (but held as a separate cost element) when
a e
• With assembly completions, you earn material overhead, which is added to the cost of the
n
t e r
completion in inventory. It is never charged to the job.
s
Resource Rates in the Average Rates Cost Type
U
I n
• You define your resource rates in an Average Rates cost type, depending on the method
you select for charging labor and nonlabor resources to WIP.
l e
• The Average Rates cost type is which ever cost type is referenced by the organization
c
parameter field “Average Rates Cost Type”.
r a
• Resources can be charged at a Standard Rate or at an Actual Rate (labor resources only),
depending on the resource check box.
O • Standard resource rates are derived from the average rates cost type.

• Actual labor rates, entered on the resource transaction, apply only to manually charged
resources.
Resource Transactions
• Charge resources to WIP at an actual amount or at a predefined amount.
• Either you manually charge resources in the shop floor transaction window or the system
automatically charges resources during move transactions.
• You choose to autocharge the resource, basing the resource amount on the routing, or to
manually charge it, entering the amounts manually.
• If you enter the amounts manually, you can also choose to enter the rates.
• If you autocharge, then the rate from the average rates cost type is used.
Labor Charges to WIP
• Choose the method for charging labor to WIP.
• Charge labor to WIP jobs either at actual employee rate or at an average rate for a labor
classification.
• Once you select a labor subelement rate or actual employee rate, your labor transaction is
valued at the rate in effect at the time of the transaction.
• As a result, when you charge the same labor subelement or employee to the same job at
different times, different rates may be used.
Labor Charges to WIP using Average Rate
• If you use an average rate, WIP move transactions automatically charge labor (by
including the resource on a routing) at the rate of the resource as defined in the Average
m y
Rates cost type.
• Enter predefined labor hours by including the resource on a routing.
d e
Labor Charges to WIP using Actual Rate
ca
• If you use the actual employee rate, you enter the employee when you perform the move
transaction or when you import the resource charges through the WIP open interface.
e A
l
• Enter actual hours as a manual resource charge in either of the following ways:
c
r a
- User-entered directly as part of a shop floor move transaction
- From a labor collection system through the WIP open interface
O ly
l & On
1. Shop floor transaction (labor resource)
- Charge resource RS1 at actual for operation 10.
n
- 11 hours at $50 = $550.a e
t e
- Reverse overcharge.
r U s
2. Shop floor transaction (reverse resource charge)
I n
- 1 hour at $50 = $50.
c l e
3. Shop floor transaction (nonlabor resource)
- Charge resource RS2 at actual for operation 20.
r a - 5 units at $25 = $125.

Resource transactions record the internal cost to convert raw material into finished assemblies.
O

1. Shop floor transaction (resource without rate variance)
2. Shop floor transaction (reverse resource charge)
3. Shop floor transaction (resource with rate variance)
Overhead Charges to WIP
• Define overheads under average costing
• Define as many overhead subelements as you want and base your charging in a variety of
ways: by item or lot, or based on resource units or value.
• For each overhead subelement, you define a rate or amount in the cost type that you have
specified as the Average Rates cost type.
• Use the actual transaction resource amount or hours to calculate the overhead amount for
overheads with a basis type of Resource Units or Resource Value.
• Charge overhead costs automatically based on the following:
• A percentage of resource or outside processing value charged
• Resource units charged
• A fixed amount per item or lot
Variable Overhead Charging
• Charge overhead as a percent of the resource value earned in WIP.
• The overhead rate is multiplied by the rate on the resource transaction.
• Example: Resource-Based Overhead
- Charge overhead for a setup activity.
m y
- To charge a fixed amount for each hour of a setup activity performed, you assign a
setup overhead based on resource units to the resource that performs the setup
d e
activity.
- Whenever you charge the setup activity, the overhead is charged as well.
ca
Fixed Overhead Charging
e A
c l
• Charge overhead as a fixed amount per item or lot moved through an operation or as a
fixed amount per resource unit earned at the operation.
• Example: Move-Based Overhead
r a
O ly
- Charge overhead for a move operation.
- To charge a fixed amount each time an item is moved from an operation, you assign
& On
an overhead based on item to the department that performs the operation.
l
n a e
- Whenever you move the item out of the operation, the overhead is charged
e r s
1. Shop floor transaction (resource-based overhead)
t U
I n
• Charge 250% on the resource charged in step 4.
• $550 * 250% = $1,375.
l e
2. Shop floor transaction (reverse resource-based overhead)
c
• Reverse overhead for resource reversed in step 5.
r a • $50 * 250% = $125.
O 3. Shop floor transaction (item-based overhead)

• Move through operation 20; charge item-based overhead.
• 10 units at $20 = $200.
Overhead transactions record the indirect cost of WIP.
1. Shop floor transaction (resource-based overhead)
2. Shop floor transaction (reverse resource-based overhead)
3. Shop floor transaction (item-based overhead)
Outside Processing
• Charge outside processing (OSP) costs to WIP at actual cost in an average costing
organization. When you charge outside processing resources at actual, you charge the
purchase order cost to WIP.
• Define outside processing resources under average costing.
• If you clear the Standard Rate check box, outside processing is charged to WIP at the
purchase order unit cost.
• Associate an outside processing item to an outside processing resource. When you move
assemblies into the Queue step of the routing operation that calls for the related outside
processing resource, a purchase requisition for this item is automatically created.
1. Shop floor transaction (outside processing resource without rate variance)
- Charge OSP OS1 at actual for operation 30.Receive 11 units at $25 = $275.
2. Shop floor transaction (reverse OSP charge)
- Reverse overcharge.1 unit at $25 = $25.
m y
3. Shop floor transaction (resource overhead on outside processing resource)
d e
- Charge overhead at 1 unit at $20.
ca
Outside processing transactions record the external cost to convert raw material into finished
assemblies.
e A
1. Shop floor transaction (OSP)
c l
2. Shop floor transaction (reverse OSP charge)
r a
3. Shop floor transaction (resource overhead on OSP)
O ly
Use the WIP Value Summary window for a specific job to view charges for:
• Material
• Material overhead
l & On
• Resource
n a e
• Overhead
• Outside processing
t e r U s
I n
• (N) WIP Discrete > WIP Value Summary (B) Find > Value Summary
l e
Elemental Cost Distribution
c
r a
• Distribute previous-level costs based on their elemental cost structure and the valuation
accounts assigned to the WIP Accounting Class.
O

• Distribute this-level costs based on the cost element being charged and the valuation
accounts assigned to the WIP Accounting Class.
• Material costs and material overhead costs are always previous-level costs.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Agenda
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Accounting Flows: Costs Relieved, Assembly Completion from
WIP
m y
d e
ca
e A
Accounting for Costs Relieved From WIP
c l
Assembly Completions
r a
O ly
• When assemblies being built on WIP jobs are complete, you move them into a
subinventory using a completion transaction.
& On
• The system assigns the same unit cost to all assemblies completed in the same
l
transaction.
n a e
• As part of the completion transaction, the system recalculates the unit cost of the
t e r U s
assembly in the completion subinventory when it is different from the unit cost being
used in the completion transaction.
I n
Costing Assembly Completions
c l e
• You choose to have completed assemblies costed in one of the following two ways:
- Using a predefined cost in a user-designated cost type
r a - Using a system algorithm that, based on actual job charges, calculates the unit cost to
be relieved from the job and charged to inventory
O Costing Completions Using a User-Defined Method

• When you complete finished assemblies from a job to inventory, you can cost them using
a user-defined method.
- You can use a predefined cost to value the unit(s) being completed.
- You can use the current average cost of the assembly or some other manually
predetermined cost like a target cost.
- Then, you use a final completion to flush all (positive) unrelieved costs at the end of
the job and all negative cost to the variance accounts.
Costing Assembly Completions Using a System Calculated Algorithm
• This algorithm costs completions using material usages from the assembly bill, multiplied
by the average unit costs in the job.
• This algorithm costs completions using labor usages from the routing, multiplied by the
average unit costs in the job. You select from two options:
- Use Actual Resources: When you choose this option, the unit cost to be relieved
from the job is calculated based on actual job charges and is charged to inventory as
each unit is completed.
- Use Pre-Defined Resources: When you choose this option, resource costs are
relieved from the job based on the job routing resource usages. This option works
best for jobs with accurate routings.
Final Completion for Negative Cost in WIP Job
• Negative cost in a job is credited to variance at final completion.
• You can create negative cost, by element by level, by using a partial completion method
that relieves more cost than incurred. m y
• When you finish assemblies as final completions, negative cost in the job is credited to
d e
variance.
• For each batch, you can start with zero costs within a job.
ca
A
• Using final completions in average costing in WIP, you can flush out all residual costs in
e
a job.
c l
• Example of Final Completion for Negative Cost in WIP Job
r a
- You can move residual charges in an old job to variances by performing a final
completion
O ly
transaction before you begin additional new assemblies in the job.
Final Completion
l & On
• The system defaults the value of the Final Completion option (enabled/disabled) based on
n a e
the setting of the WIP Autocompute Final Completions parameter.
t e r U s
• Using the default eliminates the need to manually choose the option.
• Final completions ensure that no positive residual balance is left in the job after the last
I n
assembly has been completed.
Unit Cost Calculation for Completed Assemblies
l e
• When you perform a completion transaction, the system calculates a unit cost for the
c
r a completed assemblies and creates accounting entries, using this unit cost.
Completion Transactions
O

• To assist you with moving costs properly as assemblies are completed, you select the
final completion check box in the Completion Transactions window to determine what
method to use to cost that completion transaction:
- When the check box is not selected, the assemblies being completed are costed based
on the completion cost source that you selected at the organization or WIP
accounting class.
- When the check box is selected, the assemblies being completed are costed by taking
the current balance in the job and spreading it evenly over the units being completed.
Use the Completion Transactions window to:
• Complete assemblies
• (N) WIP Material Transaction > Completion Transactions
Accounting Flows: Costs Relieved, Defining WIP Parameters
Select Defaults in the WIP Parameters Window
• You select a default way of valuing completions:
- If you want to use a predefined cost, you need to specify the cost type where the
system can find these predefined costs. At the WIP accounting class level, you can
override these defaults. If you select to define unit costs to be used for valuing
completions, you identify the cost type where these predefined costs reside.
- Before performing a completion transaction on an item, you need to ensure that its
cost in this cost type rolls up correctly—that is, all component and this-level
resource and overhead details have been defined. m y
• You select a default way of valuing completions:
d e
- In the WIP Parameters window, you indicate whether you want the system to
automatically determine when a completion transaction completes the required job
ca
quantity.
e A
c l
- When you select the Auto Compute Final Completion check box, the system
automatically determines when a completion transaction completes the required job
r a
quantity (that is, when: completed + scrapped units = job quantity) and, for such a
transaction, values the units by spreading the job balance over the units being
completed.
O ly
l & On
- You do not need to manually identify the final completion. In this way you can
ensure that no residual balance is left in the job after the last completion occurred.
a e
Use the Work in Process Parameters window to:
n
t e r U s
• Select a new WIP Parameter for the system
• To automatically determine when a completion transaction completes the required job
quantity.
I n
• To value the units being completed by spreading the job balance over those units.
l e
c
• (N) WIP Setup > Parameters (T) Average Costing
r a
Accounting Flows: Costs Relieved, Work Order-less Completions
O Work Order-less Completions

• Work order-less completions can be performed in a manufacturing average costing
environment. You can complete assemblies without having to create a job or schedule.
• Using work order-less completions, the system does all of the following in one step at
completion:
- Backflushes pull and push components
- Charges resources and overhead based on the routing
- Completes assemblies to a designated completion subinventory/locator
- No move transactions are required since the work order-less completion backflushes
and charges resources at completion versus at each operation
- Substitutes components by adding, deleting, and substituting components that are not
normally associated with the assembly you are building
- Supports Lot/Serial number control
• You cannot charge manual resources using work order-less completions.
• All resources and overheads should be set up with WIP moves.
• Workorderless completions only charge WIP move resources, overheads on WIP move
resources, and move based overheads.
Accounting Flows: Costs Relieved, Assembly Returns to WIP
Return of Completed Assemblies
• You can return assemblies to WIP at the average cost of completed assemblies from that
job, based on a combination of system-calculated or user-defined costs and final
completions.
m y
Return of Completed Assemblies
• If the completion cost source is system-calculated, you can return completed assemblies d e
at the average cost of all completions in the job, whether
resources are predefined or used at actual cost. ca
• If the job uses predefined resources, the return is costed based on the routing usages.
e A
user-defined costs. c l
• If the completion cost source is user-defined, you can return completed assemblies at
Accounting Flows: Costs Relieved, Scrap

r a
Scrap Transactions
O ly
l & On
• Scrap transactions are valued at the cost of the assembly through the operation where the
scrap is recorded. The cost is based on actual charges in the job and assumes that all
job.
n a e
resources and material required through the scrapping operation have been charged to the
e r s
• Set the Require Scrap Account check box in the WIP Parameters window to determine
t U
how WIP scrap will be charged:
I n
- If the check box is selected, scrap is costed by an algorithm that calculates the cost
c l e
of each assembly through the operation at which the scrap occurred, relieves the job
for that amount, and charges the user-defined scrap account.
r a - If the check box is not selected, the units are recorded as having been scrapped, but
all amounts remain in the job to be absorbed into the cost of good assemblies when
O they are completed or written to the variance account(s) when the job is closed.

Scrap Reversals
• The system values scrap reversals based on the operation at which the scrap is returned to
WIP, and then only if the Require Scrap Account check box is selected.
• The system determines the cost to reverse scrap by valuing the assembly based on the
average cost of each required resource, overhead, and component scrapped in the job (net
of any prior scrap reversals).
1. Shop floor transaction
• Scrap two assemblies at operation 40.
• 2 units at $467 = $934.
2. Shop floor transaction
• Return repaired unit from scrap.
• 1 unit at $467.
3. WIP completion transaction
• Complete nine assemblies from WIP to inventory.
• 9 units at $467 = $4203 + 9 units at $20 for material overhead.
You relieve costs from WIP when you complete assemblies to inventory or scrap assemblies at
an operation.
Completion and scrap transactions relieve costs from WIP on a this-level basis and on a
previous-level basis.
Accounting Flows: Variances
m y
WIP Job Closures and Cancellations
d e
• The system recognizes variances when you close a job with a balance remaining in the
job.
ca
• Define variance accounts for each of your WIP accounting classes. These variance
e
accounts should be different from the Average Cost Variance account.
A
c l
• Upon closing a WIP job, either all the cost in the job will have already been relieved
r a
leaving a zero balance or there will be a balance remaining in the job.
• Any balance remaining in a job after it has been closed is written off elementally to these
variance accounts.
O ly
l & On
• When you complete a job and all units required have been either rejected/scrapped or
completed, and you are using the final completion indicator, there will be no job balance.
a e
The final unit(s) completed will have absorbed all remaining job cost into its value.
n
t e r U s
I n
c l e
r a
O

Practice 26 - Average Costing
Overview
The M3 Dallas Organization is set up for Average Costing. To view the affects of average
costing, we will transfer ten tires and ten bikes from M1 Seattle Manufacturing to M3 Dallas
Manufacturing using the Intransit Transaction. We will create a purchase order with two lines
with different costs for tires to receive into M3 Dallas. We will then process an average cost
update in the M3 Dallas Manufacturing organization.
• Change organization
• Transfer items to Intransit
• Receive the items
• Process a receiving transaction
• View material transactions
• View item costs

m y
• Create a purchase order
d e
• Receive the purchase order
ca
• Perform an Average Cost Update
e A
Assumptions
c l
• r a
You must have access to an Oracle Application Vision database, or a comparable
O ly
•
l & On
Students log in to Oracle with User Name mfg and Password welcome. Your instructor
a e
n
•
t e r U s
Each student should replace XX with a unique student identifier.
Tasks
I n
l e
Change Organization
c
1.
r a Navigate to the Organizations window and change your organization to M3 Dallas.
O2. View the Organization Parameters for M3 Dallas Manufacturing.

Note: When the items XX-TIRES and XX-MB2XR were created and assigned to Dallas, the
cost type Average Cost was created.
3. View the cost for the items.
4. Query your items.
5. Change the organization to M1 Seattle.
6. View the Inter-Organization network for M1 Seattle Manufacturing to M3 Dallas

Manufacturing.
Transferring To Intransit
7. We will now put 10 tires and 10 bikes into intransit in M1 Seattle Manufacturing.
Field Name Value

To Org
Type
Dallas Manufacturing
Intransit Shipment
m y
Number XX-1234 (receiving number in Dallas)
d e
ca
e A
c l
Item
XX-TIRES
Subinventory
Stores r a To Subinv
Stores
Quantity
10
XX-MB2XR Stores O ly Stores 10
l & On
n a e
t e r
11. View the Material Transactions in M1 Seattle Manufacturing.
U s
12. Enter Item = XX-TIRES and XX-MB2XR.
I n
13. Select the Inventory Intransit View under the Transaction Type tab.
c l e
14. Click (B) Distributions.
r a
O

15. Change Organization to M3 Dallas Manufacturing.
Receiving The Items
16. Receive the items.
17. Enter the Shipment Number that you used in M1 Seattle.
18. Click (B) Find.
19. Select the Lines to process the receipt.
Receiving Transaction
Since this transaction was set up in the Shipping Networks as a Standard Receipt, you must
process a Receiving Transaction to make the items available in inventory.
20. Process a receiving transaction.
22. Click (B) Find. m y

23. Click on each line. d e
24. Navigate to the Material Transactions window to view the Material Transactions in M3 ca
Dallas.
e A
25. Enter Item = XX-TIRES.
c l
r a
O ly
Viewing Material Transactions
l & On
n a e
t
28. Enter Item = XX-MB2XR. e r
27. View the Material Transactions for item XX-MB2XR.
U s
I n
c l e
r a
O

Viewing Item Costs
30. View the costs of the items in Item Cost History.
31. Navigate to the Item Cost for Cost Groups window.
32. Enter item XX-TIRES.
33. Click (B) Find.
34. Click (B) Cost Details.
35. View the costs of item XX-MB2XR.
37. View the costs of the items in Item Cost.
39. Enter item XX-MB2XR.
Note: Compare the costs to those in M1 Seattle.
m y
Creating a Purchase Order
d e
40. Create a purchase Order for XX-TIRES to receive in M3 Dallas Manufacturing with the
following two lines: ca
e A
Quantity
c l Purchase Order Price
Line 1 10
r a $30
Line 2 10
O ly $29
l & On
Receiving The Purchase Order
n a e
e r s
41. Receive the Purchase Order lines.
t U
42. View the results.
I n
l e
c
r a
O

Average Cost Update
44. Process an Average Cost Update to update the cost of the XX-TIRES to $30.
46. While in the Item Cost History window, click on the lines to view the Material Accounting.
For example, the first transaction into M3 Dallas Manufacturing was the intransit receipt
(the bottom line). Click on the line and click (B) Cost Elements.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Solution - Average Costing
Change Organization
1. Navigate to the Organizations window and change your organization to M3 Dallas.
2. View the Organization Parameters for M3 Dallas Manufacturing.
• (N) Inventory > Setup > Organizations > Parameters (Tab) Costing Information
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Note: When the items XX-TIRES and XX-MB2XR were created and assigned to Dallas, the
cost type Average Cost was created.
3. View the cost for the items.
4. Query your items.
m y
d e
ca
e A
c l
5.
r a
Change the organization to M1 Seattle.
• O ly
(N) Inventory > Change Organization
6. l & On
View the Inter-Organization network for M1 Seattle Manufacturing to M3 Dallas
Manufacturing.
n a e
•
e r s
(N) Inventory > Setup > Organizations > Shipping Networks (B) Open
t U
I n
c l e
r a
O

m y
d e
ca
e A
Transferring To Intransit
c l
7.
r a
We will now put 10 tires and 10 bikes into intransit in M1 Seattle Manufacturing.
• O ly
(N) Inventory > Transactions > Inter-organization Transfer
8. Enter the following data: l & On

n a e
Field Name
t e r U s Value
To Org
I n Dallas Manufacturing
Type
c
Numberl e Intransit Shipment
XX-1234 (receiving number in Dallas)
r
9. a Click (B) Transaction Lines.
O

m y
d e
Item Subinventory To Subinv Quantity
ca
XX-TIRES
XX-MB2XR
Stores
Stores
e
Stores
Stores
10
10 A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

11. Save the transaction.
m y
12. View the Material Transactions in M1 Seattle Manufacturing.
d e
• (N) Inventory > Transactions > Material Transactions
ca
13. Enter Item = XX-TIRES and XX-MB2XR.
e A
c l
14. Select the Inventory Intransit View under the Transaction Type tab.

r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

16. Change Organization to M3 Dallas Manufacturing.
Receiving The Items
17. Receive the items.
• (N) Inventory > Transactions > Receiving > Receipts
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
l e
19. Click (B) Find.
c
r a
20. Select the Lines to process the receipt.
O

21. Save your work.
m y
d e
Receiving Transaction
ca
Since this transaction was set up in the Shipping Networks as a Standard Receipt, you must
e
process a Receiving Transaction to make the items available in inventory.
A
c l
22. Process a receiving transaction.
r a
•
O ly
(N) Inventory > Transactions > Receiving > Receiving Transactions
& On
l
24. Click (B) Find.
n a e
25. Click on each line.
t e r U s
I n
26. Save your work. The items are now in M3 Dallas inventory.
l e
27. Navigate to the Material Transactions window to view the Material Transactions in M3
c
Dallas.
r a • (N) Inventory > Transactions > Material Transactions

O

28. Enter Item = XX-TIRES.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

m y
d e
Viewing Material Transactions
30. View the Material Transactions for item XX-MB2XR. ca

e A
•
c l
(N) Inventory > Transactions > Material Transactions
31. Enter Item = XX-MB2XR.

r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Viewing Item Costs
33. View the costs of the items in Item Cost History.
34. Navigate to the Item Cost for Cost Groups window.
• (N) Cost _Item Costs > Item Cost History
36. Click (B) Find.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

38. View the costs of item XX-MB2XR.
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

40. View the costs of the items in Item Cost.

m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

42. Enter item XX-MB2XR.
m y
d e
Note: Compare the costs to those in M1 Seattle.
ca
e A
Creating a Purchase Order
c l
following two lines:
r a
43. Create a purchase Order for XX-TIRES to receive in M3 Dallas Manufacturing with the
O ly
Quantity
l & On Purchase Order Price
Line 1 10
n a e $30
Line 2 10
t e r U s $29
•
I n
(N) Purchasing > Purchase Orders > Purchase Orders
c l e
r a
O

Receiving The Purchase Order
44. Receive the Purchase Order lines.
• (N) Inventory > Transactions > Receiving > Receipts
• (N) Cost > Item Costs > Item Cost History
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
Average Cost Update
t e r U s
47. Process an Average Cost Update to update the cost of the XX-TIRES to $30.
• I n
(N) Cost > Item Costs > Average Cost Update
c l e
r a
O

m y
d e
• (N) Cost > Item Costs > Item Cost History
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

m y
49. While in the Item Cost History window, click on the lines to view the Material Accounting.
For example, the first transaction into M3 Dallas Manufacturing was the intransit receipt
d e
(the bottom line). Click on the line and click (B) Cost Elements.
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O

Summary
m y
d e
ca
e A
c l
r a
O ly
l & On
n a e
t e r U s
I n
c l e
r a
O


R12 Cost Management Fundamentals Vol 1

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

R12 Cost Management Fundamentals Vol 1

Uploaded by

Copyright:

Available Formats

R12 Oracle Cost Management

U.S. GOVERNMENT RIGHTS

Technical Contributors and Reviewers

Charles Pirnat, April Nelson

This book was published using: oracletutor

Overview of Cost Management ......................................................................................................................1-1

ODescribing Organizational Cost Controls......................................................................................................4-1

Copyright © 1996, 2007, Oracle. All rights reserved.

R12 Oracle Cost Management Fundamentals Ed 1 Table of Contents

OSummary of Implementing and Setup for Cost Management .....................................................................7-1

Copyright © 1996, 2007, Oracle. All rights reserved.

R12 Oracle Cost Management Fundamentals Ed 1 Table of Contents

Copyright © 1996, 2007, Oracle. All rights reserved.

R12 Oracle Cost Management Fundamentals Ed 1 Table of Contents

r a Solution - Copying Costs Across Organizations .......................................................................................14-59

O Editing Item Costs Using Mass Edits ............................................................................................................14-63

Copyright © 1996, 2007, Oracle. All rights reserved.

R12 Oracle Cost Management Fundamentals Ed 1 Table of Contents

Copyright © 1996, 2007, Oracle. All rights reserved.

R12 Oracle Cost Management Fundamentals Ed 1 Table of Contents

Copyright © 1996, 2007, Oracle. All rights reserved.

R12 Oracle Cost Management Fundamentals Ed 1 Table of Contents

Copyright © 1996, 2007, Oracle. All rights reserved.

R12 Oracle Cost Management Fundamentals Ed 1 Table of Contents

Business Value of Periodic Incremental LIFO Costing.................................................................................26-8

Copyright © 1996, 2007, Oracle. All rights reserved.

R12 Oracle Cost Management Fundamentals Ed 1 Table of Contents

R12 Oracle Cost Management Fundamentals Ed 1 Table of Contents

• Thorough knowledge of basic accounting concepts

• Oracle Inventory and Purchasing

• Oracle Work In Process (if products are installed at your site)

How This Course Is Organized

R12 Oracle Cost Management Fundamentals Ed 1 Table of Contents

• System release bulletins

• Installation and user’s guides

• International Oracle User’s Group (IOUG) articles

R12 Oracle Cost Management Fundamentals Ed 1 Table of Contents

R12 Oracle Cost Management Fundamentals Ed 1 Table of Contents

Passwords DROP USER scott

Lowercase Syntax variables CREATE ROLE role

Typographic Conventions in Oracle Application Navigation Paths

3. (B) Click the Approve button.

O (ST) = Sub Tab

Copyright © 1996, 2007, Oracle. All rights reserved.

R12 Oracle Cost Management Fundamentals Ed 1 Table of Contents

The following help navigation path, for example—

(Help) General Ledger > Journals > Enter Journals

—represents the following sequence of actions:

2. Under the General Ledger entry, expand Journals.

3. Under Journals, select Enter Journals.

R12 Oracle Cost Management Fundamentals Ed 1 Table of Contents

R12 Oracle Cost Management Fundamentals Ed 1 Table of Contents

Overview of Cost Management

Overview of Cost Management

Overview of Cost Management

Overview of Cost Management

Overview of Cost Management

r a Incremental LIFO costing

Overview of Cost Management

Overview of Cost Management

Overview of Cost Management

Overview of Cost Management

Copyright © 1996, 2007, Oracle. All rights reserved.

Overview of Cost Management