2006 Oracle Corporation Proprietary and Confidential 2 Agenda New on R12 Item Cost Resource Cost Overhead Cost Cost Process Cost Types Calendar Cost Component Classes & Group Cost Analysis Code General Ledger Fiscal Policy Actual Cost Set Up / Process Few Points Actual Costing Exercise 2006 Oracle Corporation Proprietary and Confidential Cost Setup Calculate Cost Store Costs SLA Oracle GL Oracle Inventory Purchasing GMD, GME Order Management OPM Costing in R12 2006 Oracle Corporation Proprietary and Confidential OPM Costing Process
2006 Oracle Corporation Proprietary and Confidential Items Costing Attribute Ensure for Asset Items, Inventory Asset Value (in Costing Tab) & Process Costing Enabled Flags are set.
2006 Oracle Corporation Proprietary and Confidential Cost Type (N) Setup / Cost Type Select Raw material & Product calculation method 2006 Oracle Corporation Proprietary and Confidential OPM Cost Calendar (N) Setup / Cost Calendar Define Costing Calendar for each Fiscal Year 2006 Oracle Corporation Proprietary and Confidential OPM Cost Calendar (N) Setup / Cost Calendar
Assign Legal Entiry and Cost Type to each Calendar 2006 Oracle Corporation Proprietary and Confidential OPM Cost Calendar (N) Setup / Cost Calendar
Open Cost Period 2006 Oracle Corporation Proprietary and Confidential Cost Component Class (N) Setup / Cost Component Class Cost component classes are buckets used to define the elements of cost detail you want to view. Costs from several ingredients, routings, or burdens can be summarized into component classes. 2006 Oracle Corporation Proprietary and Confidential Cost Component Class (N) Setup / Cost Component Class The cost component classes are classified into 5 different elements or usages: Material, Resource, Overhead, Expense Allocation and Standard Cost Adjustment types 2006 Oracle Corporation Proprietary and Confidential Understand about Item Cost This level cost Lower level cost if exists intermediate ingredients used (N) OPM Financials > Items Cost 2006 Oracle Corporation Proprietary and Confidential Understand about Resource Cost Enter the Nominal Cost for this resource for using it for one unit of measure. For example, if you are defining the resource cost for a mixing machine, and its usage is measured in hours, then enter the cost of using the resource in per unit. Select Cost Method & Enter cost Per Unit 2006 Oracle Corporation Proprietary and Confidential Understand about Overhead Cost . A overhead is a cost associated with a resource other than the resource usage assigned in the routing. 2006 Oracle Corporation Proprietary and Confidential Actual Costing Setups & Processes 2006 Oracle Corporation Proprietary and Confidential Actual Cost Setup Defining Adjustment Reason Codes
Defining Allocation Codes
Defining Allocation Definitions
Defining Expense Allocation Accounts
Actual Cost Calculation
2006 Oracle Corporation Proprietary and Confidential Actual Cost Adjustment Reason If a situation arises in which you have to make adjustments to the actual costs calculated by OPM, you can use the Actual Costs Adjustments window to enter the necessary component cost changes for new cost calculations. However, you will have to specify a valid reason code that justifies the reason for that cost change. You define those reasons on the Actual Costs Adjustment Codes window.
(N) Setup > Actual Cost > Adjustment Reason 2006 Oracle Corporation Proprietary and Confidential Defining Allocation Codes On this window you create the allocation codes that are used to define the indirect expenses from the general ledger accrued expense accounts. Later, you will define the parameters to allocate those expenses to the appropriate cost component classes. Since allocations can be processed in multiple steps, we recommend that you adopt a naming convention to simplify processing of ranges of allocation codes.
(N)OPM Financials > Setup > Actual Cost > Expense Allocations > Codes 2006 Oracle Corporation Proprietary and Confidential Defining Allocation Definitions On this window you specify two sets of information:
The item, component class, and related information required identifying where the allocation results will be placed.
The account keys that maintain the basis information (for example, the quantity of production and machine usage) associated with each item.
The Allocation Results section at the bottom of the window is linked to a specific item line, and indicates where the resulting allocated expenses are placed. This functionality requires Oracle General Ledger to be fully installed. If you are using OPM not integrated with Oracle Financials, and GL is not fully installed, then a warning message displays and the data you enter may not be used.
2006 Oracle Corporation Proprietary and Confidential Defining Allocation Definitions (N) OPM Financials > Setup > Actual Costs > Expense Allocations > Basis Select Allocation Code Select Allocation Method I.e Fixed % or Amount basis Enter Items for Allocation & their % Allocation 2006 Oracle Corporation Proprietary and Confidential Defining Expense Allocation Accounts
Assign Cost Component Class and Analysis Code to Allocation Code 2006 Oracle Corporation Proprietary and Confidential Define Expense Allocation Accounts (N) OPM > Setup > Actual Cost > Expense Allocations > Expense On this window you specify the general ledger account , which capture the overhead expenses to be allocated. Here you are defining the expense pool to be allocated; on the Allocation Definitions window, you will specify the products to which these expenses are allocated. Select Period to date or Year to date as per requirement 2006 Oracle Corporation Proprietary and Confidential Actual Cost Calculation The following topics are covered: Processing Expense Allocations Calculate Actual Costs Viewing Actual Cost Processing Status Using Actual Cost Adjustments Viewing Actual Costs Displaying Item Cost List Important Points
2006 Oracle Corporation Proprietary and Confidential Running Expense Allocations (N) OPM Financials > View > Request > Submit a new Request
From parameter of OPM Cost Allocation Process entering Allocation code, Cost Calendar and period 2006 Oracle Corporation Proprietary and Confidential OPM Cost Allocations The GL Expense allocations are averaged out using Prior Period Inventory Balance for items that have no current period transactions, such as receipts or production. Whenever there is a non-zero GL expense amount that could not be allocated because the total quantity is zero, a warning is displayed.
For Raw Materials: The GL Expense amount is calculated as the sum of GL expenses to be allocated and the product of prior period inventory balance and prior period cost. This is represented as:
GL Expense component cost = [(Previous Period Inventory Balance * Previous Period GL Expense Component Cost) + GL Expense Amount for Current Period] / [Previous Period Inventory Balance + Received Quantity]
For Products The Quantity is determined as sum of the previous period balance, the total quantity produced and the total quantity received, if any. The GL Expense amount is the sum of GL expenses to be allocated in the current period and the product of prior period inventory balance and prior period cost.
GL Expense component cost = [(Previous Period Inventory Balance * Previous Period Component Cost) + GL Expense Amount for Current Period] / [Previous Period Inventory Balance + Produced Quantity + Received Quantity (if any)]
The GL Expense allocations are averaged out using Prior Period Inventory Balance for items that have no current period transactions, such as receipts or production. Whenever there is a non-zero GL expense amount that could not be allocated because the total quantity is zero, a warning is displayed.
2006 Oracle Corporation Proprietary and Confidential Calculate Actual Cost Enter Calendar, Period, Cost Method in above window and then Press Accept to run Actual Cost Process. System will fire request to run.
2006 Oracle Corporation Proprietary and Confidential Calculate Actual Cost
System displays the number of errors while running Actual cost process. You can view the errors from the Action menu. 2006 Oracle Corporation Proprietary and Confidential Calculate Actual Cost (M) Action > View Error Message Before viewing the actual cost, first correct errors and then again run the Actual cost process. 2006 Oracle Corporation Proprietary and Confidential View Actual Cost (N) OPM Financials > Item Cost 2006 Oracle Corporation Proprietary and Confidential View Actual Cost Transactions
Click on Action menu from Items Cost form, you can view actual transactions. 2006 Oracle Corporation Proprietary and Confidential Actual Cost Adjustment This option allows you to adjust the final calculated actual cost of a raw material or product based on quantity and unit cost. Actual costs are recalculated based on the adjustments that you enter for the specified item, warehouse, cost calendar, and cost period.
Note that these adjustments do not directly alter the cost of an item. Rather, they influence cost calculations by adding quantity and cost adjustments to the existing costs after other cost calculations have been completed. This approach produces a complete adjustment audit trail.
Avoid Cost Adjustments If unavoidable, this would require manual journals in General Ledger to be passed for reconciliation between OPM and GL. 2006 Oracle Corporation Proprietary and Confidential Actual Cost Adjustment (N) OPM Financials > Actual Costs > Adjustments
2006 Oracle Corporation Proprietary and Confidential Important Points-Actual Costing Entirely driven by Actual Production Batch details. I.e. Quantity of actual Ingredients consumed, Finished Goods Yielded, Resource Usage. Only batches which are Closed in a specific period are considered for Costing. No need to establish Source and Target Warehouse relationships. Cost Warehouse (Optional) as in Standard Cost. Instead of Cost Rollup Process - Actual Cost Process needs to be run. While submitting this process, the previous Inventory Period should have been at least Preliminary Closed. For each of the cost components calculation would be governed by the Raw Material / Finished Goods calculation methods set in Cost Methods I.e. PWAC, PMAC, PPAC, LSTT, LSTI. Widely used computation methods are PWAC and PMAC. Resource / Burden costs (if required) need to be established for Actual Costing method separately for each of the cost period. All the other setups like Calendar (specific for Actual Cost Method), Component classes, Groups, Material cost components - same as in Standard Costing.
2006 Oracle Corporation Proprietary and Confidential Cost Update (N) OPM Financials > Cost Update Select calendar and period to Update ost Selet Final Update for Closing Period 2006 Oracle Corporation Proprietary and Confidential COGS Recognition Running in sequency three Program: Record Order Management Transaction Collect Revenue Recognition Information Generate COGS Recognition Events
(N) OPM Finacials > COGS Recogition 2006 Oracle Corporation Proprietary and Confidential Record Order Management
2006 Oracle Corporation Proprietary and Confidential Collect Revenue Recognition Information
2006 Oracle Corporation Proprietary and Confidential Generate COGS Recognition Events
2006 Oracle Corporation Proprietary and Confidential OPM Pre-processor Accounting (N) OPM Financials > OPM Accounting Pre-processor 2006 Oracle Corporation Proprietary and Confidential OPM Pre-processor Accounting (M) Actions > Submit Process 2006 Oracle Corporation Proprietary and Confidential OPM Pre-processor Accounting Select Period and Source Transactions to Accounting You can run Pre-Processor for each Source in separate running. 2006 Oracle Corporation Proprietary and Confidential Event Model - Example 2006 Oracle Corporation Proprietary and Confidential Run Create Accounting (M) View > Request > Sumit a new Request Choose Draft Mode first for Review Journal Entry You can run Create accounting for each Process Category Transaction or All 2006 Oracle Corporation Proprietary and Confidential Run Create Accounting
View Output to review Create Accounting program result 46 Review the accounting entries 47 Subledger Journal Entry Description Line Type Account Derivation Rule 48 Period End Closing with SLA 49 Period End Closing Progress 50 Run the preliminary inventory close Final Close = No is temporary closing ; Final Close = Y is permanent Close inventory Period 51 Run Preliminary cost update process
52 Run OPM Accounting Pre-processor
53 Run Detailed Subledger Report 54 Review the accounting entries 55 Inventory Close- Final 56 Final Cost Update 57 Create accounting final mode On Submitting program, the following requests will be invoked: Create Accounting Accounting Program Journal Import and Subledger Accounting Balances Update 58 Shailendra.naithani@oracle.com Venkat.chukkapalli@oracle.com 59