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Douglas Volz Consulting
doug@volzconsulting.com
›genda
3 Ônventory Structure

3 High Level Review of Oracle Cost System Capabilities

Costing Methods
Oracle Cost Management Structure

3 Discrete MFG and Costing

3 Setting Standard Costs

3 Setting ›verage, FÔFO, LÔFO Costs

3 Month-End ›ccounting Close

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## Slide 
›genda (Continued)
3 Release 12 Cost Ômprovements

3 Flexible ›ccount Number ›ssignment

3 Little Known Cost Features

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## Slide 0
 Ônventory Structure
 
3 Global Organization (Ôtem Master)
 



3 Ônventory Organization

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3 Subinventory
    

3 Locators
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Complex Financial Entities

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 Costing Concepts

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›verage Costing

Standard Costing

Periodic Costing

FÔFO Costing

LÔFO Costing

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## Slide &
 ›verage Costing
3 Oracle supports a moving or weighted average cost
The unit cost changes with each receipt transaction

3 Unit costs reflect the average of the incoming receipts from

purchase order receipts,
purchase order returns
inter-organization receipts
and for manufacturing, for WÔP assembly completions
miscellaneous issues may or may not affect the unit cost

3 ›ll issues occur at the existing average costs

3 ›ssembly costs come from the cost of your assemblies built in WÔP

3 You may have indirect costs (material overheads, etc.) as well

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## Slide )
 Standard Costing
3 The primary objective of standard costing is to provide a
performance measurement system
Unit costs are set up in advance as an 6
66 cost
Component costs (material costs) are defined using the projected
average acquisition costs, plus any associated indirect costs
›ssembly costs are rolled up using bills of material and routings
Standards are reset periodically, depending on how quickly your
costs change

3 ›ll manufacturing and distribution activities are measured against

the expected costs
3 Typical variances include:
Purchase Price Variance,
Ônvoice Price Variance
Manufacturing Variances (material usage, resource efficiency, etc.)


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## Slide *
Other Costing Methods

3 m  
FÔFO costing values inventory by assuming that the oldest inventory (first
in) is the first to be used or sold (first out), but there is no necessary
relationship to the physical movement of specific items
FÔFO supports WÔP costing

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LÔFO 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
LÔFO supports WÔP costing

3 º
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Periodic has dual costing capabilities, using Periodic Costing at month-end
and using transaction-based ³real-time´ costing prior to month-end
Periodic supports WÔP costing

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## Slide #
Cost Structure


  
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## Slide 
Organizational Costing
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Each inventory organization has its own item material, labor, outside
processing, and overhead costs

‡ Each inventory organization may have multiple cost versions, called  +,"

‡ You can have any number of cost types that are not active (unimplemented costs)

Each inventory organization can have its own costing method

There is only one ³›ctive´ cost type that is used to record your Subledger
Transactions
‡ Standard costing uses the !
cost type, and average costing uses the 

cost
type «

Within an inventory organization, all items have the same costing method,
›verage, or Standard or FÔFO or LÔFO or Periodic

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## Slide 
 Cost Elements

3 You have five available cost elements for each cost type
‡ Material (supplier purchase costs)
‡ Material Overhead (freight in, material handling, etc.)
‡ Resource (labor, machines, other factors of production)
‡ Outside Processing (subcontracting or outsourcing)
‡ Overhead (Resource and Outside Processing Overhead)

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3 Œut you can have an unlimited number of sub-elements

‡ Material (metal, plastic, etc.)
‡ Material overhead (inter-co profit, in-bound freight, etc.)
‡ Resources (labor, machine groups, etc.)
‡ Outside Processing (subcontract vendor service1, service2, etc.)
‡ Production Overheads (Factory Œurdens, etc.)

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## Slide 
Oracle Cost Management Ônteraction

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## Slide 0
 Ônventory Costing
3 Costs Ônto Ônventory/Stores
Purchase costs into Ônventory: Material, Material Overhead, etc. costs
For Standard Costing: Purchase Price Variances

3 More Costing for Ônventory Movement

Misc. ›ccount Receipt / Ôssue
Physical Ônventory, Cycle Counts
Consignment (WÔP/OSP, purchase consignment)
Subinventory and location transfers
Customer shipments
Ônternal orders
Project shipments and transfers (PJM)
Logical Transactions (extended supply chain network)

3 Supports many intercompany scenarios

Ônternal orders
Ônternal shipping and billing


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## Slide $
 Discrete MFG and Costing
3 ›ll of the Costing Methods support WÔP Costing
Timing varies by how your charge to WÔP
‡ Œackflush, ›ssembly Pull, etc.
‡ Push

3 Costs into WÔP:

Material Ôssues
Material Overhead
Earning Resources, Outside Processing and Overheads

3 Costs out of WÔP

Scrap
›ssembly Completion

3 Job Close Variances

Only for Standard Costing

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## Slide %
Manufacturing Variance Summary
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## Slide &
 Cost Reports and Ônquiries

3 Material Distribution Detail/Summary Reports

3 WÔP ›ccount Detail/Summary Reports

3 Discrete Job Value

3 Expense Job Value Report

3 WÔP Value Report

3 WÔP Value Ônquiries

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## Slide )
 Setting Standard Costs

3 Cost Mass Edits

3 Ôtem Cost Copies

3 Cost Rollups (also across the Supply Chain)

3 Standard Cost Updates

3 Œills of Material Cost Ônquiries and Reports

3 Pending and Standard Cost ›djustment Reports

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## Slide *
 Setting ›verage, FÔFO, LÔFO Costs

3 Simulation Costing with Cost Rollups and Mass Edits

3 Transaction-based updates of ›verage, FÔFO, LÔFO costs

3 Manual cost updates

3 PO retroactive price adjustments

3 ›nd if you are clever, using open interfaces for custom

updates

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## Slide #
 Month-End ›ccounting Close
3 Close by Ônventory Organization

3 Month-End Ônventory, Receiving, WÔP Value Reports

3 Release 12, close in Ônventory

Transfer to G/L using Subledger ›ccounting (Create ›ccounting)

3 Closing Ônventory closes Receiving and WÔP

3 Purchasing has its own close (and also closes off Receiving)

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## Slide 
 Month-End Ônventory Value Reports
3 Ônventory Value Report
3 Ôntransit Value Report
3 Subinventory ›ccount Value Report
(disabled in Release 12)

3 ›ll Ônventories Value Report

3 Receiving Value Report
3 Receiving Value by Destination Report
(disabled in Release 12)

3 WÔP Value Report

3 Period Close Value Summary Report
3 Period Close Reconciliation Report (11.5.10 and 12)

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## Slide 
 R12 Ômprovements Period Close Diagnostics

3 Forms Drilldown
‡ Using the same Ônventory ›ccounting Periods form you can drilldown
to associated forms to view the problem transactions

3 New workflow to notify of failing transactions

3 Period Close Pending Transactions Report

‡ Report for transactions holding up the inventory accounting period

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## Slide 
Reconciliation Ômprovements in R12
3 Ônventory Value Reports have an ³as of date´

‡ Ônventory Value Report

‡ Receiving Value Report
‡ Ôntransit Value Report
‡ ›ll Ônventories Value Report

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## Slide 0
Flexible ›ccount Number ›ssignment

Release 12 Subledger ›ccounts allows you to extend the standard

oracle setups (all costing methods except periodic)

Subledger ›ccounting rules govern how the final accounting

entries are created and sent to the G/L

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 SL› for Product Line ›ccounting, Variance Recognition

  
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 Œasic Table Structure for SL›


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## Slide &
 More Release 12: COGS Recognition

3 Ôn R12 the customer shipment entries go to deferred COGS

3 ›utomates the matching of Cost of Goods Sold (COGS) for a sales order
line to the revenue that is billed for that sales order line.

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## Slide )
Related R12 ŒOM Features
3 Fixed Component Usage Support:
Support for lot-based materials that have a fixed usage regardless of the
job size for discrete WÔP jobs, OSFM lot-based jobs and Flow
Manufacturing

3 Component Yield Support:

Flexibility to control the value of component yield factors at WÔP job
level. The transaction logic now considers pre-yield ŒOM quantity per
assembly rather than the quantity inflated by shrinkage.

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## Slide *
 Standard Features You May Not Œe Using

3 Currency setup

3 Period open and close by organization hierarchy

3 Material overhead absorption rules

3 Transaction Value Historical Summary Report

3 Period close snapshots

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## Slide #
Standard Features: Currency Setup
3 You can change your item cost decimal precision at any time

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 Standard Features:
Period Open/Close by Org Hierarchy

3 You can open and close multiple inventory periods by organization

hierarchy
Define your organization hierarchy using an Human Resources,
Purchasing or Ônventory responsibility
Using the Ônventory Organization Parameters, Costing tab, make
sure your ³Transfer to GL´ settings are all the same for all orgs in
the same organization hierarchy

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 Standard Features:
Period Open/Close by Org Hierarchy

3 Open Period Control request

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 Standard Features:
Period Open/Close by Org Hierarchy
3 Close Period Control request

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 Standard Features:
Mat¶l Overhead ›bsorption Rules
3 Explicitly say which ones do and do not earn material overhead

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## Slide 0$
Standard Features:
Transaction Value Historical Summary Report
3 Rollback inventory value to any date you choose

3 Choose which columns of information to view

You have four columns to select
The fifth column on the report is everything else

3 Useful as a ³roll-forward´ audit report

3 Useful to verify month-end inventory value report balances

3 Two reports:
Transaction Value Historical Summary (for Standard Costing)
Transaction Value Historical Summary ± ›verage Costing


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Standard Features:
Transaction Value Historical Summary

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 Standard Features: Period Close Snapshot
3 Period close snapshots (Release 11.5.10 onward)

Prior to Release 11.5.10, the inventory period close only stored

summary values by inventory organization and subinventory
(blank subinventories are for intransit)

When you close inventory you automatically store period-end

inventory values and costs by organization, subinventory and
item

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## Slide 0)
 Desired Enhancements

3 Multi-Org Reporting
Multi-Org Material ›ccount Summary Report
Multi-Org Receiving ›ccount Summary Report
Multi-Org WÔP ›ccount Summary Report
Multi-Org ›ll Ônventories Value Report (with account numbers)
Multi-Org Ônventory Value Report (with account numbers)
Multi-Org Receiving Value Report (with account numbers)
Multi-Org Expense Value Report (with account numbers)
Multi-Org WÔP Value Report (R12 still has account numbers!)

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## Slide 0*
Summary
Oracle Discrete Costing offers robust, flexible costing

Multiple costing methods are supported

Powerful mass edits, item cost copies and cost update

capabilities

›ccount classification is much better with Subledger ›ccounting

›s you transact your cost accounting happens automatically

Multi-org reporting is a continuing area of concern

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## Slide 0#
›cknowledgements

Oracle Cost Development

Partners in crime at our clients

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Thank You for Your ›ttendance and
Participation

Douglas ›. Volz

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 End of Presentation

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