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A cost structure is the collection of definitions and methods used to cost inventory, bills
of material, and work in process.
Organizations
Cost organizations and shared costs
Cost elements
Sub-elements
Activities
General Ledger accounts
Cost Organizations and Shared Costs: You can share costs across standard cost
organizations as long as the child cost organizations have not enabled WIP.
Cost Elements:
1. Material - The raw material/component cost of the component item.
2. Material Overhead - The overhead cost of material, calculated as a percentage of
the total cost, or as a fixed charge per item, lot, or activity.
3. Resource - Direct costs, such as people (labor), machines, space, or miscellaneous
charges, required to manufacture products
Costing
Sub-elements:
Note: Negative item costs are not supported in Oracle Cost Management.
Activities: An action or task you perform in a business that uses a resource or incurs
cost.
Basis Types: Basis types determine how costs are assigned to the item.
1. Item: Used with material and material overhead sub-elements to assign a fixed
amount per
item, generally for purchased components.
2. Lot: Used to assign a fixed lot charge to items or operations.
Costing
Total Value: Used to assign material overhead to an item, based on the total value of
the item.
Mass Editing Item Accounts: 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 items, a category of items, or a specific
item.
. Mass Edit Material Cost: Apply new activity rates to item costs, Create new costs
and change costs to a specified amount by a percentage or an absolute amount,
Create new costs by averaging the purchase order price for open purchase orders or
historical purchase order receipts, or actual accounts payable invoice prices for items.
. Mass Edit Material Overhead Cost: To change the overhead cost assigned to
items.
. Navigate to the Item Costs window. Choose the Costs button from either the Item
Costs Summary folder window or from the Item Costs Details window.
. Select the activity. The default activity you associated with the sub element is the
Costing
Select the basis. The default is the default basis associated with the sub-element.
Save
Error Resubmission:
If you are using Average Inventory Costing, including Project Manufacturing Costing, then
you can resubmit cost transactions that have failed to cost, and projects that have failed
to transfer.
Navigate to the Find Material Transactions window from the Cost function.
Select Error from the Costed or the Transferred to Projects dropdown list.
Navigate to the Costed column of the Reason, Reference tab in the View Material
Transactions window.
Average Costing: Under average cost systems, the unit cost of an item is the average
value of all receipts of that item to inventory. Each receipt of material to inventory
updates the unit cost of the item received. Issues from inventory use the current average
cost as the unit cost.
For purchased items, this is a weighted average of the actual procurement cost of an
item.
For manufactured items, this is a weighted average of the cost of all resources and
materials consumed.
If you increase average costs, then debit your subinventory accounts and credit the
specified adjustment account. If you decrease average costs, then the reverse
adjustments are generated.
If you are updating costs using a percentage change, then enter a default to use as
the percentage change for individual item costs.
Enter a percentage change in the item's average cost. The item cost is updated by
this percentage value. On-hand inventory in all subinventories and intransit is
revalued.
Enter the amount to increase or decrease the current on-hand inventory value. To
decrease the value, enter a negative amount. However, you cannot enter a value that
drives the inventory value negative.
Note : You cannot change the average cost value by this method unless the item has
quantity onhand.
Costing
Open the Value Change tabbed region and review the change in inventory value.
The transfer process picks up only invoices that have been posted to GL to ensure that
the invoices are approved for payment, and that variances can be added back to
inventory.
You can only run the transfer process for one organization at a time.
Cost Updates @
Purchase Order Receipt to Receiving Inspection No
Physical Inventory No
RMA Returns No
- Deferred COGS-
You must specify the Deferred COGS Account in the Organization Parameters
window.
1. Navigate to the Organization Parameters window and select the Other Accounts
tab.
(N) Inventory > Setup > Organizations > Parameters (T) Other Accounts
2. Enter the Deferred COGS Account. There is no default for this account. Specify a
Deferred COGS Account for each organization.
Deferred COGS: How to use this featur
e of Oracle AppsR12
Business Process:
In R11i When a Sales order is shipped and interface trip stop is completed. This then
generate following accounting.
Cr Inventory Valuation account Rs. 25000
Dr COGS Account Rs. 25000
In R12 when a sales order is shipped and interface trip stop is completed the following
accounting entries gets generated.
Cr Inventory Valuation account Rs. 25000
Dr Deferred COGS Account Rs. 25000
After the AR invoice is generated and the revenue is recognized, following program will
create COGS recognition transaction. This will reflect a change in the revenue recognition
percentage for a sales order line.
Navigation: Cost > COGS Recognition > Collect Revenue Recognition Information
2. Generate COGS Recognition Events: This will create accounting entries as follow
Navigation: Cost > COGS Recognition > Generate COGS Recognition Events
Business Process:
With this feature the COGS recognition now requires few extra concurrent requests to be
submitted.
To make the complete set of transactions visible in the Material Transaction screen,
Include Logical Transaction checkbox need to be checked.
Deferred COGS: How to use this featur
e of Oracle AppsR12
COGS Recognition and Concurrent Processes
The matching and synchronization of the earned and deferred components of sales
order revenue and COGS is accomplished by running the following COGS recognition
concurrent processes at user-defined intervals:
Record Order Management Transactions (Optional)
Collect Revenue Recognition Information
Generate COGS Recognition Events
(N) Cost > COGS Recognition
Important Reports
In R12, Oracle introduced two changes to help with identifying transactions that
would prevent you from closing the period.
The first is the ability to drilldown to transactions from the Accounting Periods
form.
In R12, there are three new modules that integrate with Cost Management
1. Subledger Accounting,
Period Close
Dependencies
Period Close Process R12- Sequence
3. Payables
4. Receivables
5. Purchasing
6. Inventory / Costing
7. Projects
8. Assets
9. General Ledger
Period Close Process R12- Process
Order Management:
Cash Management:
Payables
Receivables
Purchasing
Inventory/WIP
Projects
Change the Current Oracle Projects Period Status from Open to Pending Close
Open the Next Oracle Projects Period
Complete All Maintenance Activities
Run Maintenance Processes
Complete All Transaction Entry for the Period Being Closed
Run the Final Cost Distribution Processes
Interface Transactions to Other Applications (AP, GL, FA)
Generate Draft Revenue for All Projects
Generate Invoices
Run Final Project Costing and Revenue Management Reports
Transfer Invoices to Oracle Receivables
Interface Revenue to General ledger (Project Billing Only)
Run Period Close Exception and Tieback Reports
Change the Current Period Oracle Projects Status from Pending Close to Closed
Advance the PA Reporting Period (Optional)
Update Project Summary Amounts
Restore Access to User Maintenance Activities
Permanently Close the Oracle Projects Period (Optional)
Reconcile Cost Distribution Lines with General Ledger (Optional)
Period Close Process R12- Process
Assets
General Ledger
Purchasing : Purchasing Responsibility > Setup > Financials > Accounting > Control
Purchasing Periods
Inventory : Inventory Responsibility > Accounting Close Cycle > Inventory Accounting
Periods
AP: Payables Responsibility > Setup > Calendar > Accounting > Accounting Periods
AR: Receivables Responsibility > Control > Accounting > Open/Close Period