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Douglas Volz Consulting
doug@volzconsulting.com

genda
3 nventory 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, FFO, LFO Costs
3 Month-End ccounting Close

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genda (Continued)
3 Release 12 Cost mprovements
3 Flexible ccount Number ssignment
3 Little Known Cost Features

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nventory Structure
3 Global Organization (tem Master)

 

 



3 nventory Organization



 

3 Subinventory

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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
FFO Costing
LFO Costing

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

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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,
nvoice Price Variance
Manufacturing Variances (material usage, resource efficiency, etc.)

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Other Costing Methods

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FFO 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
FFO supports WP costing

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LFO 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
LFO supports WP costing

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

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Cost Structure


  
 

  

  

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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 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 FFO or LFO or Periodic

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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 ut 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 urdens, etc.)

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Oracle Cost Management nteraction

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nventory Costing
3 Costs nto nventory/Stores
Purchase costs into nventory: Material, Material Overhead, etc. costs
For Standard Costing: Purchase Price Variances

3 More Costing for nventory Movement

Misc. ccount Receipt / ssue
Physical nventory, Cycle Counts
Consignment (WP/OSP, purchase consignment)
Subinventory and location transfers
Customer shipments
nternal orders
Project shipments and transfers (PJM)
Logical Transactions (extended supply chain network)

3 Supports many intercompany scenarios

nternal orders
nternal shipping and billing

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Discrete MFG and Costing

3 ll of the Costing Methods support WP Costing
Timing varies by how your charge to WP
ackflush, ssembly Pull, etc.
Push

3 Costs into WP:

Material ssues
Material Overhead
Earning Resources, Outside Processing and Overheads

3 Costs out of WP
Scrap
ssembly Completion

3 Job Close Variances

Only for Standard Costing

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Manufacturing Variance Summary

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Cost Reports and nquiries

3 Material Distribution Detail/Summary Reports
3 WP ccount Detail/Summary Reports
3 Discrete Job Value
3 Expense Job Value Report
3 WP Value Report
3 WP Value nquiries

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Setting Standard Costs

3 Cost Mass Edits
3 tem Cost Copies
3 Cost Rollups (also across the Supply Chain)
3 Standard Cost Updates
3 ills of Material Cost nquiries and Reports
3 Pending and Standard Cost djustment Reports

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Setting verage, FFO, LFO Costs

3 Simulation Costing with Cost Rollups and Mass Edits
3 Transaction-based updates of verage, FFO, LFO 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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Month-End ccounting Close

3 Close by nventory Organization
3 Month-End nventory, Receiving, WP Value Reports
3 Release 12, close in nventory
Transfer to G/L using Subledger ccounting (Create ccounting)

3 Closing nventory closes Receiving and WP

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

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Month-End nventory Value Reports

3 nventory Value Report
3 ntransit Value Report
3 Subinventory ccount Value Report
(disabled in Release 12)

3 ll nventories Value Report

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

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

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R12 mprovements Period Close Diagnostics

3 Forms Drilldown
Using the same nventory 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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Reconciliation mprovements in R12

3 nventory Value Reports have an as of date

nventory Value Report

Receiving Value Report
ntransit Value Report
ll nventories Value Report

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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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asic Table Structure for SL

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More Release 12: COGS Recognition

3 n 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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Related R12 OM Features

3 Fixed Component Usage Support:
Support for lot-based materials that have a fixed usage regardless of the
job size for discrete WP jobs, OSFM lot-based jobs and Flow
Manufacturing

3 Component Yield Support:

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

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Standard Features You May Not e 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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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 nventory responsibility
Using the nventory Organization Parameters, Costing tab, make
sure your Transfer 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:
Matl Overhead bsorption Rules
3 Explicitly say which ones do and do not earn material overhead

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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 roll-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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Desired Enhancements
3 Multi-Org Reporting
Multi-Org Material ccount Summary Report
Multi-Org Receiving ccount Summary Report
Multi-Org WP ccount Summary Report
Multi-Org ll nventories Value Report (with account numbers)
Multi-Org nventory Value Report (with account numbers)
Multi-Org Receiving Value Report (with account numbers)
Multi-Org Expense Value Report (with account numbers)
Multi-Org WP Value Report (R12 still has account numbers!)

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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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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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