Oracle Apps – Manufacturing & Distribution
Inventory - Costing
Costing Methods
Standard Costing
Average Costing
If BOM and WIP are installed, only
Standard Costing should be
adopted.
Oracle Apps – Manufacturing & Distribution
Standard Costing
Under Standard Costing, the system will
not calculate any cost.
User will have to average out the cost
manually and should be entered into the
system.
System will automatically record the
difference between defined Standard cost
and the purchase price in the Purchase
Price Variance account.
Oracle Apps – Manufacturing & Distribution
Average Costing
Current INV Balance Purchase Price
100 10
100 12
The Average Cost is derived as
(100x10)+ (100x12) / 200 = 11
When ever the items are purchased and
added to the inventory the system will
calculate the cost of the item by averaging
the existing Item cost with new item cost.
Oracle Apps – Manufacturing & Distribution
Inventory - Costing
Cost Elements
Sub-elements
Basis Types
Cost Types
Define Material Costs
Oracle Apps – Manufacturing & Distribution
Cost Elements
Material
Material Overhead
Resource
Over Head
Outside Processing
Note: These elements are standard and
cannot add or remove the cost element.
Define as many Subelements and associate
with Cost element.
Oracle Apps – Manufacturing & Distribution
Cost Elements - Details
Material: Purchased price of an item.
Material Overhead: Additional expenditure
like freight, loading, unloading and stacking
charges incurred is called as Material Overhead.
Resource: The cost incurred on the resources
to manufacture an assembly is the Resource Cost.
Charges incurred on Machines, Machine Operators
and Assemblers are Resource Cost.
Outside Processing: The expenditure incurred
towards outside processing of an assembly, where
the operation is required in rare occasion in low
volume.
Oracle Apps – Manufacturing & Distribution
Cost Elements - Details
Overhead
Resource Overhead: The cost incurred
towards PF, Gratuity, Conveyance Allowance,
Paid Holidays, LTA, Subsidized Food, Medical
Expenses are called Resource Overhead.
Another type of resource overhead is the
cost of maintaining the machines or
equipment.
Oracle Apps – Manufacturing & Distribution
Sub - Elements
Sub-elements are smaller classification
of Cost Elements. Each cost element must
be associated with one or more sub-
elements.
Material Sub-elements: It classifies
material costs of an Item. Order Cost and
Unloading cost are sub-elements of a
Material of a particular Item.
Oracle Apps – Manufacturing & Distribution
Sub - Elements
Material Overhead Sub-Elements:
Over heads such as purchasing, freight, duty,
material handling costs are sub-elements of
Material Overhead cost.
Resource Sub-Elements:
Operator, equipment, assembler costs are
sub-elements of Resource Cost. Costs applied
in routings of BOM to estimate and in WIP to
know the actual cost of resource.
Oracle Apps – Manufacturing & Distribution
Sub - Elements
Overhead Sub-Elements:
Indirect costs incurred towards the welfare of
an operator and equipment maintenance.
Departmental overheads such as electricity,
HVAC, sweeper, postage, and courier charges .
Outside Processing Sub-Elements:
Cost associated in getting the odd jobs done
externally to meet the production requirement
are called Outside processing sub-elements.
Oracle Apps – Manufacturing & Distribution
Basis - Types
Use basis types to determine how costs are
assigned to the item. Each sub-element
should have a basis types.
Item: Used with material and material overhead
sub-elements to assign a fixed cost per item, for
purchased components. Used with resource, outside
processing, and overhead sub-elements to charge a
fixed amount per item moved through an operation.
Lot: Used to assign a fixed lot charge to items or
operations. Used with Resource, Outside Processing
or Overhead sub-element.
Oracle Apps – Manufacturing & Distribution
Cost - Types
A set of costs uniquely identified by name
and are predefined.
Frozen (Standard costing)
Current (Average Costing)
Under Standard Costing the item cost is defined
by user. The cost update is not possible once after
transacting the item. To update the cost a separate
new cost type is created. Running cost is held by
default cost type (Frozen) and the other is held by
new cost type which will be updating Default Cost
Type.
