R12 OPM COSTING

-- Akbar M. Shaik
NEW AND CHANGED FEATURES - R12 OPM COSTING

➢OPM Costing has been enhanced to work with the Common

Inventory model that replaces OPM Inventory in Release 12.
commonly known as Inventory Convergence
➢The process-specific features in OPM Inventory have been
incorporated in Oracle Inventory. As a result of this, OPM Costing
has been modified to cost all transactions in a Process Enabled
organization in Oracle Inventory. All transactions created in a
Process enabled organization will be costed only by OPM Costing.
➢ The Organization structure used across E Business suite is now
applicable for all process enabled organizations. To ensure
compliance with the organization structure, the costing entities that
were at the OPM Company (such as Cost Roll Up and Actual cost
calculation) has now been mapped to the Legal Entity level.
➢Benefits: Support for new transactions and modules such as
Advanced Drop ship, Consigned Inventory and better usability
through sharing common set ups and terminologies

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NEW AND CHANGED FEATURES - R12 OPM COSTING

11i and R12 Structure

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NEW AND CHANGED FEATURES - R12 OPM COSTING

Process Inventory Organization features in Oracle Inventory

➢Dual unit of measure control for any item
➢Advanced lot control
➢Material Status
➢Enhanced inventory allocation rules

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NEW AND CHANGED FEATURES - R12 OPM COSTING

R12 OPM Costing Terminology changes

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NEW AND CHANGED FEATURES - R12 OPM COSTING

➢Oracle Sub ledger Accounting application replaces the OPM

Manufacturing Accounting Controller (MAC) MAC is now obsolete
➢ SLA is an intermediate step between sub ledger products and the
Oracle General Ledger. SLA provides common data model and UI
across sub ledgers. All transactions that are costed are picked up by
SLA and it creates the necessary journals which is stored in a
common data model.
➢ Benefits: Analysis, Usability was improved and increased. All the
financial data is available in a single sub ledger and hence provides a
single source of truth. Standard user interface for sub ledger
applications across several financial applications

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NEW AND CHANGED FEATURES - R12 OPM COSTING

Sub ledger Accounting Replaces MAC

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Equivalent Functionality SLA (vs.) MAC

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NEW AND CHANGED FEATURES - R12 OPM COSTING

OPM Costing in Converged Inventory Transfers between Process and

Discrete Organizations
➢Provides an ability to cost material transfers between
Organizations that use different Costing methods
➢Transfers between Process and Discrete organizations will use
Transfer Price
➢Transfer price derived from price list set up in the Shipping Networks
form
➢Transfer applies to both inter-org transfers with or without internal
orders
➢New Interorg Profit account created to record profits from such
transactions

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Dependencies and interaction points for OPM Costing

➢OPM Costing integrates with several applications in the OPM family

and other Oracle Applications. The dependencies and interactions
are with:

➢OPM Applications
-New Product Development for Formulas and Recipes
-Process Execution for Batches information

➢Other Oracle Applications

-Oracle Sales and Shipping
-Oracle Purchasing and Receiving
-Oracle Inventory

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R12 OPM COSTING OVERVIEW

➢All material and resource transactions in a "process enabled"

Inventory Organization are costed using OPM Costing.
➢OPM Costing supports different Cost Types that can be used to
monitor and analyze costs. It has the ability to store cost of a single
item in multiple cost types at any given point of time, though only
one is used for inventory valuation in OPM Sub ledger.
The cost methods supported are:
1. Standard Cost
2. Actual Cost
3. Lot Cost

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STANDARD COSTING

➢Standard costs are predefined costs that are set up for ingredients
resources and are calculated for products based on formulas,
routings, and overheads. Define the cost of ingredients in a specific
organization for a cost period. This cost information remains static
during a cost period.
➢The standard cost of a product depends on the combination of:
Ingredients that are defined in formulas, Resources that are defined
in routings and Overheads from facilities where the product is
produced.

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ACTUAL COSTING

➢OPM Actual Costing calculating Item cost based on actual inventory

and Resource transaction data. OPM captures the actual cost from
business transaction. Cost of Raw material is captured based on raw
material purchase order receipts and or invoices. Cost of products
are captured based on the actual quantities of raw material
Consumed and the resource usage or conversion cost recorded in
production batch. A transaction history is maintained for reference.
➢There are five methods available to calculate the Actual Cost
1) PWAC Period Weighted Average Cost
2) PMAC Period Moving Average Cost
3) PPAC Perpetual Weighted Average Cost
4) LSTT Last Transaction
5) LSTI Last Invoice Transaction

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ACTUAL COSTING - PWAC

➢Period Weighted Average Cost (PWAC): The period weighted average

cost is a strict average cost for the period based on Period Total
Quantity and Estimated or Final Prices.
➢PWAC Calculation:
Trans Qty - Receipt Quantities or AP interfaced quantities within the
costing period
Price - Receipt estimated prices or AP invoice final prices within the
costing period

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ACTUAL COSTING - PMAC

➢ PMAC: PMAC calculates the average cost for the period while moving
previous period's cost with last period's inventory balance and cost
➢ PMAC Calculations:
Prior Period Inv Balance - This is the prior period inventory balance captured
from the inventory period ending balances.
Prior Period Cost - The prior period actual cost component from the cost
component details table.
Trans Qty - Receipt Transaction Quantities or AP Interfaced Quantities within
the costing period.
Price - Receipt estimated prices or AP invoice final prices within the costing
period.

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ACTUAL COSTING - PPAC

➢ PPAC: The perpetual weighted average cost type computes the average cost
for the entered receipts and quantities within the defined boundaries of the
cost calendar. The calendar definition may in turn be identical to a fiscal year,
or may span multiple fiscal years providing the flexibility of a variety of
Perpetual Weighted Average cost methods.
➢ PPAC Calculations:
Trans Qty - Receipt Quantities or AP interfaced quantities from the start of the
costing calendar to the end of the current period.
Price - Receipt estimated prices or AP invoice final prices within the costing
calendar.

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ACTUAL COSTING - LAST TRANSACTION COST

➢Last Transaction (LSST) - OPM uses the last transaction in the

costing period as the basis for the raw material cost (if there is no
Accounts Payable invoiced cost for the period, the last receipt price
is used to cost the raw material).
➢Last Invoice Transaction (LSTI) - OPM uses the last Accounts
Payable invoice transaction in the costing period as the basis for the
raw material cost, even if there are raw material receipt transactions
that occur later in the period. If there are no Accounts Payable
invoiced costs for the period, the last receipt price is then used to
cost the raw material. Actual cost adjustments supersede any of the
methods used to calculate actual cost - an adjusted cost is the actual
cost.

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LOT COSTING

➢Lot Costing: Lot Costing is a perpetual form of costing unlike

standard or actual costs that are periodic in nature. The lot costs do
not have cost calendar and period.
➢Once the cost of a lot is identified, it remains the cost of the lot until
the entire lot is consumed or another receipt or batch yield is created
for the same lot.
➢When a lot is received or yielded from a batch again, the previous
cost of the lot and the current on hand quantity of the lot is averaged
with the new receipt or batch yield quantity and cost to arrive at the
new cost of the lot.

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▪ R12 OPM COST MANAGEMENT PROCESS FLOW

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OPM Costing

➢OPM Accounting Preprocessor OPM Accounting Preprocessor that lets

you create events in SLA tables. SLA identifies eligible events and uses these
events to extract data using OPM supplied extract program into extract tables.
➢Cost Update The process by which all component costs are updated to
the proper general ledger accounts.
➢Actual Cost Processor Request in order to produce accurate actual cost
calculations
➢Cost Rollup Calculates the cost for product based on Ingredient, Resource
and Overhead cost

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Setups

➢Cost Types

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BMR Setups

➢Cost Calendar

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BMR Setups

➢Cost Calendar Assignments and Period Statuses

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BMR Setups

➢Cost Calendar Assignments and Period Statuses

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BMR Setups

➢Component Groups Defined for Reporting and Analysis purpose.

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BMR Setups

➢Cost Components Classes Item Cost will be broken down into several buckets,
is useful for tracking and analysis purpose.

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BMR Setups

➢Cost Analysis Codes The cost analysis codes are used to group component
costs from multiple cost component class types to provide an alternate view of the total
cost. cost component class can be further broken down using cost analysis codes for
more granular tracking of costs

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BMR Setups

➢Fiscal Policies The Fiscal Policy options define the Legal Entity-wide parameters
that determine the cost type that will be used for inventory valuation, the default material
and overhead cost components and analysis codes for actual cost processing, additional
cost types used for costing simulations

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