The Cost Update process requires that there is an open accounting period. The
update performs the following tasks:
- Moves the cost type to the frozen cost type
- Creates item cost history
- Submits adjustment reports
- Creates accounting transactions
- Can save update details for rerunning the adjustment reports
The variance amount that is created during the standard cost update is the new standard cost minus the old standard cost. The actual cost of items is known, but it is not used for inventory purposes. The standard cost is determined by a company to reflect all the costs of an item for a time period. This is the agreed on price that will be used for all reports and uses until the standard cost is updated.
If sharing costs across organizations, the cost update program automatically revalues on-hand balances in the organizations that share costs. The costs can only be updated from the master costing organization, which must be using standard costs. If using Work in Process, the cost update re-values discrete job balances, and creates accounting adjustments.
Standard Cost update prints three reports:
Inventory Standard Cost Adjustment Report (CSTRUSIA)
Intransit Standard Cost Adjustment Report (CSTRUSTA)
WIP Standard Cost Adjustment Report (CSTRUSJA)
Purchased items use material and material overhead cost elements. For these
items, resource costs are not used because these items generally do not consume resources.
For items that have existing transactions, the frozen cost cannot be entered and saved. The item must have a pending cost defined, and then the cost update is used to transfer the pending cost to the standard cost. Also, if the item is already on a bill of material that will be rolled up at a later time, then it is not necessary to create the frozen cost for the purchased item.
Note: The Use Default Cost/Controls on the item cost screen must be set to NO
when trying to create a pending cost if transactions already exist.
Manufactured items use the Bill of Material and routings to gather costs.
A cost rollup will compile all the cost of an assembly. These rolled up costs are then updated to standard costs. In addition to material and material overhead cost elements, the costs of resources, overhead and outside processing are added to the manufactured item. These are included in the overall cost of the item.
There are two seeded cost types in the system. Users can add as many cost types as required, but these two type are seeded and cannot be deleted.
Frozen - These are the standard costs of items. These costs cannot be
rolled up because these are the end cost; the destination of rollups.
Pending - These costs are created when there are new parts or when the
user wants to add new costs ahead of the regular year end cost update.
These costs are separate from frozen costs and can be transferred to frozen
at any time by using the cost update process.
Rollup pending costs (or any other cost type), then perform the standard cost update from pending to frozen. This will set the desired standard to be used for the specified time period.
The item costs are broken down by these elements in subinventories and in Work in Process. These costs can be broken into cost sub-elements for more detail:
Material - Raw material costs
Material Overhead - Extra costs associated with purchased items i.e.,
freight costs
Resources - People or machines used in manufacturing i.e., labor costs
Overhead - General costs of doing business i.e., depreciation, utilities
Outside Processing - Costs of subcontractor services i.e., painting
To divide costs across a business, subinventories and WIP classes are used. Each have their own set of accounts to hold costs. These accounts are setup in the organization parameters.
WIP classes have two accounts: one for costs and one for variances. The first is the standard cost, and the second is for the difference between the actual cost and the standard cost. The Discrete Job Value report shows the costs incurred, the costs relieved, and the resulting variances. This report can be used prior to closing jobs to review variances that may occur for job closes and make the appropriate adjustments prior to the job close.
A WIP class is required for each type of workorder -- standard, asset non-standard, expense non-standard. A default class can be set in the parameters, but a WIP class is mandatory.
Resources also use accounts to track the costs. Two accounts are used:
Variance account - This would be used if an actual rate was being entered
against a job. This is generally not done. The standard rate is used and
recorded against the WIP class.
Absorption account - This is used the most. It is credited by any resource
usage, i.e. labor. It is debited from other systems outside manufacturing, i.e.,
payroll.
** It is best to run the cost update at the beginning of an inventory accounting period before new transactions start for the period.
The cost transaction processors must be started before entering transactions. If these are not started, then transactions will not be processed properly and will need to be resubmitted. All accounting processing uses the following processors:
Material Cost Transaction processor - Used by Inventory items
Resource Cost Transactions processor - Used by WIP transactions
These can be activated in the Request Interface Managers form:
Inv > Setup > Transactions > Interface Managers Special > Launch
The Cost Manager is a concurrent process that spawns workers that process the transactions. The Cost Manager runs in the background at a set interval. When transactions are available for processing, the Cost Manager spawns the
appropriate worker: The Material Cost Worker validates costing data. If the data is okay, the costed_flag is set to NULL and the rows are inserted into the
MTL_TRANSACTIONS_ACCOUNTS table. These can then be transferred to the
general ledger. If the data is not okay, then the costed_flag is set = N or E and must be fixed and resubmitted for processing.
The Resource Cost Worker validates data and moves it to
WIP_TRANSACTION_ACCOUNTS for transfer. If the data cannot be validated,
then the transactions will remain in the WIP_COST_TXN_INTERFACE table and
will need to be resubmitted.
Standard Cost update can be submitted even when running transactions, since
accounting transactions occur in a batch process. When submitting the cost update it: will turn off the accounting, perform the revaluation and after completing the revaluation, it resubmits the accounting processors. Standard Cost Update is incompatible with Period Close, Job Close and GL transfer processes.
Steps to perform Standard Cost Update:
1. Rollup costs
2. Before running cost update, print and review reports:
The Standard Cost Adjustment Report shows the valuation changes for
inventory, intransit, and work in process. This report can sort by item,
category or subinventory.
The Cost Type Comparison Report displays differences in item costs for any
two cost types. Comparisons can be performed on cost elements and
subelements, activities, operations, as well as this level/previous level costs.
This report can be run for specific item, range of items or categories. The
report can also include percentage cost differences, absolute amounts, or
minimum unit costs.
3. Update to frozen costs.
This process copies the pending cost to frozen costs and prints the cost
update reports.
Options to update:
- all costs to include a combination of overhead resource activity and
item costs
- for specific item
- range of items
- specific category
- zero cost items
- items whose costs are based on rollup
- items whose costs are NOT based on rollup
**Note: The update process commits to the database and changes the value
of inventory. It is recommended that this responsibility be assigned a high
level of security. The Maintain Cost History Privilege must be included in the
user’s responsibility to perform this process.
4. Specify the general ledger account.
This is used by cost management to collect the changes in values and
generate transactions that adjust the inventory accounts. Inventory is adjusted by subinventory and elemental cost accounts. WIP is adjusted by job and cost element accounts. WIP accounting class defines the adjustment
account used for discrete jobs.
5. Cost History
This is a history of each item that is in inventory. The history is held for each
cost update. This history can be viewed for each item in total and by cost
element. This history can be purged when it is no longer needed.
Note: The Privilege to View Cost security function must be included in the
user’s responsibility to view the cost history.
The Privilege to Maintain Cost security function must be included as part of
the user’s responsibility
6. Cost Adjustment Reports
If the save option is chosen when running cost update, then the inventory and
WIP on-hand quantities are saved. This can then be reprinted. This can be
viewed using the View Standard Cost Update form. These reports can be
purged when no longer needed
Note: The Privilege to Maintain Cost security function must be included as
part of the user’s responsibility
Common Problems after running the Cost Update:
· The user has run cost update but not all costs have changed.
Explanation: Have not carried out the full procedure
Solution: 1 - Copy frozen costs to a new cost type
2 - Update the new cost type
3 - When happy compare with frozen costs
4 - Update standard costs from new cost type
· Using the Discrete Job Value report and the detail and summary amounts, they do not agree after a cost update although the total variance does.
The detail information (material & resources) is based on the
CST_ITEM_COSTS table. The summary information is based on the
WIP_PERIOD_BALANCES table. When you perform a cost update,
the system updates the CST_ITEM_COSTS table to get the new values.
Since Cost updates do not update closed jobs, if you then print Discrete Job
Value report for 'closed' jobs, then the summary and details differ. This is
because Oracle WIP produces the Discrete Job Value report, when a discrete
job is closed.
· Updating Standard costs and getting error
APP-20501 CMCICU :error processing in main()
The current Inventory accounting period must be open in all child organizations that correspond to the master when updating costs for the master organization.
All child organizations must have the current Inventory Accounting period open
when running a cost update for a master costing organization.
· Updating Standard costs and getting error
APP-20501 CMCICU: error processing in main
The logfile reveals: APP-20502 cmlogi has detected an internal data error
Check to see if one of the Inventory organizations has been disabled.
· If the standard cost update program is aborted then performance issues can
occur. Since costs are inserted with a cost_type_id = negative update_id and
then the changes occur, then the cost_type_ids will stay in the system. Running the following scripts can help keep the tables clean and increase performance:
delete from CST_ITEM_COSTS
where cost_type_id <0;
and
delete from CST_ITEM_COST_DETAILS
where cost_type_id <0;
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