OPM Financials R12

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Oracle Process Manufacturing OPM Financials

2006 Oracle Corporation Proprietary and Confidential
2
Agenda
New on R12
Item Cost
Resource Cost
Overhead Cost
Cost Process
Cost Types
Calendar
Cost Component Classes & Group
Cost Analysis Code
General Ledger Fiscal Policy
Actual Cost Set Up / Process
Few Points Actual Costing
Exercise
Cost Setup Calculate Cost Store Costs SLA Oracle GL
Oracle
Inventory
Purchasing GMD, GME
Order
Management
OPM Costing in R12
OPM Costing Process

Items Costing Attribute
Ensure for Asset Items,
Inventory Asset Value
(in Costing Tab) &
Process Costing Enabled
Flags are set.

Cost Type
(N) Setup / Cost Type
Select Raw material & Product calculation method
OPM Cost Calendar
(N) Setup / Cost Calendar
Define Costing
Calendar for each
Fiscal Year
OPM Cost Calendar

Assign Legal Entiry and
Cost Type to each
Calendar
OPM Cost Calendar

Open Cost Period
Cost Component Class
(N) Setup / Cost Component Class
Cost component classes are buckets used to define the elements of
cost detail you want to view. Costs from several ingredients, routings,
or burdens can be summarized into component classes.
Cost Component Class
(N) Setup / Cost Component Class
The cost component classes are classified into 5 different elements or
usages: Material, Resource, Overhead, Expense Allocation and
Standard Cost Adjustment types
Understand about Item Cost
This level cost
Lower level cost if exists
intermediate ingredients
used
(N) OPM Financials > Items Cost
Understand about Resource Cost
Enter the Nominal Cost for this resource for using it for one unit
of measure. For example, if you are defining the resource cost
for a mixing machine, and its usage is measured in hours, then
enter the cost of using the resource in per unit.
Select Cost Method &
Enter cost Per Unit
Understand about Overhead Cost
. A overhead is a cost associated with a resource other than the
resource usage assigned in the routing.
Actual Costing Setups & Processes
Actual Cost Setup
Defining Adjustment Reason Codes

Defining Allocation Codes

Defining Allocation Definitions

Defining Expense Allocation Accounts

Actual Cost Calculation

Actual Cost Adjustment Reason
If a situation arises in which
you have to make
adjustments to the actual
costs calculated by OPM,
you can use the Actual
Costs Adjustments window
to enter the necessary
component cost changes for
new cost calculations.
However, you will have to
specify a valid reason code
that justifies the reason for
that cost change. You define
those reasons on the Actual
Costs Adjustment Codes
window.

(N) Setup > Actual Cost > Adjustment Reason
Defining Allocation Codes
On this window you create the allocation codes that are used to define the
indirect expenses from the general ledger accrued expense accounts. Later,
you will define the parameters to allocate those expenses to the appropriate
cost component classes. Since allocations can be processed in multiple steps,
we recommend that you adopt a naming convention to simplify processing of
ranges of allocation codes.

(N)OPM Financials > Setup > Actual Cost > Expense Allocations >
Codes
On this window you specify two sets of information:

The item, component class, and related information required identifying
where the allocation results will be placed.

The account keys that maintain the basis information (for example, the
quantity of production and machine usage) associated with each item.

The Allocation Results section at the bottom of the window is linked to a
specific item line, and indicates where the resulting allocated expenses are
placed.
This functionality requires Oracle General Ledger to be fully installed. If you
are using OPM not integrated with Oracle Financials, and GL is not fully
installed, then a warning message displays and the data you enter may not
be used.

(N) OPM Financials > Setup > Actual Costs > Expense
Allocations > Basis
Select Allocation Code
Select Allocation Method I.e Fixed % or
Amount basis
Enter Items for Allocation &
their % Allocation
Defining Expense Allocation Accounts

Assign Cost Component Class and Analysis Code to Allocation Code
Define Expense Allocation Accounts
(N) OPM > Setup > Actual Cost > Expense
Allocations > Expense
On this window you specify the general ledger account
, which capture the overhead expenses to be allocated.
Here you are defining the expense pool to be allocated;
on the Allocation Definitions window, you will specify the products
to which these expenses are allocated.
Select Period to date or Year to date
as per requirement
Actual Cost Calculation
The following topics are covered:
Processing Expense Allocations
Calculate Actual Costs
Viewing Actual Cost Processing Status
Using Actual Cost Adjustments
Viewing Actual Costs
Displaying Item Cost List
Important Points

Running Expense Allocations
(N) OPM Financials > View > Request > Submit a new Request

From parameter of OPM Cost Allocation Process entering Allocation code,
Cost Calendar and period
OPM Cost Allocations
The GL Expense allocations are averaged out using Prior Period Inventory Balance for items that have no
current period transactions, such as receipts or production. Whenever there is a non-zero GL expense
amount that could not be allocated because the total quantity is zero, a warning is displayed.

For Raw Materials:
The GL Expense amount is calculated as the sum of GL expenses to be allocated and the product of prior
period inventory balance and prior period cost. This is represented as:

GL Expense component cost = [(Previous Period Inventory Balance * Previous Period GL Expense
Component Cost) + GL Expense Amount for Current Period] / [Previous Period Inventory Balance +
Received Quantity]

For Products
The Quantity is determined as sum of the previous period balance, the total quantity produced and the
total quantity received, if any. The GL Expense amount is the sum of GL expenses to be allocated in the
current period and the product of prior period inventory balance and prior period cost.

GL Expense component cost = [(Previous Period Inventory Balance * Previous Period Component Cost) +
GL Expense Amount for Current Period] / [Previous Period Inventory Balance + Produced Quantity +
Received Quantity (if any)]

The GL Expense allocations are averaged out using Prior Period Inventory Balance for items that have no
current period transactions, such as receipts or production. Whenever there is a non-zero GL expense
amount that could not be allocated because the total quantity is zero, a warning is displayed.

Calculate Actual Cost
Enter Calendar, Period, Cost Method in above window and then Press
Accept to run Actual Cost Process. System will fire request to run.


System displays the number of errors while running Actual cost process. You
can view the errors from the Action menu.
(M) Action > View Error Message
Before viewing the actual cost, first correct errors and then again run
the Actual cost process.
View Actual Cost
(N) OPM Financials > Item Cost
View Actual Cost Transactions

Click on Action menu from Items Cost form, you can view actual transactions.
Actual Cost Adjustment
This option allows you to adjust the final calculated actual cost
of a raw material or product based on quantity and unit cost.
Actual costs are recalculated based on the adjustments that
you enter for the specified item, warehouse, cost calendar, and
cost period.

Note that these adjustments do not directly alter the cost of an
item. Rather, they influence cost calculations by adding
quantity and cost adjustments to the existing costs after other
cost calculations have been completed. This approach
produces a complete adjustment audit trail.

Avoid Cost Adjustments If unavoidable, this would require manual journals
in General Ledger to be passed for reconciliation between OPM and GL.
Actual Cost Adjustment
(N) OPM Financials > Actual Costs > Adjustments

Important Points-Actual Costing
Entirely driven by Actual Production Batch details. I.e. Quantity of actual
Ingredients consumed, Finished Goods Yielded, Resource Usage.
Only batches which are Closed in a specific period are considered for Costing.
No need to establish Source and Target Warehouse relationships.
Cost Warehouse (Optional) as in Standard Cost.
Instead of Cost Rollup Process - Actual Cost Process needs to be run.
While submitting this process, the previous Inventory Period should have been
at least Preliminary Closed.
For each of the cost components calculation would be governed by the Raw
Material / Finished Goods calculation methods set in Cost Methods I.e.
PWAC, PMAC, PPAC, LSTT, LSTI.
Widely used computation methods are PWAC and PMAC.
Resource / Burden costs (if required) need to be established for Actual
Costing method separately for each of the cost period.
All the other setups like Calendar (specific for Actual Cost Method), Component
classes, Groups, Material cost components - same as in Standard Costing.

OPM Financials Accounting - SLA
Cost Update
Event Models
COGS Recognition
OPM Pre-Processor
Create Accounting

Cost Update
(N) OPM Financials > Cost Update
Select calendar and period to
Update ost
Selet Final Update for Closing Period
COGS Recognition
Running in sequency three Program:
Record Order Management Transaction
Collect Revenue Recognition Information
Generate COGS Recognition Events

(N) OPM Finacials > COGS Recogition
Record Order Management

Collect Revenue Recognition Information

Generate COGS Recognition Events

OPM Pre-processor Accounting
(N) OPM Financials > OPM Accounting Pre-processor
(M) Actions > Submit Process
Select Period and Source Transactions to Accounting
You can run Pre-Processor for each
Source in separate running.
Event Model - Example
Run Create Accounting
(M) View > Request > Sumit a new Request
Choose Draft Mode first for
Review Journal Entry
You can run Create accounting for each
Process Category Transaction or All
Run Create Accounting

View Output to review
Create Accounting program result
46
Review the accounting entries
47
Subledger Journal Entry
Description
Line Type
Account Derivation Rule
48
Period End Closing with SLA
49
Period End Closing Progress
50
Run the preliminary inventory close
Final Close = No is temporary closing ;
Final Close = Y is permanent
Close inventory Period
51
Run Preliminary cost update process

52
Run OPM Accounting Pre-processor

53
Run Detailed Subledger Report
54
Review the accounting entries
55
Inventory Close- Final
56
Final Cost Update
57
Create accounting final mode
On Submitting program,
the following requests
will be invoked:
Create Accounting
Accounting Program
Journal Import and
Subledger Accounting
Balances Update
58
Shailendra.naithani@oracle.com
Venkat.chukkapalli@oracle.com
59

OPM Financials R12

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Oracle Process Manufacturing OPM Financials

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