A cost structure is the collection of
definitions and methods used to cost inventory, bills of material, and work in
process. The cost structure is composed of:
Organizations
Cost organizations and shared costs
Cost elements
Subelements
Activities
Basis types
General Ledger accounts
Inventory Organizations
In Oracle Manufacturing, each inventory
organization must have a cost structure that you define. Organizations can have
their own cost structure or can share attributes of a similar cost structure.
See: Defining Organization Parameters.
Before you set up Inventory, Bills of
Material, or Work in Process, examine the current cost structure of your
organization(s) to determine which costing features and functions to use.
Cost Organizations and Shared Costs
You can share costs across standard cost
organizations as long as the child cost organizations have not enabled WIP. You
cannot share costs across average costing organizations.
The two item attribute controls, Costing
Enabled and Inventory Asset Value determine whether you share costs. If you
plan to share costs across standard costing organizations, set the control
level for these attributes to the item level. The organization that holds the
costs is called the cost master organization.
Costs are maintained by the cost master
organization and shared by the child cost organizations. All reports,
inquiries, and processes use the shared costs. You cannot enter costs into the
child cost organizations.
Note: The cost master organization can be a
manufacturing organization using Work in Process.
You can also set up average cost
organizations even if you share standard costs between another group of
organizations. The average and standard costing organizations can share the
same item master organization. However, the average cost organization does not
share costs.
For each organization to create and
maintain its own costs, set the control level for Costing Enabled and Inventory
Asset Value item attributes to the item/org level. Even if each organization
holds its own costs, they can share the same common item master. See:Defining
Items.
Cost Elements
Product costs are the sum of their
elemental costs. Cost elements are defined as follows:
Material
The raw material/component cost at the lowest level of the bill of
material determined from the unit cost of the component item.
Material Overhead The overhead cost of material, calculated as
a percentage of the total cost, or as a fixed charge per item, lot, or
activity. You can use material overhead for any costs attributed to direct
material costs. If you use Work in Process, you can also apply material
overhead at the assembly level using a variety of allocation charge
methods.
Resource
Direct costs, such as people (labor), machines, space, or miscellaneous
charges, required to manufacture products. Resources can be calculated as the
standard resource rate times the standard units on the routing, per operation,
or as a fixed charge per item or lot passing through an operation.
Overhead
The overhead cost of resource and outside processing, calculated as a
percentage of the resource or outside processing cost, as a fixed amount per
resource unit, or as a fixed charge per item or lot passing through an
operation. Overhead is used as a means to allocate department costs or
activities. For example, you can define multiple overhead subelements to cover
both fixed and variable overhead, each with its own rate. You can assign
multiple overhead subelements to a single department, and vice versa.
Outside Processing This is the cost of outside processing
purchased from a supplier. Outside processing may be a fixed charge per item or
lot processed, a fixed amount per outside processing resource unit, or the standard
resource rate times the standard units on the routing operation. To implement
outside processing costs, you must define a routing operation, and use an
outside processing resource.
Subelements
You can use subelements as smaller
classifications of the cost elements. Each cost element must be associated with
one or more subelements. Define subelements for each cost element and assign a
rate or amount to each one. You can define as many subelements as needed.
Material Subelements Classify your material costs, such as
plastic, steel, or aluminum. Define material subelements and assign them to
item costs. Determine the basis type (allocation charge method) for the cost
and assign an appropriate amount. See: Defining Material Subelements.
Material Overhead Subelements Define material overhead subelements and
assign them to item costs. Determine the basis type for the cost and define an
appropriate rate or amount, such as purchasing, freight, duty, or material
handling. See: Defining Overhead.
Resource Subelements Define resource subelements. Determine the
basis type for the cost and define an appropriate rate or amount. Each resource
you define is a subelement, can be set up to charge actual or standard costs,
and may generate a rate variance when charged. See: Defining a Resource.
Overhead Subelements Define overhead subelements and assign them
to your item costs. Determine the basis type for the cost and define an
appropriate rate or amount. Overhead subelements are applied in the routing and
usually represent production overhead. You can define overheads based on the
number of units or lot moved through the operation, or based on the number of
resource units or value charged in the operation. See: Defining Overhead.
Outside Processing Subelements Define outside processing subelements.
Determine the basis type for the cost and define an appropriate rate or amount.
This subelement is associated with the outside processing cost element and
represents service provided by suppliers. Each outside processing resource you
define is a subelement, may be set up to charge actual or standard costs, and
may generate a purchase price variance when charged. See: Defining a
Resource.
Activities
An action or task you perform in a business
that uses a resource or incurs cost. You can associate all product costs to
activities. You can define activities and assign them to any subelement. You
can also assign costs to your activities and build your item costs based on
activities.
Basis Types
Basis types determine how costs are
assigned to the item. Basis types are assigned to subelements, which are then
assigned to the item. Each subelement must have a basis type. Examples: one
hour of outside processing per basis item, two quarts of material per basis
lot.
Basis types are assigned to subelements in
three windows and, for the overhead subelement, a setting established in one
window may not always be applicable in another. (This refers specifically to
the overhead subelement, not the material overhead subelement.)
Basis types in Subelement and Routing
Windows
Basis types assigned to subelements in
subelement and routing windows are the defaults for the purpose of routing.
Basis types Resource Units and Resource Value, when assigned to an overhead
subelement (Routing only in the table below), are available to flow through to
routing, but are not available in the Item Cost window.
Basis types in the Item Cost window
When you are defining item costs, for any
overhead subelement with a previously assigned basis of Resource Units or
Resource Value, that basis is ignored, and only item or lot appears in the
basis pop-up window. This does not change the assigned basis for the purpose of
routing.
The following table details the basis types
available for use with each subelement.
Basis Types Available to Subelements
Basis Type
Material Material Overhead Resource
Outside Processing Overhead
Activity
Item
Lot
Resource Units Routing only
Resource Value Routing only
Total Value
Item
Used with material and material overhead
subelements to assign a fixed amount per item, generally for purchased
components. Used with resource, outside processing and overhead subelements to
charge a fixed amount per item moved through an operation.
Lot
Used to assign a fixed lot charge to items
or operations. The cost per item is calculated by dividing the fixed cost by
the item's standard lot size for material and material overhead subelements.
For routing steps, the cost per item is calculated by dividing the fixed cost
by the standard lot quantity moved through the operation associated with a
resource, outside processing, or overhead subelement.
Resource Value
Used to apply overhead to an item, based on
the resource value earned in the routing operation. Used with the overhead
subelement only and usually expressed as a rate. The overhead calculation is
based on resource value:
resource value earned in the operation x
overhead rate
Resource Units
Used to allocate overhead to an item, based
on the number of resource units earned in the routing operation. Used with the
overhead subelement only. The overhead calculation is based on resource units:
resource units earned in an operation x
overhead rate or amount
Suggestion: You may optionally use resource
units and resource value to earn material overhead when you complete units from
a job or repetitive schedule.
Total Value
Used to assign material overhead to an
item, based on the total value of the item. Used with the material overhead
subelement only. Material overhead calculation is based on total value:
Activity
Used to directly assign the activity cost
to an item. Used with the material overhead subelement only. The material
overhead calculation is based on activity:
activity occurrences
# of items x activity rate
Cost Transfer and Distribution to the
General Ledger
All costs are maintained by cost element.
If you assign a different account to each cost element as you define your
subinventories and WIP accounting classes (if you use Work in Process),
elemental account visibility is maintained when transactions are processed.
If you are using standard costing and
assign the same account to more than one cost element, you can choose to have
the values of these costs elements summarized before being transferred to
General Ledger by setting the CST:Account Summarization profile option to Yes.
You can also choose to have elemental visibility maintained by setting the
CST:Account Summarization profile option to No. If you are using average
costing, elemental visibility is maintained regardless of how this profile
option is set.
