Oracle Fusion Costing
Costing Type
1. Standard Costing.
2. Actual Costing
3. Average
Explanation
1,Standard Costing:
- Standard Costing involves setting a fixed cost for an item, which is predetermined for a given period (e.g., monthly or annually).
- The standard cost includes materials, labor, and overhead. Variance between the actual cost and the standard cost is tracked separately.
- This method is commonly used in manufacturing environments where costs are predictable and stable.
- In standard costing, any difference between the actual cost and the predetermined standard cost is recorded as a variance (e.g., material variance, labor variance
2.Actual Costing:
- Actual Costing tracks and calculates the actual costs incurred to produce a product. It includes the actual costs of materials, labor, and overhead for each unit produced.
- This method is more accurate, as it reflects real-world cost data; however, it may require more processing power and data capture.
- It is commonly used in businesses with fluctuating or uncertain costs, as it provides a precise reflection of how much each product costs in real time.
3.Average Costing:
- Average Costing calculates the average cost of goods sold (COGS) by averaging the cost of the inventory items.
- This method is typically used when inventory items are interchangeable, and it doesn’t make sense to track individual item costs separately.
- The system calculates the cost based on the weighted average cost of all inventory received during a specific period, updating the inventory value with each new transaction (e.g., purchase, return
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