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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Date Saturday, 28 June 2025
Implementation of Oracle Fusion Costing
The following implementation is based on the inventory organization level. However, you can apply the same implementation approach at the sub-inventory level or lot level, depending on your business requirements
Not
(i) Standard Costing is implemented only at the Inventory Organization level. In contrast, other costing methods—such as Actual Costing or Average Costing—can be implemented and tracked at various levels, including sub-inventory and lot levels
(ii) The Following implementation is based on the AVG Costing Method
Role Requirements for Cost Implementation
(i) Application implementation Consultant
(ii) Cost Accountant
1. Create Value Set
Note. If your client wants to implement cost in the Lot level, then you create one more Value
Set for a lot.
2. Flexfield Structures
Click on +
Note .
If your client wants to implement cost at the lot level, then you add one more segment for the lot.
KFF Structure Instances are predefined segment structures that Oracle Fusion uses to capture additional attributes for cost accounting. They are derived from Accounting KFFs or Costing-specific KFFs
4. Value Set Value
(I) Search Value set
(ii) Click on Manage Value
Click on add
(i) Enter the Cost Organization Name
(ii)Click on Save
5. Cost Organization
A Cost Organization is a logical grouping of one or more Inventory Organizations under a Business Unit that shares a common cost accounting setup, such as:
(i) Cost Books
(iI) Costing Method (Standard, Actual, etc.)
(iiI) Valuation Structure
(iv)Accounting Rules
(I) Add Cost Organization
Click on +
Cost Org is Created
6. Granting User Access to the Cost Organization
1. Assign the Cost account role to the User
Enter the user name and other relevant details
Click on Save and Clock
Run LDAP
7. Cost Books
In Oracle Fusion Costing, a Cost Book is a foundational component used to record and
Manage cost accounting data.
(i) A Cost Book is a configuration that specifies:
(ii) The costing method (Standard, Actual, FIFO, etc.)
(iii) The ledger where cost data is posted
(iii) The valuation structure
(iv) The accounting rules (SLA mapping)
(v)The cost processing level (Inventory Org, Subinventory, Lot)
Click on +
Enter the Cost Book Name and Click on Save and Close
8. Cost Organization Relationships
In Oracle Fusion Costing, Cost Organization Relationships are essential
configurations that define the connection between the Cost Organizations
and Inventory Organizations within a Business Unit (BU). These
relationships determine how cost transactions are captured, processed,
and accounted for across inventory operations
Click on +
Add set assignment and inventory organization, etc
Note
You can add multiple inventories to one Cost Book
9. Valuation Structure
A Valuation Structure is a set of cost-tracking segments configured using the
Cost Accounting Valuation Flexfield. It determines the level of cost granularity,
allowing Oracle to uniquely value and report costs for various inventory segments.
Click on +
(i) Enter Structure Name
(ii) Enter the KFF name
(iii) Click on Save and Clock
Valuation Structure is Created
COST Element refers to a cost component or classification of cost used
to track and report the type of expense incurred during inventory or
Manufacturing transactions. Elements help break down the total cost
of an item into meaningful categories such as Material, Overhead,
and Labor.
Enter name
Cost Component represents a specific breakdown of cost assigned to an
item or transaction within a broader Cost Element (e.g., Material, Labor,
Overhead). While Cost Elements define the type of cost, Cost Components
Define the source or detail of that cost, such as which resource or overhead
rate, or supplier charge, contributes to the final item cost
Click on +
Add COST Component Mapping for the below LOV
valued, and accounted for specific items or item categories within a cost
organization. It governs the costing method, cost behavior, and valuation
settings applied to inventory transactions.
Enter all relevant information
13 Default Cost
profile
The Default Cost Profile is a predefined cost profile that is automatically
assigned to items that do not have an explicitly assigned cost
profile—either at the item level or item category level.
It acts as a fallback configuration, ensuring that every item can
be costed properly without manual setup for each one.
Click on +
Cost method is average
14 Valuation unit
Organization, Subinventory, Lot, etc.) that together represent the level at
which an item’s cost is valued and stored.
Click on +
Select Cost and inventory ORG
Excellent Sajid good work
ReplyDeleteThanks a lot for the apparition
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