OPM Financials Costing Process

http://oracleprocessmanufacturing.blogspot.com/2016/01/opm-financials-costing-process.html

Costing Process

Costing of items in process organization is done differently than the discrete costing. In discrete costing, the cost processor which is scheduled to run calculates the cost of items across all transactions like receiving, issue etc. For process organization, the costing will be done in an elaborate process which is detailed in this document. Assume, we are receiving a chemical into an OPM enabled org using a standard PO. In order to view the cost of material after delivery of the material , the below processes should be performed.

1. Run ‘GMF Period Close Process for Process Organizations

2. Run the ‘Actual Cost Process’

Nav: OPM Financials > Actual Costs > Actual Cost Process

Parameters: Enter the Legal Entity, Calendar, Period and Cost Type. Ignore warning that previous period has not been closed. Ignore the program completing with ‘Warning’, which is because the previous period has not been closed.

3. Run ‘Cost Update Process’

Nav: OPM Financials > Cost Update

Parameters: Enter the Legal Entity, Calendar, Period and Cost Type. [Uncheck ‘Final Update’]

4. Submit ‘OPM Accounting Pre-Processor’

Nav: OPM Financials > OPM Accounting Pre-Processor > Actions (M)> Submit Process

Parameters: Legal Entity Name, Ledger, Cost Type, Fiscal Year, Period, Post Start Date (Period start date) and Post End Date (Period end date)Pre-processor should be submitted source wise (Inventory Transactions, Order Management Transactions etc.) or else the programs might take a longer time to run.

While submitting for ‘Costing Transactions’ uncheck the ‘Revaluation Transactions’

5. Run ‘Create Accounting’

OPM Financials > Submit Request > Create Accounting (Process Manufacturing)

Parameters: Ledger, End Date (current date), Mode(Draft, unless you want to actually post the transaction), Errors Only, Report and Include User transaction identifiers.

After the above processes are completed, the item cost can be viewed for the specific item. Also the accounting entries can be viewed based on the Material Transactions –Transaction ID in the Subledger Accounting > Journal Entries

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2nd Document

OPM Financials Cost Update Process


Step 1:
Login to OPM Financials and run the concurrent program
GMF Period Close Process for Process Organizations to close the inventory periods.

Step 2:
If you use Overhead Allocations from GL then run the concurrent
OPM Cost Allocation Process

Step 3
Run Actual Cost Process

Step 4
Run Cost Update Process

Step 5
Run OPM Accounting Preprocessor

Step 6:
Run Create Accounting

Process Manufacturing (OPM) Processing Steps

http://oracleprocessmanufacturing.blogspot.com/2016/01/process-manufacturing-opm-processing.html

Define Test inventory item and assigned to GIT inventory organization
Make sure that on Costing tab, the ‘Inventory Asset Value’ is being checked
Create an approve a PO for Test item qty = 100, unit price = 100

IMPORTANT: After the PO is being approved, the field LCM_FLAG on PO_LINES_LOCATIONS_ALL table should become
‘Y’, otherwise will not be found in LCM module.
IMPORTANT: Make sure that Invoice Match Option = Receipt on the PO Shipment line.
==================================================================================
Under Landed Cost Management responsibility, go to Workbench – Shipments
- Select Inventory Organization, then ‘Go’
On next page, click on Create button:
On Create Shipment page, on Header section, enter Operating Unit, LCM Shipment Type (i.e. SHIP), Receiving
Location;
- On Line Groups, enter a Group Reference identifier (any text), Source Type = Purchase Order, Third party as the PO
supplier, and its Site (last 2 information to be taken from PO header) then Apply changes
- go to Lines tab
On the Lines tab, go to section Find Expected Shipment Lines and enter the Purchase order number, then click on Go
button
Once the Shipment line is being retrieved, selected and Save the LCM Shipment
After LCM Shipment is saved, we can execute Generate Charges action
-Next, perform the Validation action by selecting Validation value from Actions LOV and click on GO button
Next action is to Calculate charges
Once the Calculation was done, we can view Landed Cost
-On Allocation page, we can verify the Estimated Amounts and total Unit Landed Cost ;
To return to Shipment Header page, select ‘Return to Shipment’ link
- Finally,we ‘Complete’ the Shipment by executing the Submit action.
- Once the Shipment has been submitted, it can no longer be updated. Optionally, we can review the charges:
When executing the Submit action, Receiving Transaction Processor is being run

====================================================================================
Perform the normal PO receipt through the standard Receipts form
- Note that on Find Expected Receipts form, we have to specifically select Source Type = LCM and then, in Shipment
field, look for LCM Shipments to be received.
Normally, it is considered that, selecting Source Type = All, we should be able to see expected data. However, for
the moment, we need to specifically select Source Type = LCM, to access LCM shipments to be received.
- Further, select the line to be received, enter required information for subinventory, location and lot and save the
receipt
===============================================================================
In OPM Financials, submit Landed Cost Adjustments Import Process
Then, running Actual Cost processor
When checking cost for test item, cost should appear fine(inclusive of estimated)
================================================================================

Invoicing part:
============
Enter 2 invoices in Payables: one to be matched with Item line type and second to be matched with Freight and
Miscellaneous (for insurance) line types.
- Under Payables Super User responsibility, go to Invoices – Entry – Invoices
- First, enter invoice header details for the invoice to be matches with Item line type;
- After entering the invoice header details, click on Match button;
- On Matching form, select Type = Item, enter the receipt and click Find:
- Select the line to be matched, change the unit price accordingly if you have any change else leave it as it is and click on Match button:
- Once the matched line has been added to the invoice, go to Actions button and select Validate option
- And the first invoice has been validated:
- Now, enter a new invoice for LCM charges
After entering invoice header details, click on match button to add matched invoice lines;
- First, select Type(whatever line type you have used) = Freight and same receipt number , then click Find:
- On Match Other Charges to Receipts form, enter Cost Factor Name (Example: LCM Freight Charges) and related amount for
freight ;
above steps need to be repeated if you use miscellaneous as invoice type
==================================================================================

Next steps are to import actual invoice prices into Landed Cost Management application.
- First, we need to run Matches Interface Import request
-The request log file confirms that the 4 transactions found in INL_MATCHES_INT table have been processed (and
removed from this table):
-If we are checking the LCM Shipment number concerned in LCM Workbench, we will notice that ‘Pending Matching’ flag is
now checked
- Next step is to run ‘Submit Pending Shipments’ request from LCM responsibility:
- The log file confirms that LCM shipment has been processed:
-If we query the LCM Shipment number 3 in LCM Workbench, we can see the actual amounts:

=================================================================================
In OPM Financials, re-running Landed Cost Adjustments Import Process
Make sure that fiscal policy is set sa Book inventory at receipt price(no ppv)
Run actual cost process
cost update,
opm accounting preprocesser and then Detailed subledger report or transaction diagnostic script for Tested PO.

CREATE ACCOUNTING OPM

Actual Cost Adjustments in OPM Costing - R12

http://webadiissues.blogspot.com/2016/01/actual-cost-adjustments-in-opm-costing.html

Using Actual Cost Adjustments in OPM Costing

Actual Cost Adjustment functionality gives the users an ability to change the cost of an item – Product or Raw materials.

Typically this functionality to :
• Adjust cost to include freight and other charges recorded on a separate freight/charge invoice
• To handle price difference in invoices that are received in a different period than the receipt
• To adjust cost to include vendor rebates

The adjustment types available are:
• Average Cost Adjustment
• Value Adjustment
• Unit Cost Adjustment

Average Cost Adjustment
This type of adjustment requires the user to enter an adjustment quantity and a cost. The effect of this adjustment is to simulate a transaction that has happened outside the scope of OPM actual costing engine.

For example, if a customer uses a 3rd party system which has transactions that need to be included in the cost calculations, the customer can replicate the event with Actual Cost Adjustments can be used in OPM Costing to either directly affect the cost of items or to simulate the effect of a transaction that happens outside the purview of the Actual Costing process.

This white paper talks about the effect of the various cost adjustments on the cost of the items and recommended scenarios for each of adjustment types.
Using Actual Cost Adjustments in OPM Costing  this type of adjustment. The actual costing logic would consider these transactions similar to a purchase receipt.

Value Adjustment
This type of adjustment requires the user to enter a total value of the adjustment that needs to be passed to the entire quantity. The effect of this type of adjustment is to add a specific value to the inventory account that needs to be spread to the onhand quantity.

For example, if the effect of vendor rebates need to be applied to the entire onhand quantity, this type of adjustment can be used.

Unit Cost Adjustments
This adjustment type requires the user to enter a fixed cost that they would like to apply to the existing unit cost. The effect of this adjustment is to add a specific value to the unit cost of the item.

For example, if the user wants to see the effect of changing the unit cost of the item by a fixed number for simulation purposes, this adjustment can be used.

Example
Let us take the following example to describe the types of adjustments and its effect on the cost of the item and Inventory account balances.
For an item FG100 under warehouse PR1, the following are the balances and
transactions that have taken place.

                                  Quantity                             Cost
Opening Balance             100 LB                           $7.00
Receipts                        100 LB                            $9.00

Actual Cost = (Prior Qty * Prior Cost) + Σ (Receipt Qty * PO Price)
                    __________________________________________
                                       (Prior qty + Σ Receipt Qty)

                     ((100 * 7.00) + (100 * 9.00))
                 =   __________________________
                                (100 + 100)

                 = $ 8.00


Let’s now create the following adjustments.

             Adjustment Type            Quantity                  Cost / Value
             Value Adjustment               -                          $300.00
             Average Adjustment       100.00 LB                  $11.00
             Unit Cost Adjustment          -                          $2.00

Let us look at the effect of each of these adjustments on Actual cost and Sub- Ledger entries:

Assumption: Purchase Order Receipts is booked at the PO price

Value Adjustments

Actual Costing Logic

PMAC cost =

(Prior Qty * Prior Cost) + Σ (Receipt Qty * PO Price) + Value Adjustments
_______________________________________________________________
                                  (Prior qty + Σ Receipt Qty)

                  = ((100 * 7.00) + (100 * 9.00)) + 300.00    
                       _________________________________
                                         (100 + 100)

                  = $ 9.50


Inventory Valuations Comparison

Inventory valuations and the A/C balances in the INV account in GL can be compared to verify the effect of the Sub-Ledger entries.

Inventory Valuation = Actual cost * On Hand Quantity
                            = 9.50 * 200
Inventory Valuation = $ 1900.00

INV Account balances

Balances from prior period   = $ 700.00 (100 * 7.00)
Receipt                             = $ 900.00 (100 * 9.00)
Value Adjustment               = $ 300.00
Total                                 = $ 1900.00 

Average Cost Adjustments

Lets look at the effect of adding an Average Cost Adjustment of 100 LB @ $11.00 to the above scenario

Actual Costing Logic 

PMAC cost =

 (Prior Qty * Prior Cost) + Σ (Receipt Qty * PO Price) + Value Adjustments + Average Cost Adjustments ___________________________________________________________________________________

                            (Prior qty + Σ Receipt Qty + Σ Average Cost Adjustment Qty)

                    = ((100 * 7.00) + (100 * 9.00)) + 300.00 + (100 * 11.00)

                          _______________________________________________

                                        (100 + 100 + 100)

                     = $ 10.00 

Sub-Ledger Entries

Since the adjustment quantity does not affect the physical Inventory balance, the accounting entry that this adjustment creates uses only the difference between the cost specified in the adjustment and the calculated PMAC cost. 

 

Inventory Valuations Comparison 

Inventory ValuationU                = Actual cost * On Hand Quantity

                                             = 10.00 * 200

Inventory Valuation                  = $ 2000.00

INV Account balances

Balances from prior period         = $ 700.00 (100 * 7.00)

Receipt                                   = $ 900.00 (100 * 9.00)

Value Adjustment                     = $ 300.00

Average Cost Adjustment          = $ 100.00 (100 * (11.00 – 10.00)) 

Total                                      = $ 2000.00 

Unit Cost Adjustments

Let us look at the effect of applying a Unit cost Adjustment of $2.00 to this scenario.

Actual Costing Logic

The Unit Cost Adjustments are applied after the actual cost calculations are completed as before. Hence, it’s a two-stage calculation of the actual unit cost of the item. 

PMAC Cost =

(Prior Qty * Prior Cost) + Σ (Receipt Qty * PO Price) + Value Adjustments + Average Cost Adjustments __________________________________________________________________________________

                  (Prior qty + Σ Receipt Qty + Σ Average Cost Adjustment Qty)

      

                         = ((100 * 7.00) + (100 * 9.00)) + 300.00 + (100 * 11.00)  

                             __________________________________________

                                             (100 + 100 + 100)

                         = $ 10.00 (Without Unit Cost Adjustment)

Unit Cost Adjustment is considered only after the calculation of the actual cost in the Actual costing logic. So applying a Unit Cost Adjustment of $ 2.00, the new PMAC Cost will be as follows:

                           = $ 10.00 + $ 2.00 (Unit Cost Adjustment)

                           = $ 12.00 

Sub-Ledger Entries

Since the Unit Cost Adjustment is essentially an addition to the Item Cost, the sub ledger considers entire quantity considered by the Actual Cost calculation and not just the on-hand quantity for the accounting postings.

Inventory Valuations Comparison

Inventory Valuation                                  = Actual cost * On Hand Quantity

                                                                  = 12.00 * 200

Inventory Valuation                                   = $ 2400.00

INV Account balances

Balances from prior period                       = $ 700.00 (100 * 7.00)

Receipt                                                 = $ 900.00 (100 * 9.00)

Value Adjustment                                   = $ 300.00

Average Cost Adjustment                        = - $ 100.00 (100 * (11.00 – 12.00))

Unit Cost Adjustment                              = $ 600.00 (300 * 2.00)

Total                                                     = $ 2400.00

CONCLUSION

The Actual Cost Adjustments is a very versatile functionality available in OPM Costing and can be used to affect the cost of items for a variety of reasons. The white paper shows the various uses and the effect of such adjustments to the cost of the item and Inventory account balances.