Periodic Average Costing 1460062

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Periodic Average Costing - Setup and Workflow [ID 1460062.1]

Modified: May 22, 2012 Type: REFERENCE Status: PUBLISHED Priority: 3
In this Document Purpose Scope Details INTRODUCTION TO PERIODIC AVERAGE COSTING PAC SETUP PAC BUSINESS PROCESS FLOW HOW PAC PROCESSES TRANSACTIONS? References
Applies to: Oracle Cost Management - Version 11.5.10.0 to 12.1.3 [Release 11.5 to 12.1] Information in this document applies to any platform. Purpose The purpose of the document is to guide users in the setting up of Periodic Average Costing Cost groups and understanding the functional flow of the processes concerning PAC. Scope This document is intended for users who have a basic understanding of the Costing methods such as Average, Standard, LIFO/ FIFO and also the setup of Inventory organizations and other basic costing setups.
Details INTRODUCTION TO PERIODIC AVERAGE COSTING Periodic Average Costing is an option that enables customers to value inventory on a periodic basis. Periodic Costing is relevant for customers with fiscal inventory reporting requirement as it is invoice-based and allows you to include additional invoiced charges in the cost of the item. Periodic Costing is also used by customers who want invoice-price based valuation of their inventory to set standards or to update their perpetual costs. THREE PRINCIPAL OBJECTIVES OF PAC: To capture actual acquisition costs based on supplier invoiced amounts plus other direct procurement charges required by national legislation or company policy To capture actual transaction costs using fully absorbed resource and overhead rates To average inventory costs over a prescribed period, rather than on a transactional basis
TERMINOLOGY Cost Group (Organization Cost Group) A group with one or more inventory organizations that share same periodic item costs Cost Type Periodic Cost Type : Periodic Cost Type holds Periodic Average item cost. Periodic Rate cost type: Define resource rates, department overheads. Acquisition Cost Sum of the costs associated with the acquisition of goods. Include PO Price, Invoice Price, freight, special charges and non-recoverable taxes. Cost Owned Transactions that carry their own costs. Used to compute periodic weighted average cost. Example: PO Receipt, Return To Vendor, PO Distribution Adjustment, MISC transactions with a value, and Inter-Organization Transfer. Cost Derived
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Transactions that are transacted at the newly computed periodic weighted average cost. These transactions do not carry their own costs and do not contribute towards periodic weighted average cost calculation. Example: Account Issues, WIP issues, Return from WIP, Material Issues, Cycle Count Adjustment, Physical Adjustment, Sub-Inventory Transfer, Sales Order Issues, and Misc. transactions w/o a user entered value.
PAC SETUP
PAC SETUP FLOW
We are using the below Demo Setup to explain the above flow. Average Costing Org PAV and Standard Costing Org PST are already defined and not being covered here.
STEP I - DEFINE COST GROUP, COST TYPE
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A) Cost > Periodic Costing > Setup > Organization Cost Group
Table: cst_cost_groups cost_group_type = 2 - meaning 'Organization'
B) Inventory > Setup > Costs > Cost Types --> Periodic Cost Type
--> Periodic Rates Cost Type
Cost types used for Periodic Costing must be Multi Org and Non Updatable. Periodic Rates Cost types must be Multi Org and Updatable. Cost types used for Periodic Costing cannot be disabled.
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STEP II - Org Cost Group / Cost Type Associations Cost > Periodic Costing > Setup > Org Cost Group / Cost Type Associations --> Cost Group Association to the Inventory Organizations created.
Table: cst_cost_group_assignments
--> Cost Type association
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Note: a) Material Relief Algorithm indicator to Use Pre-defined Materials, or UseActual Materials. This indicator is introduced in R12. -- The relief algorithm is only applicable for components. -- Resource and overhead are always relieved using the actual quantity. Prior to R12, PAC used to relieve material based only on actuals b) Restrict Documents by Process upto date - This is to run PAC for partial period processing. You can run a partial period by entering the date in the parameter Process Upto Date field in the PAC processors. c) Perform Multiple Iterations pertains to IPAC (Iterative Periodic Average Cost Processing) if enabled. STEP III - Cost Type Associations, Accounting Options
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To enable accounting in PAC, this setup needs to be completed. Transfer to GL is optional based on your setup requirements. To avoid duplication in GL, ensure transfer to GL is enabled either for your Inventory organizations alone or for your PAC Cost Group alone. Though system does not prevent transfer from both ends if enabled, to ensure correct valuation, transfer the accounting entries from any one source. STEP IV - Periodic Account Assignments Cost > Periodic Costing > Setup > Periodic Account Assignments
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Define the Material Accounts, Cost Variance account for the Cost Group/ Cost Type combination to ensure successful completion of the Periodic Cost Distributions Processor. For a given legal entity, cost group and cost type combination :1) The MTL Accounts tab refers to the Inventory accounts in MTL_CAT_FISCAL_ACCOUNTS.2) The Cost Group Accounts tab refers to the Cost Group Accounts in CST_ORG_COST_GROUP_ACCOUNTS.
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NOTE: If you receive below error while executing the Periodic Cost Distributions Processor, then the accounts for the specific Cost Type/ Cost Group has not been defined correctly: 30005There are no accounts defined for the category, for the cost type, cost group and legal entity. STEP V - Open PAC Period for Legal Entity, Cost Type Cost > Periodic Costing > Period Close Cycle > Periodic Accounting Periods
Table:cst_pac_periods Note: Only one PAC Period can be open at a time. If the next PAC Period is to be opened, any open PAC Periods must be closed.
PAC BUSINESS PROCESS FLOW
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HOW PAC PROCESSES TRANSACTIONS?
Finally once all the Phases have been completed successfully for the Concerned Cost Groups associated to the Cost types, you can proceed to close any open PAC period for the concerned LE/ Cost Type. PAC Period Close Cost > Periodic Costing > Periodic Close Cycle > Periodic Accounting Periods
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Clicking on the Process status would show you the status of the PAC Processors and if not complete at what phase. Review Log in case of any errors. Note: It is important that all the open periods of inventory organizations belong to PAC cost groups have to be closed, before closing PAC period. In case of any revenue/ profit related transactions, the AR Period should also be closed.
References NOTE:759522.1 - How PAC process transactions NOTE:559123.1 - FREQUENTLY ASKED QUESTIONS PERIODIC AVERAGE COST AND PERIODIC ABSORPTION COSTING (PAC/PACP/IPAC) NOTE:245487.1 - Periodic Actual Cost Processing Logic: An Oracle White Paper
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Periodic Average Costing - Setup and Workflow [ID 1460062.1]

PAC SETUP FLOW

STEP I - DEFINE COST GROUP, COST TYPE

Table: cst_cost_groups cost_group_type = 2 - meaning 'Organization'

--> Periodic Rates Cost Type

--> Cost Type association

PAC BUSINESS PROCESS FLOW

HOW PAC PROCESSES TRANSACTIONS?

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