2 - Oracle Process Manufacturing - OPM Financials PDF

5/21/2018 OPM Fina nc ia ls R12 - slide pdf.c om
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Oracle Process Manufacturing – OPM Financials
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5/21/2018 OPM Fina nc ia ls R12 - slide pdf.c om 2

Agenda
• New on R12
• Item Cost
• Resource Cost
• Overhead Cost
• Cost Process
• Cost Types
• Calendar
• Cost Component Classes & Group
• Cost Analysis Code
• General Ledger Fiscal Policy
• Actual Cost Set Up / Process
• Few Points – Actual Costing
• Exercise
© 2006 Oracle Corporation – Proprietary and Confidential


OPM Costing in R12
Oracle Order
Purchasing GMD, GME
Inventory Management
Cost Setup Calculate Cost Store Costs SLA Oracle GL


OPM Costing Process


Items Costing Attribute
Ensure for Asset Items,

Inventory Asset Value
(in Costing Tab) &

Process Costing Enabled
Flags are set.


Cost Type
• (N) Setup / Cost Type
Select Raw material & Product calculation method

OPM Cost Calendar

• (N) Setup / Cost Calendar
Define Costing
Calendar for each
Fiscal Year


OPM Cost Calendar

Assign Legal Entiry and

Cost Type to each
Calendar


OPM Cost Calendar

Open Cost Period


Cost Component Class

• (N) Setup / Cost Component Class
Cost component classes are buckets used to define the elements of

cost detail you want to view. Costs from several ingredients, routings,
or burdens can be summarized into component classes.


Cost Component Class

• (N) Setup / Cost Component Class
The cost component classes are classified into 5 different elements or

usages: Material, Resource, Overhead, Expense Allocation and
Standard Cost Adjustment types


Understand about Item Cost

(N) OPM Financials > Items Cost
This level cost
Lower level cost if exists

intermediate ingredients
used


Understand about Resource Cost
Select Cost Method &

Enter cost Per Unit
Enter the Nominal Cost for this resource for using it for one unit
of measure. For example, if you are defining the resource cost
for a mixing machine, and its usage is measured in hours, then
enter the cost of using the resource in per unit.


Understand about Overhead Cost
. A overhead is a cost associated with a resource other than the

resource usage assigned in the routing.


Actual Costing Setups & Processes


Actual Cost Setup
Defining Adjustment Reason Codes
Defining Allocation Codes
Defining Allocation Definitions
Defining Expense Allocation Accounts
Actual Cost Calculation


Actual Cost Adjustment Reason

(N) Setup > Actual Cost > Adjustment Reason
• If a situation arises in which

you have to make
adjustments to the actual
costs calculated by OPM,
you can use the Actual
Costs Adjustments window
to enter the necessary
component cost changes for
new cost calculations.
However, you will have to
specify a valid reason code
that justifies the reason for
that cost change. You define
those reasons on the Actual
Costs Adjustment Codes
window.


Defining Allocation Codes

• On this window you create the allocation codes that are used to define the
indirect expenses from the general ledger accrued expense accounts. Later,
you will define the parameters to allocate those expenses to the appropriate
cost component classes. Since allocations can be processed in multiple steps,
we recommend that you adopt a naming convention to simplify processing of
ranges of allocation codes.
(N)OPM Financials > Setup > Actual Cost > Expense Allocations >
Codes


On this window you specify two sets of information:
The item, component class, and related information required identifying

where the allocation results will be placed.
The account keys that maintain the basis information (for example, the
quantity of production and machine usage) associated with each item.
The Allocation Results section at the bottom of the window is linked to a

specific item line, and indicates where the resulting allocated expenses are
placed.
This functionality requires Oracle General Ledger to be fully installed. If you
are using OPM not integrated with Oracle Financials, and GL is not fully
installed, then a warning message displays and the data you enter may not
be used.



• (N) OPM Financials > Setup > Actual Costs > Expense
Allocations > Basis
Select Allocation Code
Select Allocation Method I.e Fixed % or

Amount basis
Enter Items for Allocation &

their % Allocation


Defining Expense Allocation Accounts
Assign Cost Component Class and Analysis Code to Allocation Code


Define Expense Allocation Accounts

• (N) OPM > Setup > Actual Cost > Expense
Allocations > Expense
Select Period to date or Year to date

as per requirement
On this window you specify the general ledger account

, which capture the overhead expenses to be allocated.
Here you are defining the expense pool to be allocated;
on the Allocation Definitions window, you will specify the products
to which these expenses are allocated.


Actual Cost Calculation
• The following topics are covered:

• Processing Expense Allocations
• Calculate Actual Costs
• Viewing Actual Cost Processing Status
• Using Actual Cost Adjustments

• Viewing Actual Costs
• Displaying Item Cost List
• Important Points


Running Expense Allocations

• (N) OPM Financials > View > Request > Submit a new Request
From parameter of OPM Cost Allocation Process entering Allocation code,

Cost Calendar and period


OPM Cost Allocations

• The GL Expense allocations are averaged out using Prior Period Inventory Balance for items that have no
current period transactions, such as receipts or production. Whenever there is a non-zero GL expense
amount that could not be allocated because the total quantity is zero, a warning is displayed.
•
• For Raw Materials:
• The GL Expense amount is calculated as the sum of GL expenses to be allocated and the product of prior
period inventory balance and prior period cost. This is represented as:
•
• GL Expense component cost = [(Previous Period Inventory Balance * Previous Period GL Expense
Component Cost) + GL Expense Amount for Current Period] / [Previous Period Inventory Balance +
Received Quantity]
•
• For Products
• The Quantity is determined as sum of the previous period balance, the total quantity produced and the
total quantity received, if any. The GL Expense amount is the sum of GL expenses to be allocated in the
current period and the product of prior period inventory balance and prior period cost.
•
• GL Expense component cost = [(Previous Period Inventory Balance * Previous Period Component Cost) +
GL Expense Amount for Current Period] / [Previous Period Inventory Balance + Produced Quantity +
Received Quantity (if any)]
• The GL Expense allocations are averaged out using Prior Period Inventory Balance for items that have no
current period transactions, such as receipts or production. Whenever there is a non-zero GL expense
amount that could not be allocated because the total quantity is zero, a warning is displayed.


Calculate Actual Cost

Enter Calendar, Period, Cost Method in above window and then Press
Accept to run Actual Cost Process. System will fire request to run.


System displays the number of errors while running Actual cost process. You
can view the errors from the Action menu.

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• (M) Action > View Error Message
Before viewing the actual cost, first correct errors and then again run
the Actual cost process.

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View Actual Cost OPM Fina nc ia ls R12 - slide pdf.c om
• (N) OPM Financials > Item Cost

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View Actual Cost Transactions
Click on Action menu from Items Cost form, you can view actual transactions.

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Actual Cost Adjustment
• This option allows you to adjust the final calculated actual cost
of a raw material or product based on quantity and unit cost.
Actual costs are recalculated based on the adjustments that
you enter for the specified item, warehouse, cost calendar, and
cost period.
•
• Note that these adjustments do not directly alter the cost of an
item. Rather, they influence cost calculations by adding
quantity and cost adjustments to the existing costs after other
cost calculations have been completed. This approach
produces a complete adjustment audit trail.
Avoid ‘Cost Adjustments’ – If unavoidable, this would require manual journals

in General Ledger to be passed for reconciliation between OPM and GL.

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Actual Cost Adjustment
• (N) OPM Financials > Actual Costs > Adjustments

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Important Points-Actual Costing OPM Fina nc ia ls R12 - slide pdf.c om
• Entirely driven by Actual Production Batch details. I.e. Quantity of actual
Ingredients consumed, Finished Goods Yielded, Resource Usage.

• Only batches which are ‘Closed’ in a specific period are considered for Costing.
• No need to establish ‘Source’ and ‘Target’ Warehouse relationships.
• Cost Warehouse (Optional) as in Standard Cost.
• Instead of ‘Cost Rollup Process’ - ‘Actual Cost Process’ needs to be run.
• While submitting this process, the previous Inventory Period should have been
at least ‘Preliminary Closed’.
• For each of the cost components calculation would be governed by the ‘Raw
Material’ / ‘Finished Goods’ calculation methods set in Cost Methods I.e.
PWAC, PMAC, PPAC, LSTT, LSTI.
• Widely used computation methods are ‘PWAC’ and ‘PMAC’.
• Resource / Burden costs (if required) need to be established for ‘Actual
Costing’ method separately for each of the cost period.
• All the other setups like Calendar (specific for Actual Cost Method), Component
classes, Groups, Material cost components - same as in Standard Costing.

5/21/2018
OPM Financials Accounting - SLA OPM Fina nc ia ls R12 - slide pdf.c om
• Cost Update
• Event Models
• COGS Recognition
• OPM Pre-Processor
• Create Accounting

5/21/2018
Cost Update OPM Fina nc ia ls R12 - slide pdf.c om
• (N) OPM Financials > Cost Update
Select calendar and period to
Update ost
Selet Final Update for Closing Period

5/21/2018
COGS Recognition OPM Fina nc ia ls R12 - slide pdf.c om
• Running in sequency three Program:

– Record Order Management Transaction
– Collect Revenue Recognition Information
– Generate COGS Recognition Events
(N) OPM Finacials > COGS Recogition

5/21/2018
Record Order Management OPM Fina nc ia ls R12 - slide pdf.c om

5/21/2018
Collect Revenue Recognition Information

OPM Fina nc ia ls R12 - slide pdf.c om

5/21/2018
Generate COGS Recognition Events OPM Fina nc ia ls R12 - slide pdf.c om

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OPM Pre-processor Accounting OPM Fina nc ia ls R12 - slide pdf.c om
• (N) OPM Financials > OPM Accounting Pre-processor

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• (M) Actions > Submit Process

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• Select Period and Source Transactions to Accounting
You can run Pre-Processor for each

Source in separate running.

5/21/2018
Event Model - Example OPM Fina nc ia ls R12 - slide pdf.c om

5/21/2018
Run Create Accounting OPM Fina nc ia ls R12 - slide pdf.c om
• (M) View > Request > Sumit a new Request
You can run Create accounting for each

Process Category Transaction or All
Choose Draft Mode first for

Review Journal Entry

5/21/2018
Run Create Accounting OPM Fina nc ia ls R12 - slide pdf.c om
View Output to review

Create Accounting program result

5/21/2018
Review the accounting entries OPM Fina nc ia ls R12 - slide pdf.c om
46

5/21/2018
Subledger Journal Entry OPM Fina nc ia ls R12 - slide pdf.c om
Description
Account Derivation Rule
Line Type
47

Period End Closing with SLA
48

5/21/2018
Period End Closing Progress OPM Fina nc ia ls R12 - slide pdf.c om
49

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Run the preliminary inventory close
Final Close = No is temporary closing ;

Final Close = Y is permanent
Close inventory Period
50

5/21/2018 Run Preliminary cost update process
51

5/21/2018
Run OPM Accounting Pre-processor OPM Fina nc ia ls R12 - slide pdf.c om
52

5/21/2018 Run Detailed Subledger Report OPM Fina nc ia ls R12 - slide pdf.c om
53

5/21/2018 Review the accounting entries OPM Fina nc ia ls R12 - slide pdf.c om
54

5/21/2018 Inventory Close- Final OPM Fina nc ia ls R12 - slide pdf.c om
55

5/21/2018
Final Cost Update OPM Fina nc ia ls R12 - slide pdf.c om
56

5/21/2018
Create accounting –final mode OPM Fina nc ia ls R12 - slide pdf.c om
On Submitting program,
the following requests
will be invoked:
•Create Accounting

• Accounting Program
•Journal Import and
•Subledger Accounting
Balances Update
57

[email protected]
[email protected]
58

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5/21/2018 OPM Fina nc ia ls R12 - slide pdf.c om

<Insert Picture Here>

Oracle Process Manufacturing – OPM Financials

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5/21/2018 OPM Fina nc ia ls R12 - slide pdf.c om 2

© 2006 Oracle Corporation – Proprietary and Confidential

5/21/2018 OPM Fina nc ia ls R12 - slide pdf.c om

OPM Costing in R12

Cost Setup Calculate Cost Store Costs SLA Oracle GL

© 2006 Oracle Corporation – Proprietary and Confidential

5/21/2018 OPM Fina nc ia ls R12 - slide pdf.c om

OPM Costing Process

© 2006 Oracle Corporation – Proprietary and Confidential

5/21/2018 OPM Fina nc ia ls R12 - slide pdf.c om

Items Costing Attribute

Ensure for Asset Items,

(in Costing Tab) &

© 2006 Oracle Corporation – Proprietary and Confidential

5/21/2018 OPM Fina nc ia ls R12 - slide pdf.c om

• (N) Setup / Cost Type

Select Raw material & Product calculation method

© 2006 Oracle Corporation – Proprietary and Confidential

OPM Cost Calendar

© 2006 Oracle Corporation – Proprietary and Confidential

OPM Cost Calendar

Assign Legal Entiry and

© 2006 Oracle Corporation – Proprietary and Confidential

OPM Cost Calendar

Open Cost Period

© 2006 Oracle Corporation – Proprietary and Confidential

Cost Component Class

Cost component classes are buckets used to define the elements of

© 2006 Oracle Corporation – Proprietary and Confidential

Cost Component Class

The cost component classes are classified into 5 different elements or

© 2006 Oracle Corporation – Proprietary and Confidential

Understand about Item Cost

This level cost

Lower level cost if exists

© 2006 Oracle Corporation – Proprietary and Confidential

Understand about Resource Cost

Select Cost Method &

© 2006 Oracle Corporation – Proprietary and Confidential

Understand about Overhead Cost

. A overhead is a cost associated with a resource other than the

© 2006 Oracle Corporation – Proprietary and Confidential

Actual Costing Setups & Processes

© 2006 Oracle Corporation – Proprietary and Confidential

Actual Cost Setup

Defining Adjustment Reason Codes

Defining Allocation Codes

Defining Allocation Definitions

Defining Expense Allocation Accounts

Actual Cost Calculation

© 2006 Oracle Corporation – Proprietary and Confidential

Actual Cost Adjustment Reason

• If a situation arises in which

© 2006 Oracle Corporation – Proprietary and Confidential

Defining Allocation Codes