Setting up Cost Accounting in Fusion

Source systems :
1) Inventory, Receiving, Shipping transactions
2) Inventory transactions to Manufacturing
3) Resource transactions in Manufacturing
4) Payables Invoices
5) Receivable invoices and Revenue Recognition in Receivables
Costing Process :
The transactions from source systems are interfaced to Cost Accounting and picked up by the cost processor for cost accounting,
based on the cost method and other cost policies. Subsequently, the distributions are created and sent to Subledger Accounting (SLA)
for posting. SLA applies the appropriate account rule and posts the accounting entries into the General Ledger

One BU can only be a profit center business unit below a legal entity.
While creating Inv orgs, mention the Management BU and map it to Profit Center BU also for association to cost orgs. In many a
implementations you have only one BU and therefore both are same.

Cost Organization : A cost organization is a grouping of several inventory organizations to help cost accountants manage and set policies.

----------------
Shared setup :

Manage Cost Elements

Manage Cost Component Mappings
Manage Valuation Structure
Manage Valuation Units
Manage Cost profiles

This is required once for every set id. When defined for Common set, it can be easily shared across Cost Orgs.
---------------

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

Setup required to introduce new cost orgs.

Manage Cost Books

Manage Cost organization
Manage Cost organization Relationships – Cost Org to Inv Org and Cost org to Cost Book Relationship and many more…
---------------

The following scheduled processes are run to transfer transactions into Costing.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

Costing setup Flow :

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com
 Cost Accounting :
The following 12 setup steps are required for setting up Cost Accounting.

1) Manage Costing Key Flexfields

Let us run thro’ the seeded setups that come for Cost Management. :
Go to task Managing Cost Key Flexfields
Choose Value and not consigned.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

These seeded Structures and structure instances were created and deployed during instantiation on 15th Feb 16, after the customer
has paid for the license.
Cost Management is a shared license and given to customers, who buy any of SCM or Financials licenses.
Structure and Instance names are kept as same..
Structure Instance– This KFF defines the granularity of Inventory Cost control used for defining costs at various levels.( at say cost
org - inv org- sub inv -locator etc). We can have different instances for diff inventory Orgs.
Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com
Bare Minimum setups : ( Sufficient for many implementations)
Segment 1 : Cost Org
Segment 2 : Inventory Org
If items are stored in Normal, Chilled and frozen sub inventory, having diff. storage costs, we may go for the third segment
Segment 3: Sub Inventory
If items of diff lots have diff costs ( eg. Normal Monitor lot costs 5K and Anti Glare monitor lot costs 6K, go for a segment Lot.
Segment 4 : Lot
Similarly for Grades. The level of granularity varies for diff. implementations. The value sets associated to the segments must pick the
value from tables for costing.
Some Important fields of the value set with validation type as table.
S. Value set Code ( Modul Valid From Clause Value Column Name Description Column Order by Clause
N User named e ation Name
o value sets) Type

1 CST_COST_ORG Core Table CST_COST_ORGS_V COST_ORG_CODE COST_ORG_NAME COST_ORG_CODE

_CODES Setup

2 CST_INV_ORG_C Core Table INV_ORGANIZATIONS_DE ORGANISATION_CODE ORGANIZATION_NAME ORGANISATION_CODE

ODES Setup FINITIONS_V A

3 CST_SUBINVENT Core Table INV_SECONDARY_INVENT SECONDARY_INVENTORY_ DESCRIPTION

ORY_CODES Setup ORIES_A NAME

We will have a look at the seeded instances.

Click on Structure Instances button in Costing KFF and query the seeded instance for Cost Management.

Upon edit, we can see the two segments.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

The Cost org has a value set ORA_CST_VALU_COST_ORG_CODE

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

And the inventory org has a value set ORA_CST_CONS_INV_ORG_CODES

Go to Manage Value Set task and query the Inventory Org value set ORA_CST_CONS_INV_ORG_CODES

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

Upon edit, it has the following vales entered. Its validation type is Table. All Value sets for Cost org, Inv Org, Sub inventory, Lot, Grade
etc will have the valuation type as table.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

Similarly have a look at the other value set for cost org ORA_CST_VALU_COST_ORG_CODE
Man Investments have made a three segmental Cost structure. The third segment is Sub Inventory.
We will have a look at the value set created for sub inventory.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com
Try to find how to create value sets for Lot , grades etc, from Costing Implementation guide.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

2) Manage Cost Organizations
Cost Organizations – Group of Inventory orgs for admin purpose and cost sharing. Every Inv Org can belong to only one cost org.
We have created a Cost org Al Faysal Cost Org 2, mentioning our LE name. Effective date can be 01-01-01.

3) Manage Cost Organization Data Access for users.

It indicates the list of roles given to the user. Not modified the existing roles.

4) Manage Cost Books

Cost book is a container for cost accounting data. Multiple Cost orgs can be contained in one Cost Book.
The following Cost Book has been created for Al Faysal. ( with name and description).

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

5) Manage Cost organization Relationships
The following Cost org relationship has been made for Al Faysal Cost Org2. Cost orgs are related to LE, IVO, Cost Planning Setup,
Costing Core Setups, Inventory Orgs and Cost Books.

Both Planning and Core Setups were made for the Data set of LE.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

Both the Master and Child Orgs are associated to the Cost org.

Cost Book , LE and Acct. Cal. are mentioned with create Accounting enabled. First open period has been matched to GL first period.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

6) Manage Valuation Structures
The valuation structure defines the level at which you want cost accounting to track quantities and costs for items. Define a valuation
unit structure for the possible levels that you will use for items, because, in your cost profile definitions, you choose one of the valuation
unit structures that you defined.
The following Asset and expense valuation Structures have been created for Al Faysal in common set. A Structure code relates to the
KFF.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

Al Faysal Asset has the following settings.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

And Al Faysal Expense has the following settings.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

7) Manage Cost Elements

There are 5 Cost Element Types : Material, Resource, Material Overhead, Resource Overhead, and Profit in Inventory.
Cost Element – User defined lowest level at which cost are defined and stored. They are created under one of the Cost Element types
mentioned above.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

 S.No Cost Element Cost Element Type
1 Item Price Material
2 Non_Recoverable_Tax Material
3 Handling_Charges Material Overhead
4 Welder Resource
5 Invoice Price variance Material
6 Freight Material

We have created the following for Al Faysal.

8) Manage Cost Component Mappings

The cost details that are captured from source systems include:
Purchase order cost components: PO price, freight, tax, and invoice variance
Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com
 Interorganization transfers: Transfer price, source organization cost, and freight

Cost Component – Pre-defined and user defined cost from external sources. Cost components represent the most atomic level of cost
detail coming into Cost Accounting from upstream sources such as Purchasing, Inventory and Accounts Payable, which are translated into cost
elements based on the cost component mappings.
External Source – Purchasing
Some pre-Defined cost components are Item Price, Non Recoverable Tax, freight, invoice price variance
External Source - Interorganization transfers
Some pre-Defined cost components are Transfer price, source organization cost, and freight
These Cost Components must be mapped to an existing Cost Element
Example of Cost Component Mapping
S.No Reference Data Set Cost Component Cost Element
( They come from PO)
1 Common Set ITEM_PRICE Item Price
2 Common set NONRECOVERABLE_TAX Non_Recover_Tax

Some examples of External Cost Components. They are mainly from Purchasing and Inter org transfers.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

The following were mapped for Al Faysal. I have initially not mapped Non Recoverable tax, as tax is not applicable for Al Falsal. But
Cost distribution scheduled process ran into error, mentioning the above mapping error. Cost was not updated. After the below
mapping, it succeeded. I then mapped all PO components.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

9) Manage Cost profiles

Cost profile – Definition of Cost Accounting Policies. ( Cost method, Cost structure instance that can be attached to a group of items (
Asset or expense) or all items of that cost org)

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

The cost profile contains three important attributes:
The valuation structure, which determines the cost-sharing levels and the level of granularity ( Inv Org, Sub Inv, Lot, Serial etc)
Cost elements, which are the basic building blocks for costs
Cost policies, which determine the key costing information such as:
a) Cost method
b) Unit of measure to be used in costing (Primary or Secondary)
c) Policies to handle exceptions such as partial completions, scrap, and negative inventory
We have created two Cost profiles for Al Faysal. One is an Asset and another is an expense. The Cost profile will link Cost method (
perpetual average) , Cost by primary UOM, Asset or Expense Cost profile, Valuation structure ( Asset or expense) and Cost
Component Mapping.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

The asset profile has the following settings.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

The expense profile has the following settings.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com
10) Manage Cost Components
The following pre-defined Cost Components are tracked against Purchasing.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

11) Manage Default Cost Profiles

If all the items in a cost organization use the same cost profile, it is easy. You define that as a single row for the cost organization on
this page. However, in many businesses, it is not always realistic that all the items in a warehouse use the same cost accounting
methods. You can assign different cost profiles to different categories of items as needed.

The Default Cost Profile for Asset and Expense has been set for Al Faysal. Category name is blank.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com
12) Manage Valuation Units

The values for the segments Cost Org – Inv Org have been defined.

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com

Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com
Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com
Prepared by Nana – 98418 67924 apps.nana@iappsconsulting.com