Standard Costing

An Oracle Technical Brief

March 2013

Table of Contents
1.OVERVIEW

2. WHAT IS STANDARD COSTING

3. UNDERSTANDING STANDARD COSTING

4. FACTORS AFFECTING STANDARD COSTING

5. WHAT IS MEANT BY THIS LEVEL AND LOWER LEVEL

6. SETUP REQUIRED FOR STANDARD COSTING

7. TEST CYCLE

8. TECHINICAL CONSIDERATION

9. COMMON STANDARD COSTING ISSUES AND HOW TO CORRECT THEM

1. Overview
The objectives of this technical brief are to consolidate and clarify information about standard costing and related
issues.
This technical brief will aim to fulfill this need and discuss the following in detail:

• To Explain when to use standard costing

• To Explain setup required for standard costing

• To Explain a full test case for standard costing

• To Explain tables populated after running standard costing

• To explain what happens when standard costing fail and discuss how to correct them

2. What is Standard Costing?

• Standard Costing is periodic in nature. It has cost calendar and period.

If you select this costing type, then you enter the costs of raw materials, for example, based on estimates.
OPM calculates product costs based on formula, routings, recipe details, and other indirect costs such as
standard overheads.

• This is cost method is used by companies where the item costs are fixed. It is set in the beginning of the
year and then copied over to the next periods.

3. Understanding Standard Costing

3.1 Raw Material
It is required to enter the standard cost of raw materials.

3.2 finished product

The standard cost of a product depends on the combination of:
• Ingredients that are defined in formulas
• Resources that are defined in routings
• Overheads from facilities where the product is produced

Factors affecting standard costing

4.1 Cost formulas and routings
Create a cost formula and routing by copying the production formula and routing and giving it
a different name or version.
After the cost is calculated and finalized, freeze the cost along with the associated formula
and routing to maintain a complete audit trail. If only one formula and routing are used, then
the formula cannot be modified for production. Only cost formulas and routings are frozen,
if they were used.
If required, set up only one Costing Use recipe for a product.
4.
Set the GMF: Use Only Costing Validity Rules for Cost Rollup profile value to Yes, so that the Cost
Rollup process considers only the costing use recipes.

4.2 Standard Quantity on the Recipe Validity Rules

The Cost Rollup process uses the Standard Quantity specified on the Recipe Validity Rules window
to determine ingredient and product proportions for cost calculation

4.3 Defining Rollup Source Organizations

When calculating costs using Cost Rollup, use the item costs from different organizations to reflect how the
ingredients are sourced from the organizations for production.
Indicate the cost from each organization to arrive at a final cost to produce the end product.
5.
What is meant by Lower Level and This Level?
The costs contributing to the calculated Standard Cost of a Product can be considered as coming from
two places or Levels, as shown in the Item Costs form (CMCSDED.fmb) :

1. Lower Level

These are the rolled‐up costs of all the Ingredients which make up the Product, as defined in the
Costing Formula.

The Lower Level costs are displayed by Usage Type (for example Material, Resource, Overhead) and
Component Class, but not separately for each individual Ingredient.

Lower Level costs for a Product Item can only be entered at the Ingredient level and rolled up using
the Standard Cost Rollup program – they cannot be entered directly at the Product level.

2. This Level

These are costs which are specific to the assembly of the Product Item, over and above the Ingredient
costs.

Typically This Level costs will include Resources (for example Labor) and Overheads (for example
electricity for a heating Operation if you have chosen not to include this as an Ingredient).

Standard Cost Adjustments can also be entered as This Level costs.

The system does not require that a Product Item has any This Level costs.

Setup Required for Standard Costing:

Note: This test cycle will present full test cycle for using standard costing.

6.1. Setup in Oracle Inventory

Path: Inventory Super User >items>Master items

6.

6.2. Setup in OPM Financial

1. Path: OPM Financials > Setup > Cost type

3. Path: OPM Financials > Setup >fiscal Policies

4. Path: OPM Financials=>Set up =>Standard cost=>Cost Organization
5. Path: OPM financial=>Resource Cost

6.3 Setup in Process Engineer

1. Path: process Engineer =>Formula Details

2. Path: Process Engineer=>Recipe Details

3. Path: Process Engineer =>Routing Details
7. Test Cycle
1. Enter the standard cost of raw materials
2. Run Cost Rollup
3. View Product item cost

4. Action =>View formula details

Component Cost of 1-lABOUR3 = usage*resource cost /process Quantity= 0.333*50/100

Component Cost of 1-Mixer =1*40/100

5. Create a batch
6. Run Cost Update
Path: OPM financial =>Cost Update

View data in table GL_ITEM_CST

7. Run OPM accounting pre processor

Path: OPM financial=>OPM accounting pre processor

 select
event_id,event_class_code,event_type_code,inventory_item_id,transaction_quantity,transaction_uom,
transaction_action_id,transaction_type_id,transaction_value from gmf_xla_extract_headers where
source_document_id= 2570126 order by 2,3

select event_id,journal_line_type,component_cost,trans_amount_raw from gmf_xla_extract_lines where event_id

in (select event_id from gmf_xla_extract_headers where source_document_id= 2570126)

8. Technical consideration
OPM Cost Rollup Process (GMFROLL) is

Executable file name is GMFROLL

• gmfroll.oc Main function and other C functions for Cost Rollup program
• gmfbill.oc common code for bill level generation
• gmfsutil.lpc Functions to support cost batch processing such as rollup
• gmfsget.lpc Functions containing ESQL for fast cost rollup
• gmfsput.lpc Procedures for inserting & updateing to cm_cmpt_dtl table
• gmfbrget.lpc Functions containing ESQL for loading percentage burden records.
• gmfblget.lpc Functions containing ESQL for Bill level module. Ingres and RDB version.
9. Common standard Costing issues And How to correct them
1. OPM: No Standard Cost for Item When There Is No Formula

How is the issue seen?

When the source organization is same: we need to have one indirect cost component to get rollup work for an item where
there is no formula/recipe

When the source organization is different: we are not able to view the cost of the item where there is no formula/recipe, but
the standard cost of the item is implicitly used while rolling up other items cost.

Solution:

This is the expected behavior.

However if customer wants to derive the cost purely based on overheads, they should either have a dummy recipe, or define
costs manually.

2. ORA‐1403: No Data Found When Trying to Run the Standard Cost Rollup

How is the issue seen? When opening the form to run the cost rollup
in OPM, an error appears:

ORA‐1403: No Data Found

Clicking on the details button shows additional information.
FRM‐40735: WHEN‐NEW‐FORM‐INSTANCE trigger raised unhandled exception ORA‐1403 the form does
eventually open and you are able to enter information.
Another symptom of this problem is when you click on the LOV for the Cost Category you do not see any selections even though
you know you have cost categories defined.

Cause:
The cause of the problem is a default category is not defined for the OPM category set of Cost Class. You need to have a default
category defined.

Solution:
Please go to Inventory >> Setup >> Items >> Categories >> Default Category Sets. Please assign a default category for Process
Cost Class.

3. Standard Cost Rollup Doesn’t Calculate Product Cost

How is the issue seen? When attempting to run OPM financial>Standard costs>Cost rollup, the
following error occurs: GMF_RL_NO_YLD_TYP_DE_FOR_ORGN

Cause :
Yield UOM setup at org level (product development security manager) is required to have batch related transaction quantities
to get converted for cost calculation

Solution:
Set parameter YIELD UOM which is set in Production Development Security Manager>Organization Parameters under the
Formula tab for Cost organization as well.

4. Need standard cost to be rolled‐up against costing organization?

How is the issue seen?

On Application Release 12, we need standard cost to be rolled‐up against costing organization. Solution:

To get standard item costs to be calculated against costing organization for product items, we need to setup recipe validity rules
against these costing organizations. This is replacing Target Organization setup from release 11i.

5. Standard Cost Rollup Gives Invalid UOM Conversion Error When Recipe Organization Details are
entered to Override

How is the issue seen?

When attempting to do the Cost rollup,

The following error occurs if there is a throughput override on Recipe Organization Details.:

Invalid UOM Conversion from: H to for Resource XXXX Operation YYYY

Cause :
Cost rollup process was looking at wrong columns (pre‐convergence) to get UOMs of the resources on a recipe. This
issue has been fixed in the file gmfsget.lpc

Solution:

1. Download and review the readme and pre‐requisites for Patch.7461338.

2. Ensure that you have taken a backup of your system before applying the recommended patch.

3. Apply the patch in a test environment.

6. Standard Cost Roll Up Completed With Error

How is the issue seen?

When attempting to run standard costing cost rollup, the following error occurs :(Mrp Bill Error: MR_CYCLEITEMS)

Cause :

Circular reference in formulas

Solution:

A) Run cost roll up for particular product where you do not have circular reference, if this run is going error free
then only reason which is causing error is Direct circular reference and indirect circular reference (A is an
Ingredient of B is an Ingredient of C is an Ingredient of A) Customer has to review the formulas listed in query
output and rectify them to avoid circular reference. To identify such formulas following queries can be used: 1)
SELECT COUNT(*) FROM fm_form_mst f1, fm_form_mst f2,mtl_system_items i1,mtl_system_items i2,
fm_matl_dtl fg1,fm_matl_dtl in1,fm_matl_dtl fg2,fm_matl_dtl in2
WHERE (fg1.line_type = 1 OR fg1.line_type = 2)
AND fg1.formula_id = in1.formula_id
AND in1.line_type = ‐1
AND (fg2.line_type = 1 OR fg2.line_type = 2)
AND fg2.formula_id = in2.formula_id AND in2.line_type = ‐1
AND fg1.inventory_item_id = in2.inventory_item_id
AND fg2.inventory_item_id = in1.inventory_item_id
AND fg1.inventory_item_id <> fg2.inventory_item_id AND
i1.inventory_item_id = fg1.inventory_item_id AND
i2.inventory_item_id = fg2.inventory_item_id
AND f1.formula_id = fg1.formula_id
AND f2.formula_id = fg2.formula_id ;

2) SELECT DISTINCT i1.inventory_item_id item_1, f1.formula_no formula_1,

f1.formula_vers version_1, i2.inventory_item_id item_2, f2.formula_no formula_2,
f2.formula_vers version_2
FROM fm_form_mst f1,fm_form_mst f2,mtl_system_items i1,mtl_system_items i2, fm_matl_dtl
fg1,fm_matl_dtl in1,fm_matl_dtl fg2,fm_matl_dtl in2
WHERE (fg1.line_type = 1 OR fg1.line_type = 2)
AND fg1.formula_id = in1.formula_id
AND in1.line_type = ‐1
AND (fg2.line_type = 1 OR fg2.line_type = 2)
AND fg2.formula_id = in2.formula_id AND in2.line_type = ‐1
AND fg1.inventory_item_id = in2.inventory_item_id
AND fg2.inventory_item_id = in1.inventory_item_id AND fg1.inventory_item_id
<> fg2.inventory_item_id
AND i1.inventory_item_id = fg1.inventory_item_id
AND i2.inventory_item_id = fg2.inventory_item_id
AND f1.formula_id = fg1.formula_id AND f2.formula_id = fg2.formula_id ORDER BY item_1,
item_2;

B) Mrp bill generation error usually happens in two cases. One is at the time of circular reference and other is when validity is
not covering full cost period.

7. Standard Cost Rollup errors With: Unable To Load Base Currencies For Organizations.

How is the issue seen?

When running the process manufacturing Standard Costing Cost Rollup for a period, Found the

following Errors:

Unable to load base currencies for organizations. Contact System Admin

Error while loading Standard Cost data

Cause:
Coding issue: It was seen that Currency derive type on the records is EURO. The process is trying to store this non‐numeric value
into a numeric field. This is the reason for the error: ORA‐01722: invalid number error.

Solution:
Apply patch 6527068 the code was modified in gmfsget.lpc to handle the
data type mismatch issue