level of cost capture for pjm transactions - generic

MODULE FUNCTIONAL DESIGN

Level of Cost Capture of Project Manufacturing Transactions using Average Cost Method

Author: Clay Fincher

Creation Date: September 26, 2006

Last Updated: February 8, 2012

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Level of Cost Capture of Project Manufacturing Transactions using Average Cost MethodLevel of Cost Capture of Project Manufacturing Transactions using Average Cost Method

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Contents

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Topical Essay..............................................................................................1

Basic Business Needs............................................................................1

Functional Overview....................................................................................2

Overview of the level of cost capture for PJM transactions....................2

Bicycle Scenarios...................................................................................3

Purchase common inventory........................................................................4

Issue common material to a common job.....................................................5

Charge labor resources to a common job.....................................................7

Intransit shipment of common material from an inventory organization.....8

Intransit receipt of common material to an inventory organization.............9

Issue common inventory to a project WIP job.............................................11

Charge labor resources to a project job......................................................12

Purchase project inventory.........................................................................13

Issue project inventory to a project WIP job...............................................15

Complete assembly from a project WIP job to project inventory................16

Return an assembly item from project inventory to a project job..............17

Scrap an assembly item on a project job....................................................18

Scrap an assembly item from project inventory.........................................19

Miscellaneous receipt of item into project inventory..................................21

Transfer item from common to project inventory.......................................22

Transfer project inventory to another organization....................................24

Project expenditures for transfer of item from common to project inventory then transfer to Project inventory in another organization.........................27



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Transfer inventory from one project inventory to another.........................27

Open and Closed Issues............................................................................29

Open Issues.........................................................................................29

Closed Issues.......................................................................................29



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Topical Essay

The purpose of this paper is to document the level of cost capture associated with project manufacturing transactions that can be expect for soft-pegged and hard-pegged configurations and with transfers of material across inventory organizations and for transfers between projects.

All inventory organization are defined as average cost organizations.

Basic Business Needs

For cost plus projects, we need to know the direct costs for material and labor by burden center by calendar year and have the ability to apply and rerate cost and billing overheads within each project.

For firm fixed price projects, we need the ability to apply overheads for labor and material based using the rates for the organization where the costs were incurred. Rerating may be done outside of projects.

Ability to capture direct labor hours by project for contract performance reporting



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Functional Overview

Overview of the level of cost capture for PJM transactions

The table below gives an overview manufacturing transactions and the level of cost capture in Projects. Only two types of project manufacturing transactions have costs collected at the subelement level in Projects. They are resource and overhead charges and PO receipts / returns with associated material overheads. All other transaction costs that are collected to projects at the cost element level.

No. Transaction DescriptionCost collected

Cost level

1 Sales order issues No NA

2Work in Process component issues from the same project/task as the one for the WIP job

No NA

3 Assembly completions No NA

4 Average and standard cost updates No NA

5 Job close and average cost variances No NA

6 WIP assembly scrap No NA

7 PO Receipt to a project YesMaterial sub-element and associated material overhead sub-elements

8 Labor hours charged to a project job YesResource sub-element and associated overhead sub-elements

9Issue company-owned or other project-owned to a project job

Yes Cost element transfer

10Transfer project inventory between inventory organizations


11Permanent transfer to project inventory from company-owned or other project-owned inventory


12Expense type issue (miscellaneous issue, account issue, account alias issue) of from project inventory






No. Transaction DescriptionCost collected

Cost level

13Cycle count or physical adjustment of project inventory






Bicycle Scenarios

A simple bicycle project manufacturing example will be used to demonstrate the level of cost capture to Projects from Project Manufacturing transactions. Below is the Bill of Material structure for the Bicycle. Tubing is the lowest level item. Tubing is purchased in the AKN organization as company-owned material. It is used to make the Unfinished Frame at AKN, which is also company-owned. The Frame is made in YRK organization specifically pegged to a project. It requires the Unfinished Frame is made in AKN and transferred to YRK as company-owned. The Bicycle is manufactured in YRK on a project job using the Frame, Wheels, Gruppo (component group), Handlebar, and Saddle. The Frame is made in YRK on a project job. Wheels may be directly purchased to the project in YRK or made in APP for the project and transferred to YRK. Gruppo is purchased in YRK for the project. Lastly, Handlebar and Saddle are purchased into company-owned material.

LEVEL

1 2 3 4 Type YRK AKN APPPegging

BICYCLE Make X Hard

FRAME Make X Hard

UNFIN FRAME Make X X Soft

TUBING Buy X Soft

WHEEL Make X X Hard

RIM Buy X Hard

SPOKE Buy X Hard

HUB Buy X Hard

GRUPPO Buy X Hard

HANDLEBAR Buy X Soft

SADDLE Buy X Soft





Purchase common inventory

In this example, AKN has purchased company-owned tubing material as shown in inventory material transactions.

The accounting distributions in Oracle inventory are to debit material inventory account at PO price value and earn material overhead of 3%.





The cost of purchased material is collected to the common project to the expenditure type associated with the default material sub-element defined for the inventory organization, Purchased Material. Also, the material overhead sub-element cost is collected to the Material Overhead expenditure type.





Issue common material to a common job

In this example, tubing is issued to a common WIP job to make unfinished frames in AKN. The DCF01 WIP job is defined to make 10 unfinished frames. Tubing is a component item defined on the BOM of the Unfinished Frame and is issued to the job DCF01.





The material transaction distributions are for the current average cost in the common cost group for the material and material overhead.

No costs are collected to the Common project because the cost of the tubing was charged to the common project when it was received from the purchase order.





Charge labor resources to a common job

Labor resource hours are charged to unfinished frame job in AKN. The DCF01 WIP job is defined to make 10 unfinished frames.

Costs for labor resources and associated labor overheads are collected to the common project to expenditure types defined for the labor resource and overhead sub-elements.





Intransit shipment of common material from an inventory organization

10 unfinished frames have been completed from the WIP job in AKN and transferred to YRK. This shows in intransit shipment inventory transaction in AKN.

The manufacturing distributions transfer the value of the unfinished frame from the inventory valuation accounts to intransit inventory accounts.





The intransit shipment transaction in AKN is collected to the common project at the cost element level to transfer the costs from the AKN expenditure organization.





Intransit receipt of common material to an inventory organization

The 10 unfinished frames shipped from AKN are now received into YRK. This shows in intransit receipt inventory transaction in YRK.

The inventory distributions are to transfer the inventory from AKN intransit inventory accounts through inter-org receivables and payables accounts to YRK inventory valuation accounts.





The costs are collected to the common project for the YRK Production expenditure organization at the cost element level.

Issue common inventory to a project WIP job

The 10 Unfinished Frames shipped to YRK from AKN are issued to a WIP job that is pegged to Proj A to make 10 complete Frames. This shows the transactions and collected costs for issuing common material to a project WIP job.





The material transaction distributions are to transfer the material from common cost group valuation accounts to the accounts for the cost group defined for Proj A. Then the material value is transferred from the valuation accounts for the Proj A cost group to the accounts on the WIP account class assigned to the WIP job.





The transaction costs collected to Projects are cost element values for the unfinished frame for the transfer from Common to Proj A.

Charge labor resources to a project job

Labor resource hours are charged to WIP job to make the frame in YRK. This job is hard-pegged to the project Proj A.





The costs are collected to Proj A in the YRK Production expenditure org at the subelement level to the expenditure types assigned to the resource and overhead subelements as defined in the YRK organization.

Purchase project inventory

In this example, YRK has purchased wheels and gruppo items for Proj A as shown in inventory material transactions.





The accounting distributions in Oracle manufacturing for the receipt of 10 gruppos are to debit material inventory account at PO price value and earn material overhead of 3%.

The accounting distributions in Oracle inventory for the receipt of 10 Wheels are to debit material inventory account at PO price value and earn material overhead of 3%.





The cost of purchased material is collected to the Proj A to the expenditure type associated with the default material sub-element defined for the inventory organization. Also, the material overhead sub-element cost is collected to the Material Overhead expenditure type.





Issue project inventory to a project WIP job

In this example, 10 gruppos that were purchased for Proj A are issued to a WIP job pegged to Proj A to make 10 bicycles in YRK.

The material transaction distributions are for the current average cost in cost group Proj A of the material and the material overhead earned when the gruppo item was purchased.





No costs are collected to the common project because the cost of the gruppo was charged to the common project when it was received from the purchase order.

Complete assembly from a project WIP job to project inventory

In this example, 10 bicycles are completed from project job DCF04 to project inventory in YRK.

The manufacturing distributions transfer the actual costs to manufacture the bicycles from WIP valuation accounts to the inventory valuation accounts for the Proj A cost group.





No costs are collected in Projects for WIP assembly completion transactions because the job costs for components, resources, and overheads charged to the job have already been collected to the project.

Return an assembly item from project inventory to a project job

One of the bicycles is returned from project inventory to the project job for rework.

The item is returned to the job at the same value that it was completed from job DCF04.





No costs are collected in Projects for WIP assembly return transactions.

Scrap an assembly item on a project job

The bicycle returned to the job is scrapped at operation 30 to the Scrap alias.

The manufacturing distributions are to expense the cost of the bicycle from WIP value to the scrap account.





No costs are collected in Projects for WIP assembly scrap transactions.

Scrap an assembly item from project inventory

In this example, a bicycle is scrapped directly from Proj A inventory using an account alias receipt transaction.

The cost of the bicycle at the current average cost in the Proj A cost group is expensed from project inventory valuation accounts to the scrap account.Level of Cost Capture of Project Manufacturing Transactions using Average Cost MethodLevel of Cost Capture of Project Manufacturing Transactions using Average Cost Method




The costs transferred to Proj A are to transfer the cost of the bicycle at the cost element level out of Proj A.





Miscellaneous receipt of item into project inventory

A bicycle was found in the stockroom and received into Proj A inventory using an account alias receipt to the INV ADJUST alias.

The manufacturing cost distribution is to receive the bicycle from the alias account to Proj A inventory valuation accounts at the current average cost in the Proj A cost group.





The costs transferred to Projects are to charge the cost of the bicycle at the cost element level to Proj A.

Transfer item from common to project inventory

This tests the option of transferring the Unfin Frame from Common to Project inventory in AKN before transferring it to YRK.





The distributions in manufacturing are to transfer the value from the common cost group to Proj A cost group. In this case, the same valuation accounts are defined for both.

This shows the transfer from common inventory to Proj A and task 2.1.





The project transfer transactions are collected to Projects at the cost element level . The expenditure items are to transfer the elemental costs of the Unfinished Frame from common to Proj A.

Transfer project inventory to another organization

After the Unfinished frame is transferred from Common to Proj A in AKN, it is picked and shipped from AKN to YRK on an internal order.





The manufacturing distributions are to transfer the costs from AKN inventory to intransit inventory. The shipping network is set a FOB Receipt so the inventory is held in AKN intransit accounts until it is received by YRK.

After the inventory is shipped from AKN, it is received into YRK inventory.





The distributions for receipt transaction in YRK credit AKN intransit inventory and debit YRK inventory valuation accounts with a pass through internal payables and receivables accounts as defined on the AKN-YRK shipping network.





The expenditures in Projects for these transactions are to transfer the inventory cost in Proj A at the cost element level from the AKN expenditure org to the YRK expenditure org.

Project expenditures for transfer of item from common to project inventory then transfer to Project inventory in another organization

This summarizes the transactions imported to projects for the scenario of transferring an item from common to the project before transferring across inventory organizations. The project transfer from Common to Proj A in Aiken transfers the cost at the element level to Proj A in the AKN expenditure organization. The transfer from AKN to YRK transfers the costs in Proj A from the AKN expenditure org to the YRK expenditure org.





Transfer inventory from one project inventory to another

After the 10 unfinished frames are received into YRK, they are transferred from Proj A to Proj B. The project transfer transaction is as follows.

The manufacturing distributions are to transfer the cost from the Proj A cost group valuation accounts to Proj B cost group valuation accounts.





The costs collected in Projects are a cost element transfer from Proj A to Proj B in the YRK expenditure org.





Open and Closed Issues

Open Issues

ID Issue Resolution

Responsibility

Target Date

Impact Date

1

2

3

4

Closed Issues

ID Issue Resolution Responsibility

Target Date

Impact Date

1

2

3

4





level of cost capture for pjm transactions - generic

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