COst Cutoff Date for 11i Inventory

8/14/2019 COst Cutoff Date for 11i Inventory

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Cost Cutoff Date for 11iInventory Organizations

Eric Guether Opnext, Inc.


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Learning Objectives

As a result of this presentation, you willbe able to understand:

How to defer costing of transactions throughuse of the Cost Cutoff Date (CCD)

Importance of CCD when updating standard

costs Impact of CCD & uncosted transactions on

Inventory reports

Impact of CCD & uncosted transactions onintercompany sales & payables


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Speakers Qualifications

Eric Guether IT Director at Opnext in Eatontown, NJ

Manages Opnexts Oracle 11i system Provides user support for 11i modules, Oracle

Alert and Discoverer 9i Desktop

Member of NJOAUG

Certified Public Accountant (CPA)


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Presentation Agenda

Introduction Business Case

Solution: Cost Cutoff Date Transaction Examples Inventory Miscellaneous Receipt

Purchasing Receipt into Inventory

WIP Workorderless Completion

Lessons Learned Impact on Inventory Reports

Impact on Intercompany Sales & Payables


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Introduction: Who Is Opnext?

Designer & maker of opto engines Active fiber optic components

Wafer fab and assembly

Pre-IPO spin-off of 2 Hitachi businesses Manufacturing in Yokohama & Komoro, Japan

Headquarters in Eatontown, NJ Sales in U.S., Canada, Europe, Japan,

and Hong Kong Customers include Cisco, CIENA, Lucent,

Alcatel, Fujitsu, NEC, Siemens, and Kodak


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Examples of Opnext Products

Laser Diode Modules Transmitters Receivers

10GbE XENPAKTransceivers Modules


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11i EBS at Opnext

Upgraded to release 11.5.8 in Oct. 2003 Multiorg, single global instance

American English with Japanese NLS

Separate operating units and inventory orgsfor U.S., Japan & Europe

Standard costing in all orgs Financials, OM, Inventory & Cost Mgmt.

used globally

Discrete MFG (BOM, WIP, MRP/MPS) &Purchasing for Japan & U.S.


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Business Case

Company practice is to update standardcosts every 6 months as of: April 1st [Cost Period: April 1, 2005 to Sept. 30, 2005]

October 1st [Cost Period: Oct. 1, 2005 to March 31, 2006]

New costs not finalized until after April 1st/

October 1st

Standard cost updates typically occuraround April 10th or October 10th

All transactions in the new 6-month costperiod need to be valued at the new costs


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Dilemma Before Release 11.5.7

Record early April / October transactions(quantities) in the new cost period beforethe standard cost update

Value those early April / Oct. transactionsafter the standard cost update at the new

costs

Cannot simply shut-off the Cost Manager

Need to cost any March / Septembertransactions created in early April / October atthe old costs prior to standard cost updates


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Initial Workaround

Opnexts only workaround under 11.5.3 Record April / October inventory, WIP,

shipping, and PO receiving transactionsoff-line (outside of 11i EBS) untilcompletion of standard cost updates

Retroactively record early April / Octobertransactions in 11i EBS after completion of

standard cost updates


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Workaround Issues

Unnecessary control weaknesses Risk of data inaccuracy

Extra, unnecessary data entry for users Unreliable / unusable inventory quantities

in 11i EBS for a week or more Shipping and export documents had to be

prepared manually (not via 11i EBS) for aweek or more


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Solution: Cost Cutoff Date

Inventory organization parameter Introduced in release 11.5.7

Intended to keep new period transactionsuncosted until you finish your standardcost updates for the org

Controlled simply by the entry of one CostCutoff Date for the org


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Parameter Setup

Organization Parameters > CostingInformation tab


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Functionality (Continued)

Transactions in the org with G/L date: On or after the Cost Cutoff Date (CCD)

parameter value will not be costed

Before the CCD value will be costed, even ifcreated on or after the CCD

Once the CCD has been changed to alater date, any uncosted transactions

whose G/L date < new CCD will be costedat the current frozen cost the next time theCosting Manager runs


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Functionality (Continued)

If the Cost Cutoff Date = 01-APR-2005,transactions with G/L Date of:

01-APR-2005 or later will not be costed

31-MAR-2005 or earlier will be costed, even ifcreated on or after 01-APR-2005


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C U d S


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Cost Update Sequence

Complete all March trx by early April Valued at current frozen costs = old costs

Begin entry of April-dated trx on 01-APR Close the March period in early April

Perform std. cost updates (early/mid April) Change the CCD to a later date

Example: 01-OCT-2005

Cost Manager then costs all existing April-dated transactions at updated frozen costs


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E l # 1 T ti


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Example # 1 Transaction

E l # 1 Ch t


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Example # 1 Chart

10 units received and recorded upon entry Costed upon entry at old cost of $1,200

E l # 1 R lt


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Example # 1 Results

Transaction costing is not deferred,because transaction (G/L) date is beforethe Cost Cutoff Date

Creation date of transaction does not matter

Costed at old cost of $1,200, which is still

the current frozen cost Standard cost update did not occur yet;

occurs on 04-APR Material distributions created as soon as

the transaction is costed

E l # 2 INV Mi R i t


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Example # 2: INV Misc. Receipt

Scenario where CCD will defer costing Receive 5 units of item LASER123

Standard Cost $1,200 per unit through end of March

$1,000 starting April 1st (updated on 04-APR)

Transaction date, 01-APR-2005, is equalthe cutoff date of 01-APR-2005

Creation date, 01-APR-2005, is on thecutoff date



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Example # 2 Cost Update


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Example # 2 Cost Update

To change the unit cost for LASER123from $1,200 to $1,000


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Example # 2 Chart


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Example # 2 Chart

Quantity of 5 units recorded immediately Costing deferred until 06-APR

Example # 2 Results


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Example # 2 Results

Transaction costing is deferred, becausetransaction (G/L) date is on the CostCutoff Date

Creation date of transaction does not matter

Costed at new cost of $1,000, which is the

current frozen cost when the cutoff date ischanged on 06-APR to a future date

Material distributions created on 06-APRonce the transaction is costed

INV Trx Affected by CCD


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INV Trx Affected by CCD

partial list; not complete

Miscellaneous / Account Alias Transactions

Subinventory Transfer Interorg Transfer

Receiving Pick Confirm

Pick Release Create Intercompany AR Invoices

Other Trx Affected by CCD


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Other Trx Affected by CCD

partial list; not complete

Purchasing module

PO Receiving (including PPV) Returns to Supplier

WIP module Discrete WIP assembly completion

Discrete WIP component issue

Workorderless completion

Example # 3: PO Receiving


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Example # 3: PO Receiving

Receive & deliver to INV (no inspection) Receive 200 units of item DIODE-5002

PO Unit Price = $0.90 Standard Cost

$1.25 per unit through end of March $1.00 starting April 1st (updated on 04-APR)

Transaction date, 02-APR-2005, is afterthe cutoff date of 01-APR-2005

Creation date = transaction date



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Example # 3 Chart


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Example # 3 Chart

Quantity of 200 units recorded immediately Costing deferred until 06-APR

Example # 3 Results


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Example # 3 Results

Transaction costing is deferred Costed at new cost of $1.00 per unit


Purchase Price Variance (PPV) calculatedat $0.10 per unit

Difference between PO unit price of $0.90

and new cost of $1.00, not old cost of $1.25

Example # 4: WOC


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Example # 4: WOC

Workorderless Completion (WOC) Transaction Type = WIP Assembly Completion

Three Transactions in One Receive 10 units of final product TRM999 intoinventory

Consume 10 units of component LASER123from inventory

Create accrual distribution for OutsideProcessing (OSP) resource charge

Transaction date 03-APR-2005 > CCD

Three Transactions in One


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Three Transactions in One

Final ProductAdded to Inventory

ComponentConsumed from

Inventory

Liability Accruedfor OutsideProcessing

Charge

WORKORDERLESSCOMPLETION

Example # 4 Costs


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Example # 4 Costs

Component Standard Cost $1,200 per unit through end of March

$1,000 starting April 1st (updated on 04-APR)

Outside Processing Charge

$50 per unit through end of March

$30 starting April 1st (updated on 04-APR)

Final Product Standard Cost

Derived from Assembly Cost Rollup $1,250 through end of March [$1,200 + $50]

$1,030 starting April 1st

[$1,000 + $30]



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Example # 4 New OSP Charge


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Example # 4 New OSP Charge

Example # 4 Cost Rollup


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p # p

Example # 4 Results


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p

Transaction costing is deferred in: INV module for final product completion and

component consumption

WIP module for OSP routing resource charge

Costed at new cost of $1,030 per unit


Lessons Learned: Reports


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p

When so many transactions are uncostedfor days or weeks, some INV reports in11.5.8 show inaccurate historical balances

Reports affected:

Transaction Value Historical Summary

Transaction Balance Historical Summary

Period Close Value Summary

Cause: Reports fail to estimate cost ofsome uncosted WIP transactions whenbacking into historical balance

Report With Error


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p

Uncosted WIP component issue ofLASER7777 for $480,000 is missing from

Job or Schedule column

28-FEB value of $-480,000 is incorrect;

should be zero


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Lessons Learned: Intercompany


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p y

The Create Intercompany AR Invoicesprogram does not create a record until itsparent record has been costed

Parent record = Sales order issue materialtransaction type [action = Issue from stores]

Therefore, the CCD indirectly deferscreation of intercompany A/R invoices inthe new cost period, because the CCD isdirectly defers costing of the parent record

Lessons Learned: Intercompany


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Intercompany Invoicing Process Flow For

Japan Customer Sale Sourced from U.S. Inventory Org

JapanCustomer

JAPAN SALESOperating Unit

. Japan Customer

Sales Order

sourced from

U.S. "BEI" Org 3. Customer

OM Invoice

2. Product Shipment[global drop

shipment to

customer fromU.S. "BEI" Org]

4. I/C A/R Invoice

created in U.S. MFG

5. I/C A/P Invoice

created in

JAPAN SALES

US

MANUFACTURINGOperating Unit

6. CustomerPayment

7. Payment or

I/C Netting

Parent Record:Trx type = Sales

order issue

Action = Issue fromstores


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Price List for I/C A/R Invoices


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Additional Resources


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Metalink note # 213628.1: What is the CostCutoff Date?

Metalink bug # 3585271: INVTRHAN:HISTORICAL DATA QTY=0 BUT THE VALUE IS > 0

Metalink bug # 3480557: 11I INCIAR GETS APP-5706 WHEN RUN ON END DATE OF PRICES APP-05706

11i Inventory Users Guide: Chapter 14 Intercompany Invoicing

Connection Point 2004 presentation:Workorderless Completion for Simple

Outside Processing in 11i WIP


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Q & A


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Thank You!

COst Cutoff Date for 11i Inventory

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