COST S01 Recording (17-Oct-26)
0:01 – 1: Webinar Introduction and Agenda Overview ⟶
13:20 – 2: Fundamentals of Oracle Cost Management ⟶
17:40 – 3: Real World Business Use Cases ⟶
25:55 – 4: Prerequisite Inventory and Item Setups ⟶
30:08 – 5: Standard Costing Method Explained ⟶
33:29 – 6: Average and Actual Costing Methods ⟶
46:52 – 7: Location Configuration and Reference Datasets ⟶
60:53 – 8: Business Unit Creation and Setup ⟶
1:04:41 – 9: Assigning Business Unit Functions ⟶
1:10:21 – 10: Inventory Organization and Item Master ⟶
1:15:01 – 11: Physical Inventory Organization Configuration ⟶
1:30:35 – 12: Sub Inventory Management and Material Status ⟶
1:40:41 – 13: Creating An Item Class ⟶
1:44:10 – 14: Master Versus Inventory Organizations ⟶
1:47:09 – 15: Q&A Session ⟶
2:30:11 – 99: Video is Complete ⟶
Preparing the Organization Structure for Costing
Harbourline Cookware Inc. makes frying pans and pressure cookers at a plant in Columbus, Ohio, and sells them to retailers across the United States. It buys aluminium, steel and handles from several suppliers, and metal prices change almost every week.
Today the warehouse team knows how many pans are in stock, but finance cannot say what that stock is worth, what each pan really costs to make, or how much profit each sale brings in. Month end inventory values are worked out by hand in spreadsheets.
Harbourline has bought Oracle Fusion Cloud and wants to use Cost Management. Before any costing setup, the implementation team must build the business unit, organizations, storage areas and item grouping that costing depends on. Harbourline posts to the existing US primary ledger and legal entity.
Key Business Requirements
Concept explain how Oracle Fusion meets it. Hands-on configure it in your practice instance.
- ConceptThe CFO asks: the warehouse already knows how many pans are in stock, so what more will Cost Management give us? Explain what costing adds and how it gets its data. Does it also value the consulting services Harbourline buys?
Hint:00:13:46 to 00:16:55, and 00:22:48 to 00:25:54, and 00:25:54 to 00:27:29 for services
- ConceptHarbourline must choose a cost method. Describe the cost methods Oracle offers. Which suit metals whose prices change every week, and which gives a fixed cost per pan? With which method does a purchase price variance arise?
Hint:00:30:36 to 00:33:15, and 00:33:15 to 00:37:57, and 00:37:57 to 00:44:21, and 00:44:21 to 00:45:26 for the other methods, and 01:56:11 to 01:57:49 for purchase price variance
- ConceptWhich roles do the implementation partner and Harbourline’s cost accountant each need?
Hint:00:45:59 to 00:47:03
- Hands-onThe Columbus plant needs a location that every business unit can use, and that can receive goods and be billed to.
Hint:00:46:32 to 00:50:45, and 00:57:41 to 01:00:45
- Hands-onCreate a business unit for Harbourline’s cookware operation, based at the Columbus plant.
Hint:01:00:45 to 01:04:19
- Hands-onThe cookware business unit must be able to manage inventory and purchase materials, post to the US primary ledger, and act as the profit center that owns the plant’s costs.
Hint:01:04:19 to 01:07:26, and 01:07:26 to 01:10:02
- ConceptExplain the difference between a management business unit and a profit center business unit, and why costing needs a profit center. Which business function must the business unit have before inventory organizations can be created for it?
Hint:01:07:56 to 01:09:32, and 01:16:21 to 01:17:25, and 02:27:29 to 02:28:30 for the minimum business function
- Hands-onHarbourline wants every item defined once, in one central place, and then shared with the plant.
Hint:01:11:06 to 01:14:50
- Hands-onSet up the Columbus plant as the place where stock is held and transacted. It must take its items from the central definition and keep the original receipt date when stock moves.
Hint:01:14:50 to 01:17:25, and 01:17:25 to 01:23:18, and 01:26:32 to 01:30:10
- ConceptA planner asks: if an item exists in the central item organization, can the plant transact it straight away? Explain how the item master organization and the inventory organization work together.
Hint:01:11:36 to 01:13:12, and 02:17:26 to 02:19:00
- Hands-onInside the plant, raw materials and finished pans must be kept in separate storage areas, and the stock in both must count towards the inventory value.
Hint:01:30:10 to 01:32:29, and 01:32:29 to 01:37:40
- Hands-onAll cookware items should be grouped together, and only named people should be able to create them in the central item organization and the plant.
Hint:01:38:12 to 01:40:19, and 01:40:19 to 01:46:36
Your Task
- For each Concept requirement, write a short solution: which Oracle Fusion feature meets it and how. Nothing needs to be set up in the instance for these in this session.
- For each Hands-on requirement, configure it in your practice instance. Start your setup names with your own initials, for example AB_HARBOUR_BU, so they do not clash with other learners in the shared instance.
- Session 1 stops at the item class. Items and the core costing setups come in Session 2.
Attempt the case on your own first. When you need help, show hints.
Solution hints are hidden so you can attempt the case first. Ready to check your approach? Show solution hints
Concept Answers
- Inventory tracks quantity; costing tracks value. Cost Management values inventory, works out what it costs to make or buy an item, and supports profit reporting. It does not create transactions of its own: it costs the transactions that come from inventory, purchasing, order management and manufacturing, creates cost distributions, and those are accounted and sent to the general ledger. 00:13:46 to 00:16:55 00:22:48 to 00:25:54
Services bought without an item, such as consulting, are expensed. They are not valued in Cost Management, which values inventory. 00:25:54 to 00:27:29
- Oracle’s cost methods:
- Standard: inventory is valued at a predetermined cost, and differences from the actual transaction cost are tracked as variances. This gives a fixed cost per pan. 00:30:36 to 00:33:15
- Perpetual Average: the cost is recalculated after every incoming transaction. For example, 10 pans at 100 on hand plus 10 received at 120 give an average of 110. 00:33:15 to 00:37:57
- Actual: each receipt keeps its own cost, and issues consume receipts first in, first out. 00:37:57 to 00:44:21
- Periodic Average: the average is calculated over a period, and only with a periodic average cost enabled cost book. 00:44:21 to 00:45:26
- The implementation partner needs Application Implementation Consultant to configure the setups. The cost accountant needs Cost Accountant to run cost transactions and distributions. 00:45:59 to 00:47:03
- The management business unit is where the business functions run and transactions happen. The profit center business unit owns the financial result and profitability, and appears on costing transactions. One business unit can be both. An inventory organization must have a profit center business unit, or cost processing can fail with trade transaction errors. A business unit becomes a profit center when Below legal entity is selected in Assign Business Unit Business Function. 01:07:56 to 01:09:32 01:16:21 to 01:17:25
Materials Management is the business function needed to create inventory organizations under the business unit. Costing itself is turned on through the offering and its features, not a business function. 02:27:29 to 02:28:30
- No. Items are defined once in the item master organization, a logical organization with no stock or transactions. An item can be transacted in an inventory organization only after it is assigned to that organization. Oracle recommends a single item master, kept separate from the organizations that store and transact items. 01:11:36 to 01:13:12 02:17:26 to 02:19:00
Hands-on Steps
- Create the plant location (requirement 4).
Navigation Setup and Maintenance > Manufacturing and Supply Chain Materials Management > Manage Locations > Add Location
00:46:32 to 00:48:05- Set: Common Set, so every business unit can use the location. A business unit set would limit it to that business unit. 00:48:41 to 00:49:43
- Name: your initials, for example AB_HARBOUR_LOC, and a unique code 00:49:43 to 00:50:13
- Select the location controls, including Ship-to site and Bill-to site 00:50:13 to 00:50:45
- Enter the address, then Submit 00:57:41 to 01:00:45
Address formats depend on the country. If the address will not validate, check the format for the country you selected.
- Create the business unit (requirement 5).
Navigation Setup and Maintenance > Manage Business Unit > Create
01:01:45 to 01:02:16- Name, for example AB_HARBOUR_BU 01:02:16 to 01:02:48
- Location: your plant location. Default Set: Common Set. Then Save and Close. 01:02:16 to 01:03:49
- Assign business functions and make the business unit a profit center (requirement 6).
Navigation Setup and Maintenance > Assign Business Unit Business Function
01:04:19 to 01:04:54- Select your business unit as the scope of the task 01:04:54 to 01:05:24
- Enable Materials Management and Procurement. The trainer enables every function for the demo only. 01:05:24 to 01:07:26
- Primary Ledger: the US primary ledger. The Default Legal Entity fills in from it. 01:07:26 to 01:07:56
- Select Below legal entity to make the business unit a profit center, then Save and Close 01:07:56 to 01:10:02
- Create the item master organization (requirement 8).
Navigation Setup and Maintenance > Manage Item Organizations > Create
01:12:39 to 01:13:12- Name, for example AB_HARBOUR_IMO, and a unique organization code 01:13:12 to 01:13:42
- Business unit and legal entity are optional for an item organization. The trainer adds them. 01:13:42 to 01:14:15
- On the next page, select this organization as its own item master organization, then Save and Close 01:14:15 to 01:14:50
- Create the plant inventory organization (requirement 9).
Navigation Setup and Maintenance > Manufacturing and Supply Chain Materials Management > Facilities > Manage Inventory Organizations > Create
01:14:50 to 01:15:21- Name, for example AB_HARBOUR_INV, and a unique code. Management Business Unit: your business unit; the location fills in from it. 01:15:21 to 01:15:51
- Legal Entity, and Profit Center Business Unit: your business unit. Internal organization. Then Next. 01:15:51 to 01:16:21
- Item Master Organization: your item master organization, not the inventory organization itself 01:25:25 to 01:26:32 01:27:03 to 01:27:33
- Item Grouping Behavior: Definition organization 01:27:33 to 01:28:36
- Schedule: an available schedule, and Locator Control: No locator control 01:17:58 to 01:18:31 01:20:06 to 01:20:37
- Select Use original receipt date and Use current item cost, then Save and Close 01:22:45 to 01:23:18 01:29:39 to 01:30:10
The trainer first picks the wrong item master organization and creates the inventory organization again. Check the item master before you save.
- Create the raw material and finished goods subinventories (requirement 11).
Navigation Setup and Maintenance > Manufacturing and Supply Chain Materials Management > Inventory Management > Manage Subinventories and Locators
01:31:14 to 01:32:29- Select your inventory organization, then Create 01:32:29 to 01:32:59
- Name: a short name such as AB_RM for raw materials 01:32:59 to 01:33:30
- Material Status: Active. Subinventory Type: Storage. Locator Control: None. 01:33:30 to 01:34:35 01:34:35 to 01:35:07
- Keep Asset subinventory and Quantity tracked selected, so the stock is valued and on hand is tracked 01:35:07 to 01:35:37
- Save and Create Another, then create AB_FG for finished goods the same way 01:36:40 to 01:37:40
- Create the item class and give item access (requirement 12).
Navigation Setup and Maintenance > Product Management > Items > Manage Item Classes
01:40:19 to 01:41:20- Under the Root Item Class, create an item class such as AB_COOKWARE, then Save and Add Details 01:41:20 to 01:41:50
- On the security settings, give a person access to create items in your item master organization 01:41:50 to 01:43:59
- Add the same access for your inventory organization 01:43:59 to 01:45:00
- Save and Close, then search for your item class to confirm it exists 01:45:33 to 01:46:36
Manage Item Classes appears only when the Product Management offering is selected. Under Manufacturing and Supply Chain Materials Management the search finds no task. 01:40:19 to 01:41:20