Setting Up Inventory Average Costing
The following steps are required when setting up inventory average costing. Steps previously covered in the Setup Prerequisites or the Setup Checklist are mentioned here only if there is setup information that is specific to inventory average costing.
Attention: If you have installed Release 11, the new cost processor will automatically be used regardless of how the CST: Average Costing Option profile option is set. If you have upgraded from Release 10 or Release 10SC to Release 11, you will continue to use the old cost processor and the new manufacturing average costing functionality will not be available.
Prerequisites
- Costing Method is set to Average
- Transfer Detail to GL is appropriately set
- Default Material Sub-Element account (optional)
Define activities and activity costs
Define material overhead defaults
Launch transaction managers
To set up inventory average costing:
1. Set the Control Level for your items to Organization. Average cost cannot be shared between organizations.
2. Define, at minimum, one cost type to hold the average rates or amounts for resources, resource overhead, and material overhead rates. See: Defining Cost Types.
Inventory valuation and transaction costing in a manufacturing average cost organization involve two cost types: Average and Average Rates.
4. Set the TP: INV:Transaction Processing Mode profile option in Oracle Inventory to On-line processing.
When using average costing, transactions must be properly sequenced to ensure that the correct costs are used to value transactions so that unit costs can be accurately calculated. Proper transaction sequencing can only be ensure if all processing occurs on line. See: Inventory Profile Options.
