Inventory and Manufacturing Costing Compared
The terms inventory and manufacturing costing are used to describe costing functionality that is dependent on your installation of Oracle Applications (products installed, new Release 11 users, or Release 10 or Release 10SC upgrade user) and your setup of Cost Management.
Inventory costing is specific to distribution organizations that do not use Work in Process but may use Purchasing, Order Entry/Shipping, and even Bills of Material. Manufacturing costing is applicable to organizations that specifically use Work in Process but may also use other products.
Attention: In all versions of Release 10 and in production releases of Release 10SC prior to production 16, manufacturing standard costing was not available, and you could only use inventory average costing. If you are a Release 10 or Release 10SC inventory average costing you will continue to use the old cost processor (see below). You should contact Oracle Consulting Services if you plan to do any of the following:
- continue to use inventory costing but take advantage of support for material overhead costing
- use manufacturing average costing
- use project manufacturing costing
Setup Scenario and Features
Outlined below are the major features found in five typical setup scenarios:
Scenario 1: Standard Costing - Distribution Organization
- Costing Method is Standard
- All costs transacted at standard
- Two cost elements: material and material overhead
Scenario 2: Standard Costing - Distribution Organization with Bills of Material
- Costing Method organization parameter is set to Standard
- Five cost elements (material, material overhead, resource, outside processing, and overhead) if costs are rolled up
Scenario 3: Standard Costing - Manufacturing Organization
- Costing Method organization parameter is Standard
- Five cost elements (material, material overhead, resource, outside processing, and overhead)
Scenario 4: Average Costing - Distribution Organization (R10 Processor)
- Costing Method organization parameter is set to Average
- One cost element: material only
Scenario 5: Average Costing - Distribution Organization (R11 processor)
- Costing Method organization parameter is set to Average
- Five cost elements (material, material overhead, resource, outside processing, and overhead)
Scenario 6: Average Costing - Manufacturing Organization (R11 processor)
- Costing Method organization parameter is set to Average
- Five cost elements (material, material overhead, resource, outside processing, and overhead)
- CST: Average Costing profile option set to Inventory and Work in Process
Differences Between Inventory and Manufacturing Costing
The following table shows the differences between inventory and manufacturing costing:
See Also
Overview of Standard Costing
Standard and Average Costing Compared
