Setting Up Advanced Cost Accounting

This chapter provides an overview of setting up Advanced Cost Accounting and discusses how to:

• Set up constants.

• Set up cost object edit codes.

• Set up cost object types.

• Set up AAIs by cost component.

• Set up flex accounting.

• Set up cost analyzer views.

• Set up profit management user-defined codes.

Understanding Advanced Cost Accounting Setup

This section provides an overview of Advanced Cost Accounting setup and list prerequisites.

Prerequisite

Before you complete the tasks in this section, review and set up the appropriate manufacturing AAIs.

See Also

JD Edwards EnterpriseOne Tools 8.98 Foundation Guide, User Defined Codes

Advanced Cost Accounting Setup

Setting up JD Edwards EnterpriseOne Advanced Cost Accounting correctly is critical to its success as a management decision-making tool. When JD Edwards EnterpriseOne Advanced Cost Accounting is set up correctly, you can track direct costs by creating "what-if" scenarios to make sound business decisions that are based on actual data from existing integrated systems.

Use JD Edwards EnterpriseOne Advanced Cost Accounting to create detailed revenue and cost information by using general ledger transactions from the sales, financial, purchasing, manufacturing, and transportation systems, and the measure of demand on activities or resources (driver volumes) from sales and work order systems.

Constants

To use JD Edwards EnterpriseOne Advanced Cost Accounting with your integrated system, set up constants to specify how the system displays and processes information. When you set up constants, you specify the following information:

• Whether the system displays cost object fields.

• Whether the system displays activity-based costing fields.

• Whether the system displays details of product costs, such as revenues and cost of goods sold.

Cost Objects

A cost object is the final, or lowest, level at which the system calculates or tracks costs or revenues. For example, a cost object might be a customer or an item number. You must identify the object, set up the method by which the system tracks the costs, and define the AAIs and flex accounting rules to report on financial transactions for which you track costs or revenues.

Setting up cost objects allows you to define the kind of data that you want to analyze and how you want to analyze it. You can set up four user-defined cost object types and one cost object type that is defined in the Item Master table (F4101). Examples of cost object types include customers, suppliers, and product lines.

You use cost object types to gather information about costs or revenues. You can then use the information to determine how the costs affect your business, or the source of the revenue. For example, suppose you want to analyze the amount that you are spending on postage and freight by customer. You set up a cost object type for customers. Each time that freight or postage expense is paid for a customer, the customer's address book number is used in the Cost Object field in the JD Edwards EnterpriseOne Accounts Payable system. The entry in the Cost Object field lets you track the freight and postage expenses for your customers.

You can define additional cost object types at any time. You should carefully consider the types of costs that you want to analyze to ensure the consistency of the data that you capture.

You can populate cost objects by using one of the following methods:

• AAIs and flex accounting rules set up for JD Edwards EnterpriseOne Advanced Cost Accounting transactions in other systems, such as JD Edwards EnterpriseOne Work Orders, JD Edwards EnterpriseOne Sales Orders, and JD Edwards EnterpriseOne Fixed Assets.

• Direct manual input into an accounting entry, such as accounts payable or general accounting.

• Custom programming.

Cost Object Edit Codes

Cost object edit codes ensure that the user of the subsidiary systems uses the cost object types that are set up and defined by management. The consistent entry of data into the subsidiary systems maintains the integrity of the data that you gather to analyze.

When you set up and activate edit codes, the system enforces the rules that you set up for entering data into fields in the system, such as whether a cost object must be entered or if a field can be left blank. If you set up an edit code that requires a specific cost object, and the user does not enter a cost object for a transaction on accounts payable or other subsidiary systems, the user receives an error message.

Views

Before you can review the results of calculations for either activity-based costing or managerial accounting, you must define views for the cost analyzer. Cost analyzer views allow you to post data to the Cost Analyzer Balances table (F1602) in a summarized or a detailed format.

Cost analyzer views allow you to look at data that the system summarizes differently in different years or for the same year. When you define a view, you specify the fiscal year and the fiscal date pattern for the data that you want to view. Additionally, you define the level of detail that you want to view, such as the ledger type, business unit of the data, and the cost objects.

Activities

If you use JD Edwards EnterpriseOne Advanced Cost Accounting for activity-based costing, you can set up processes and activities to perform calculations. Activities are the tasks or events that occur in a business process. For example, routing invoices for approval would be an activity in the process of paying a supplier. For each process and activity, you can define the type of calculation, the sequence of steps in the calculation, the source of the balances, the basis for the calculations, and the destination of the results.

AAIs and Flex Accounting Rules

Automatic Accounting Instructions (AAIs) are the links between your day-to-day functions, chart of accounts, and financial reports. Programs that post to specific general ledger accounts use AAIs to create the journal entries. If you want to analyze data by using detailed product costs, you must set up AAIs to create the journal entries that capture the detailed product costs.

The system uses the flex accounting rules that you set up to capture cost object information to complete the profitability management subledger and subledger type. The system provides a flexible format that allows you to determine the information that populates the subledgers. For example, you could create a format that includes the customer number, sales territory, product category, and product for each transaction.

Drivers

A driver is a measure of demand on activities or resources that influence costs or revenue. You set up automatic driver definitions to specify the tables from which the system retrieves information to calculate volumes and quantities. You set up manual driver definitions so that the system can perform calculations on data that is not stored in JD Edwards EnterpriseOne systems.

Cost Pools

Cost pools are groupings of cost elements. You set up cost pools so that you can collect data about similar costs, and use the combined costs in calculations.

For example, you could use cost pools to collect data about the labor costs that are associated with a particular business process, including regular pay, overtime pay, bonuses, and so on. By collecting all of the labor costs that are associated with the business process, you can compare the labor costs to the revenues associated with the process and determine if the labor costs for the process are in line with the profits generated.

Setting Up Constants

This section provides an overview of setting up constants and describes how to:

• Activate cost objects and activity-based costing.

• Activate detailed product costs.

Understanding Constant Setup

To use the JD Edwards EnterpriseOne Advanced Cost Accounting system in conjunction with your integrated system, you must indicate the parameters that the system uses to standardize information processing. You set up constants to indicate how the system should process information.

You must activate cost objects before using the costing features in the JD Edwards EnterpriseOne Advanced Cost Accounting system. You must activate additional features for activity-based costing and define whether the system uses total costs or detail product costs for each branch/plant. Branch/plant constants allow you to customize the daily transaction processes for each branch/plant in the manufacturing and distribution systems.

Flex Accounting Rules

You use Flex Accounting rules to determine how to populate the cost object fields when creating automatic journal entries.

The system uses the following cost tables:

• F4105 (Item Cost File).

• F30026 (Item Cost Component Add-ons).

Variances at the Work Center Level

You must activate the Cost by Work Center constant in the Manufacturing Constants program (P3009) to record variances at the work center level.

To record a variance, the system uses a formula that includes a combination of standard, current, planned, actual, completed, and scrapped costs based on the type of variance. The following table shows the formula for each type of variance:

See Also

Manufacturing Variances

Forms Used to Set Up Constants

Activating Cost Objects and Activity-Based Costing

Access the Enter/Change Cost Management constants form.

Activating Detailed Product Costs

Access the Branch/Plant Constants form.

Branch/Plant

Enter an alphanumeric code that identifies a separate entity within a business for which you want to track costs. For example, a business unit might be a warehouse location, job, project, work center, branch, or plant. You can assign a business unit to a document, entity, or person for purposes of responsibility reporting. For example, the system provides reports of open accounts payable and accounts receivable by business unit to track equipment by responsible department. Business unit security might prevent you from viewing information about business units for which you have no authority.

Use Product Cost Detail (Y/N)

Select this check box to activate product costing detail for the JD Edwards EnterpriseOne Distribution system. If you do not select this check box, the system uses total cost instead of detail costs.

See Also

Getting Started with JD Edwards EnterpriseOne Inventory Management

Setting Up Cost Object Edit Codes

This section provides an overview of setting up cost object edit codes, lists prerequisites, and discusses how to:

• Set up cost object edit codes.

• Set processing options for accounts by business unit.

Understanding Cost Object Edit Code Setup

When you set up cost object edit codes, you can include edit rules to edit your chart of accounts. A chart of accounts provides the structure for your general ledger accounts. It lists specific types of accounts, describes each account, and includes account numbers. A chart of accounts typically lists asset accounts first, followed by liability and capital accounts, and then revenue and expense accounts.

As part of creating your chart of accounts, you must define the length of the account segments. These segments are business unit object.subsidiary. For the JD Edwards EnterpriseOne Advanced Cost Accounting system, you can also indicate edit codes for cost object fields for specific accounts. The cost object edit codes define whether an object is required, edited for validity, or used for a specific cost object value.

To use the product or catalog number, set up a cost object type for either the product number or catalog number. Then set up a cost object edit code, select Specific, and enter the cost object type as the option. Based on this setup, the account is specific to one cost object type.

Note. After you revise your chart of accounts for cost object edit codes, you can copy the object and subsidiary accounts to other business units. When you revise your accounts to include cost object edit codes, the system copies the new edit code flags for the cost object fields to the new business unit.

Prerequisite

Before you complete the tasks in this section, activate cost object tracking to access additional forms.

Form Used to Set Up Cost Object Edit Codes

Setting Up Cost Object Edit Codes

Access the Account Master - ACA form.

To set up cost object edit codes:

1. Select an option for each of the edit codes:

   • No Edit.

   • Not Allowed.

   • Must Be Entered.

   • Specific (where you want to enter a specific cost object type).

     If you select Must Be Entered as the option for an Item Edit Code, the system uses the short item number. To use the second or third item number (product or catalog number), do not use the field Item Edit Code. Instead, define a cost object.

2. Click OK.

Setting Processing Options for Accounts by Business Unit (P0901)

Processing options enable you to specify the default processing for programs and reports.

Security

Setting Up Cost Object Types

This section provides an overview of setting up cost object types and discusses how to set up cost object types.

Understanding Cost Object Type Setup

A cost object is the lowest level at which costs or revenue are calculated or tracked. Cost object tracking allows you to assign daily transactions to their original cost objects. For example, if you decide to track information by customers, item numbers, and sales order numbers, each piece of information can be a cost object type.

Set up editing rules for the system to validate transactions against cost object information such as journal entries for vouchers or invoices. Editing rules validate information on master tables such as the Address Book Master table (F0101) or user defined code tables. For example, if you track customers, you can set up a cost object type C, define the edit rule to compare the information in the cost object field against the Address Book Master, and verify that the search type information has a specific value. You can also use an editing rule to format information.

Use this program to set up user defined cost object types. The new cost object types can then be included in manual journal entries, vouchers, and invoices. You can also use the cost object types when setting up flex accounting rules and driver definitions. Fields on Cost Object Entry differ, based on which edit rule value you select.

Form Used to Set Up Cost Object Types

Setting Up Cost Object Types

Access the Cost Object Entry form.

Note. To set up non-editing cost object types, complete only the cost object type, description, and edit rule fields.

Table Editing

Use this group box to set up table-based cost object types.

UDC Editing

Use this group box to set up user-defined code-based cost object types.

Setting Up AAIs by Cost Component

This section provides overviews of setting up AAIs by cost component and AAIs for detailed product costs, lists prerequisites, and discusses how to:

• Set up AAIs by cost component.

• Set processing options for distribution AAIs.

Understanding AAIs by Cost Component Setup

Automatic accounting instructions (AAIs) are the links between your day-to-day functions, chart of accounts, and financial reports. The system uses AAIs to determine how to distribute general ledger (GL) entries that the system generates. For example, in the Sales Order Management system, AAIs indicate how to record the inventory, costs of goods sold (COGS), and revenue transactions when you sell an item to a customer. The system stores AAIs in the Distribution/Manufacturing - AAI Values table (F4095).

Programs that post to specific GL accounts use AAIs to create journal entries. Create an AAI entry for each unique combination of company, transaction, document type, and GL class. AAIs for manufacturing also use the cost type. The JD Edwards EnterpriseOne Advanced Cost Accounting system allows you to separate the inventory and COGS accounts by cost component such as materials, labor, and overhead.

Note. You must use the standard cost method (07) to calculate COGS for inventory and sales to capture detailed product cost information in the distribution system.

Although the JD Edwards EnterpriseOne Advanced Cost Accounting system uses all types of AAIs, the following information explains how to use AAIs for JD Edwards EnterpriseOne Advanced Cost Accounting within the distribution and manufacturing systems.

You define AAIs by a unique combination of company number, document type, and GL class code. The system also uses a series of specific search steps to locate the correct AAI rule before creating the transactions for the journal entry. If the system cannot find an AAI rule, it returns an error message for the missing rule number for the transaction by company, document type, and GL class code.

The following scenario illustrates how the system uses the search steps within the AAI rules:

• If the company number is 00001, the document type is SO, and the GL class code is IN20, then the system first searches for a rule that is specific to company 00001 and a GL class code of IN20.

• If a rule is not found, the system searches for a rule that is defined for company 00001 and a GL class code of ****.

• If a rule is not found, the system searches for a rule that is defined for company 00000 and a GL class code of IN20.

• If a rule is not found, the system searches for a rule that is defined for company 00000 and a GL class code of ****.

• If a rule is not found, the system does not create the transaction, and you receive an error message that says the AAI rule is invalid because the rule is not defined.

You can also locate GL class codes using inventory interface rules. Transactions originating in manufacturing and distribution use inventory interface rules by order line type. This information tells the system where to locate the GL class code information. Then the GL class code is used in the AAI to locate the corresponding AAI rule.

To locate the inventory interface rules information, use the Line Type Constants program (P40205). Each order line type contains a value for the inventory interface rule. The following list of values determines how the system locates the GL class code information:

• Y and D use the GL class code for the item using item branch/plant location.

• N does not use the GL class code because it has no inventory interface.

• A uses the GL class code for purchase price variances for the item by line type.

• B uses the GL class code for purchase price variances for the item using item branch/plant location.

The system can create journal transactions using the AAIs for purchasing when a difference exists between receipted cost of an item and the actual cost of an item. The system uses this value for line types with a value of A or B as the value for inventory interface rule. The Voucher Match Variance Account field for the order line type must be checked if you want the system to create a journal entry for any cost differences using a cost variance AAI rule.

See Also

Setting Up AAIs for General Accounting

Understanding AAIs for Detailed Product Costs

You can use only the following AAIs for entries for branch/plants that use detail product costing:

Prerequisite

Before you complete the tasks in this section, verify that the Cost Type processing option for distribution AAIs is active.

Form Used to Set Up AAIs by Cost Component

Setting Up AAIs by Cost Component

Access the Account Revisions form.

Co (company)	Enter a code that identifies a specific organization, fund, or other reporting entity. The company code must already exist in the Company Constants table (F0010) and must identify a reporting entity that has a complete balance sheet. At this level, you can have intercompany transactions. Note. You can use company 00000 for default values such as dates and automatic accounting instructions. You cannot use company 00000 for transaction entries.
Do Ty (document type)	Enter a user defined code (00/DT) that identifies the origin and purpose of the transaction. The system reserves several prefixes for document types, such as vouchers, invoices, receipts, and time sheets. The reserved document type prefixes for codes are: P: JD Edwards EnterpriseOne Accounts payable R: JD Edwards EnterpriseOne Accounts receivable T: JD Edwards EnterpriseOne Time and Pay I: JD Edwards EnterpriseOne Inventory O: JD Edwards EnterpriseOne Purchase order S: JD Edwards EnterpriseOne Sales order
GL Cat (general ledger category code)	Enter a user defined code (41/9) that identifies the GL offset that system uses when it searches for the account to which it posts the transaction. If you do not want to specify a class code, you can enter **** (four asterisks) in this field. You can use automatic accounting instructions (AAIs) to predefine classes of automatic offset accounts for the JD Edwards EnterpriseOne Inventory Management, JD Edwards EnterpriseOne Procurement, and JD Edwards EnterpriseOne Sales Order Management systems. You might assign GL class codes as follows: IN20: Direct Ship Orders IN60: Transfer Orders IN80: Stock Sales The system can generate accounting entries based upon a single transaction. For example, a single sale of a stock item can trigger the generation of accounting entries similar to the following: Sales-Stock (Debit) xxxxx.xx A/R Stock Sales (Credit) xxxxx.xx Posting Category: IN80 Stock Inventory (Debit) xxxxx.xx Stock COGS (Credit) xxxxx.xx The system uses the class code and the document type to find the AAI.
Cost Type	Enter a code that designates each element of cost for an item. Examples of the cost object types are: A1: Purchased raw material B1: Direct labor routing rollup B2: Setup labor routing rollup C1: Variable burden routing rollup C2: Fixed burden routing rollup Dx: Outside operation routing rollup Xx: Extra add-ons, such as electricity and water The optional add-on computations usually operate with the type Xx extra add-ons. This cost structure allows you to use an unlimited number of cost components to calculate alternative cost rollups. The system then associates these cost components with one of six user defined summary cost buckets.
Sub (subsidiary)	Enter a subset of an object account. Subsidiary accounts include detailed records of the accounting activity for an object account. Note. If you are using a flexible chart of accounts and the object account is set to six digits, you must use all six digits. For example, entering 000456 is not the same as entering 456 because, if you enter 456, the system enters three blank spaces to fill a six-digit object. If you leave this field blank, the system uses the value you entered on the work order in the Cost Code field.

Setting Processing Options for Distribution AAIs (P40950)

Processing options enable you to specify the default processing option for programs and reports.

Defaults

Setting Up Flex Accounting

This section provides overviews of flex accounting, rules for defining a flexible format, and account information, and discusses how to set up flex accounting.

Understanding Flex Accounting

You use flex accounting to define how you capture cost object information to complete the profitability management subledger and subledger type. The flexible format allows you to define rules to determine which fields populate which subledgers. For example, you might use a format that includes customer number, sales territory, product category, and product.

The standard JD Edwards EnterpriseOne account structure is formatted with the following segments:

• Business unit

• Object account

• Subsidiary account

• Subledger

• Cost Object 1

• Cost Object 2

• Cost Object 3

• Cost Object 4

• Item

Flexible format accounts have the same segments. The length of all segments cannot exceed 90 characters. Each segment of the flexible format account has a character limit, as follows:

To create a flexible account number, you must define one or more of these segments. To do this, associate one or more pieces of information with each segment. Each piece of information is associated with a field and is stored in one of the tables that you access from the Row menu on the Flexible Sales Account Revisions form. Cost objects 1-4 require you to enter a value in the Type field. These values are defined in the Cost Object Types program (P1620). In addition, you are required to define which cost object you are associating with the flexible rule in the Cost Object column.

To associate information with a segment, you must know the data item name that JD Edwards has defined for the corresponding field in the table.

You cannot define an object segment. You must define the object account through AAIs.

The subledgers are not visible online but are stored in the Account Ledger table (F0911).

You activate flexible sales accounting through a processing option in the Sales Update program (R42800).

Understanding Rules for Defining a Flexible Format

You can define only one subledger type for each cost object. Consider the following rules about flexible account numbers when you define flexible formats:

• Each piece of information that you associate with a segment corresponds to a JD Edwards EnterpriseOne field.

  Each of these fields is hard-coded in a user defined code table that you access from the Enabled Functionality by Application program (P1690). You can view both the tables and fields for flexible rules. To use a field that is not included in these tables, you must use custom programming.

• You can define a flexible accounting rule only for applications that have been flex-enabled.

  You can view these programs using the Cost Object Rule Setup Method program (P1691).

• When the system searches for an account for an AAI, it searches the Sales Flex Accounting table (F4096), as follows:

• The system checks for a flexible account number that has been defined for a specific AAI and a specific company.

• If no account has been defined for a specific AAI and a specific company, the system checks for an account that has been defined for a specific AAI and company 00000.

Understanding Account Information

When you process a transaction that requires the system to record information to the general ledger, the system searches for flexible account information only if you have set up the appropriate processing options in the appropriate update program.

Form Used to Set Up Flex Accounting

Setting Up Flex Accounting

Access the Flexible Sales Account Revisions form.

To associate a flex rule with the item subledger, enter X in the Item column.

To enable flex accounting rules in a specific program, complete the appropriate processing options in that program that correspond to flex accounting. Use the Cost Object Rules Setup Method program (P1691) to display the programs that are enabled for flex accounting.

Setting Up Cost Analyzer Views

This section provides an overview of setting up cost analyzer views and discusses how to set up cost analyzer views.

Understanding Cost Analyzer View Setup

You can define the information that is posted to the Cost Analyzer Balances table (F1602) to summarize GL transaction information. Views are uniquely defined by using a combination of a view number, fiscal year, and date pattern code. For example, if you define a view to identify profitability by customer for the fiscal year 2008 and assign view number 1 with a fiscal date pattern code R, you cannot define a second view as 1 for 2008 with a fiscal date pattern of R.

The following rules apply to Cost Analyzer views:

• Each fiscal year can have a maximum of ten view definitions.

• View numbers can be between one and ten.

• You cannot have duplicate view definitions (that is, two identical view numbers for the same fiscal year).

• Each view must contain a date pattern code.

After you post transactions to a particular view and fiscal year, you can make changes to the view definition only by purging the posted information and regenerating it.

Form Used to Set Up Cost Analyzer Views

Setting Up Cost Analyzer Views

Access the Cost Analyzer View Entry form.

Note. These options allow you to control the level of detail that you want to view. When you select an option, the detail for the corresponding option is not included in the view. The system does not include any transactions that are related to options that are turned on.

The system creates a new record in the Cost Analyzer Balances table (F1602) whenever the option value changes. Otherwise, the system creates one balance record in the Cost Analyzer Balances table for each transaction that originates from the Account Ledger table (F0911).

Setting Up Profit Management User-Defined Codes

This section provides overviews of profit management user-defined codes and cost pools and discusses how to set processing options for user-defined codes.

Understanding Profit Management User-Defined Codes

Before you can use the features of the JD Edwards EnterpriseOne Advanced Cost Accounting system, you need to define the critical information that the system uses for processing.

Many fields throughout the JD Edwards EnterpriseOne Advanced Cost Accounting system require user defined codes. You can customize fields in your system by setting up user defined codes to meet the needs of your organization.

The User Defined Codes program (P0004A) allows you to establish and maintain a table that defines codes for various types of information. Codes are categorized by system and code type.

The JD Edwards EnterpriseOne Advanced Cost Accounting system uses the following user defined codes:

See Also

JD Edwards EnterpriseOne Tools 8.98 Foundation Guide, User Defined Codes

Understanding Cost Pools

In addition to user defined codes for activities and drivers, you can set up cost pools. A cost pool is a grouping of cost elements. When you set up rates, you can assign drivers or activities to a single cost pool. For example, you can create a cost pool called personnel expenses by aggregating all personnel-related costs, such as salaries, overtime, benefits and so on; and the driver could be man-hours invested in each activity.

You can create alternate approaches to cost pools based on your business needs, such as:

• You can specify original GL accounts as the FROM (source) of the cost assignment definition.

  In this example, all of the accounts should have a common driver.

• Use account category codes to link accounts that correspond to the same cost pool.

  Then when you define your cost assignment, the FROM definition is the category codes group, which equals the cost pool. For example, you could set up an account category code group for personnel expenses (PE) and building related costs (BL). In the Account Master table (F0901), you can assign the category codes to the appropriate accounts and, in this way, group your accounts to different cost pools.

• You can create a specific account for cost pools, and then, using a cost assignment, move balances from the original accounts to the account that you set up specifically for the aggregate total of the cost pool expenses.

Setting Processing Options for User-Defined Codes (P0004A)

Processing options enable you to specify the default processing for programs and reports.

Defaults