8 Update Frozen Costs

This chapter contains the topic:

Section 8.1, "Updating Frozen Costs."

8.1 Updating Frozen Costs

Navigation

From Manufacturing Systems (G3), choose Product Costing

From Daily Product Costing (G3014), choose Frozen Update or Frozen Update/WIP Revaluation

After you perform simulated rollups to determine the effect of changes, you can update your frozen costs with simulated values by running a frozen update. Most companies run this program at the beginning of a new fiscal year to create their manufacturing costs for the next fiscal period.

You can perform simulated rollups and frozen updates for any cost method, except 02. The Manufacturing Accounting system uses frozen standard costs (method 07), unless Actual Cost is indicated for the Manufactured item.

Note:

This program uses the costs generated by the most recent run of the Simulate Cost Rollup program. If you have changed information since the last simulated cost rollup, those changes will not be reflected by the frozen update.

The Frozen Update program uses the costs that were generated by the Simulate Cost Rollup program to:

Update unit costs in the Cost Ledger table (F4105) for the cost method selected
Update frozen costs in the Cost Components table (F30026) for the cost method selected
Update labor and overhead rates, for the cost method selected, in the Work Center Master table (F30006)
Print report totals by company, branch/plant, and G/L category code
For on-hand balances, create an Item Balance (IB) record in the Item Ledger table (F4111) if the cost method selected matches the sales/inventory cost method for an item, and a journal entry if a net change in value exists.
For on-hand balances, write journal entries to the Account Ledger table (F0911) in either detail or summary format

An item ledger record is written if the cost method selected for update is the standard (07) cost method or the sales/inventory cost method. The item ledger record indicates a change in inventory value for the updated items. The number of item ledger records written depends on the cost level of the item, which is defined in the Item Master table (F4101). For example, items at cost level 2 would have an item ledger record for each branch/plant at which they are defined, because costs can differ by branch/plant.

For cost level 3, an item ledger record is written for each lot/location.

In addition, if you set the processing option, the program does the following for work in process (WIP Revaluation):

Adjusts inventory values in the Production Cost File (F3102) for any open orders
Writes journal entries to the Account Ledger table (F0911) in either detail or summary format

Costs in the Production Cost File (F3102) are updated for those open work orders affected by a cost change. In other words:

The program creates a journal entry only if a work order has an outstanding WIP balance.
WIP costs are only updated for open work orders (variance flag is less than 3)
The work order is updated only if it contains an item selected for cost update.

Standard, completed, and scrapped costs are updated using the new parent frozen costs. Current, planned, and actual costs are updated using the new component costs and work center rates (simulated in proof mode and frozen in final mode).

8.1.1 Journal Entries for On-Hand Balances

The program creates journal entries in either detail or summary format that match in amount with the item ledger records. Thus the program maintains integrity between the Item Ledger and the Account Ledger. Use the Item Ledger/Account Integrity report to verify this integrity.

The process flow is as follows:

The program creates a journal entry only if an item ledger record has been written.
An item ledger record is written only if an item cost ledger record has been updated.
An item cost ledger record is updated only if a cost component record has been updated.

The program accesses the following AAIs to obtain the object account.

AAI Table Number	Description	Use
4134	Inventory	Debit to show increase in item cost Credit to show decrease in item cost
4136	Expense or COGS	Debit to show expense or loss Credit to show income or gain

8.1.1.1 Detail Journal Entries

If you choose detail format, the program creates matching debit and credit account ledger records for every item ledger record created. Use the detail format when you want a detailed audit trail.

8.1.1.2 Summary Journal Entries

If you choose summary format, the program creates debit and credit records by subtotals of company, general ledger category code, and transaction type. Use the summary format to reduce the amount of detail in the general ledger. You can select to run summary journal entries with a detailed report.

Caution:

Consider the memory allocation requirements, as the potential volume can be quite large.

8.1.2 Journal Entries for WIP Revaluation

The program creates journal entries in either detail or summary format that match in amount with the work order costs. Thus the program maintains integrity between the WIP balances and the Account Ledger. Use Variance Inquiry to verify this integrity.

The program accesses the following DMAAIs to obtain the object account.

DMAAI Table Number	Description	Use
4136	Expense or COGS	Debit to show expense or loss Credit to show income or gain
3120	WIP	Debit to show increase in WIP costs Credit to show decrease in WIP costs

Note:

If not familiar with the WIP Revaluation process and impact, consider using a test environment and/or running in Proof mode first.

8.1.2.1 Detail Journal Entries

If you choose detail format, the program creates matching debit and credit account ledger records for every updated work order. Use the detail format when you want a detailed audit trail. However, consider that the potential volume is large, requiring a lot of memory. If running in detail mode, the work order number can be written to the GL detail Subledger field facilitating research. It is advisable to run the proof in detail mode, followed by a summary mode run.

8.1.2.2 Summary Journal Entries

8.1.3 Before You Begin

Ensure that you have set up item cost levels on the initial Item Master Information form. See Section 3.3, "Setting Up Item Cost Levels."

8.1.4 What You Should Know About

Topic	Description
Ensuring Manufacturing Work Orders are Closed	For a manufacturing work order to be considered closed, the variance flag (PPFG) on the work order header must have a value of 3. To achieve this, set the processing options on the variance program as follows: #9 – Enter a value greater than or equal to 11. Note: A World Writer report is available on the Manufacturing Accounting Periodic menu (G3123) to locate work orders where the variance flag values are less than 3: ZJDE0013 Variance Flag Exceptions.
Flex Accounting for Frozen Cost Update	You can determine the impact of Flex Accounting when generating journal entries for product cost update.
Flex Accounting for WIP Revaluation	You can use Flex Accounting when generating journal entries for WIP Revaluation.
Configurator Work Orders	Configurator Work Orders are included in WIP Revaluation. These are work orders for stocking type C parent items.

8.1.5 Reports

The program produces the following reports:

Report	Description
Item Cost Ledger Exception report	The program produces this report if it finds any general ledger errors while formatting the journal entries. The report lists an error message once for the same combination of AAI number, account number, and G/L category code. If run in proof mode, correct any errors and run the Frozen Update program again. If run in final mode, you must manually correct the Journal Entry batch and fix any errors.
Frozen Standard Update report	This report shows the effect of the inventory revaluation based on the changes made to the cost revisions records for the inventory items. You can print all items or only those that have a cost change. You can run the report in proof mode or final mode. The report provides the following information: Old and new costs for each updated item Variances between old and new costs Item quantity on hand Net amount of change in cost Summary of the amount changed by item general ledger category (facilitates any manual journal entries required) G/L exception errors Whether G/L transactions have been written Either G/L subtotals by company and G/L category code or G/L category code only
WIP Revaluation Exception report	If you choose to do WIP revaluation, the program produces this report if it finds any general ledger errors while formatting the journal entries. An error message is printed once for the same combination of AAI number, account number, and G/L category code. If run in proof mode, correct any errors and run the Frozen Update program again. If run in final mode, you must manually correct the Journal Entry batch and fix any errors.
WIP Revaluation Update report	If you choose to do WIP revaluation, this report shows the effect of the inventory revaluation based on the changes made to the cost revisions records for the inventory items. The report lists all open work orders that use any of the items whose costs have changed. You can run the report in proof mode or final mode. The report provides the following information: Old and new WIP balance for each work order Variances between old and new WIP balance Net amount of change in WIP G/L transactions, if requested, in either detail or summary format WIP Revaluation journal entries can be viewed from G3116, number 14.
Variance Flag Exceptions Report	This report allows you to view Variance Flag Exceptions which are work order statuses greater than 96 but Variance Flag is not equal to 3. Run this report prior to executing a WIP Revaluation. Update the Variance Flag for any orders on the report that should be closed to revaluation.

Figure 8-1 Item Cost Ledger Exception report

Description of "Figure 8-1 Item Cost Ledger Exception report"

Figure 8-2 Variance Flag Exceptions report

Description of "Figure 8-2 Variance Flag Exceptions report"

Figure 8-3 WIP Revaluation Update report

Description of "Figure 8-3 WIP Revaluation Update report"

8.1.6 Processing Options

See Section 23.8, "Item Cost Update (P30835)."