Understanding Activities

When you use JD Edwards EnterpriseOne Advanced Cost Accounting (ACA) for activity-based costing, you use the profit management features to perform activity and process cost calculations. You can set up a calculation definition that indicates the type of calculation, source of the balances, driver, and destination for the results. Additionally, if you have a multitiered allocation, you can specify the sequence of calculations.

Before you begin to use activity-based costing, you must define each task that is involved in the process that you want to analyze. After you define each task, you can attach drivers to each task.

For example, in accounts payable, you perform the following tasks:

• Receive invoices.

• Route them for approvals and coding.

• Look up the supplier number.

• Add the supplier to the vendor file table.

• Verify the payment amount and authorizations.

• Input the invoices.

• Correct any errors.

• Run check processing.

• Print the checks.

• Sign the checks.

• Attach remittances.

• Put checks in envelopes.

• Mail the checks

When you analyze the time spent on each task and the cost of man-hours, machine time, square footage allowance, and so on, you begin to understand the actual cost of processing accounts payable in-house. Use this information to determine whether you can eliminate some of the steps, or out-source some, or all of the process.