Absorb This Level Component Item Overheads in Plant Overheads
If you use standard cost method for valuing your inventory, you can now define plant overheads by using a new absorption type to absorb component overheads with Cost Level set to This level. In the Manage Overhead Rates page, you can specify the absorption type for plant level overheads, item category specific overheads, and item specific overheads. When you run the Roll up Costs process, the product cost gets calculated, after including the overheads, as specified in the overhead rates setup.
You can use the following absorption types when setting up overhead rates:
- Fixed - A fixed amount overhead is added to the product cost.
- Percentage
- Percentage of material cost at all levels (prior to update 24A -> Percentage of material cost)
- Percentage of total cost excluding overheads at this level (prior to update 24A -> Percentage of total cost)
- Percentage of total cost including overheads at all levels (new absorption type introduced with this feature)
Overhead Absorption Types
| Cost Source | Cost Element Type | Cost Level | Percentage | Percentage of material cost at all levels | Percentage of total cost excluding overheads at this level | Percentage of total cost including overheads at all levels |
|---|---|---|---|---|---|---|
| Entered | Resource | This Level | No | No | Yes |
Yes |
| Entered | Material |
This Level |
Yes | Yes | Yes |
Yes |
| Entered | Overhead (buy items) |
This Level |
No | No | No |
Yes |
| Entered | Resource |
Lower Level |
No | No | Yes |
Yes |
| Rolled-up | Overhead |
Lower Level |
No | No | Yes |
Yes |
| Entered | Material |
Lower Level |
No | Yes | Yes |
Yes |
This feature provides the following benefits:
- Flexibility in configuring the overhead rates to absorb manufacturing overheads per their business requirements.
- Accurately calculate your product costs by maintaining your overhead rates in the system.
- Significantly reduce your time and effort needed to report correct inventory value for your enterprise.
Steps to Enable
You don't need to do anything to enable this feature.
Tips And Considerations
- You can define overhead rates using the Manage Overhead Rates page, the desktop spreadsheet integration, or the Standard Overhead Rates REST API.
- After you upgrade to update 24A, all the existing cost scenarios would show the new absorption types in the system without any manual intervention. An exception to this would be for the cost scenarios rolled up in update 23D, where the View Rolled-up Costs page would show the old absorption types.
Key Resources
- Oracle Fusion Cloud SCM: Implementing Manufacturing and Supply Chain Materials Management Guide, available on the Oracle Help Center.
Access Requirements
Users who are assigned a configured job role that contains these privileges can access this feature:
- Manage Resource and Overhead Rates (CST_MANAGE_RESOURCE_OVERHEAD_RATES)
This privilege was available prior to this update.