Include Co-Products and By-Products in Discrete Manufacturing Cost Planning and Work Order Costing

You can now plan and account the costs of the co-products and by-products in a discrete manufacturing work definition and work order. You can set the cost allocation factor for these additional products as either a fixed cost or apply a percentage of the total accumulated costs at that operation. If you've multiple work definitions for the product in the manufacturing plant, set the Costing Priority for your primary product and additional products to choose the appropriate work definition when rolling up the costs of your products.

Let's take an example of a aluminum sheet stamping operation where an aluminum sheet goes through multiple steps and you get a primary product of 6" Aluminum Stamps and the left over sheet metal is considered as a co-product that can either sold as metal scrap or can be reprocessed.

Example of discrete manufacturing process with multiple products: Aluminum stamping

Work definition for Aluminum stamping

Operation	Item	Item Quantity (UOM)	Resource	Resource Quantity (UOM)	Output	Output Quantity (UOM)	Cost Allocation %	Unit Cost
10 - Punching	Aluminum Sheet 10x10	100 (Each)						$100.00
20 - Blanking			MFGMACHINE-C	100 (HRS)				$30.00
20 - Blanking					AL Scrap	1 (Each)	30%
30 - Inspection			MFGLABOUR-C	100 (HRS)				$20.00

In discrete manufacturing work definitions with multiple outputs, the assumption is that the primary product is yielded after the completion of last operation.

If you specify the costing batch output size in your work definition, the Roll up Costs process will scale up (or down) the quantities of inputs (materials and resources) that are planned to be consumed on a variable basis.

After you run the Roll up Costs process, the standard costs of AL Stampings (primary product) and AL Scrap (co-product) will be calculated based on the planned cost.

The View Rolled-up Costs screen provides the breakdown of the rolled-up costs.

View Rolled-up Costs page

To calculate the cost of products, the Roll up Costs process increments the cumulative cost as inputs are consumed and decrements the cumulative cost as outputs are yielded.

Cumulative cost = Cumulative extended material costs + cumulative extended resource costs + cumulative overhead costs - output costs

Output cost of additional product (with cost allocation percentage) = Cost allocation percentage * Cumulative cost

Output cost of additional product (with fixed cost) = Entered unit cost * Quantity planned to be yielded (scaled quantity)

Output cost of primary product = Cumulative cost at the end of last operation

Unit cost of product = (Output cost + Overhead cost)/Quantity to be yielded (scaled quantity)

Standard Costs page

The unit cost of product, with the cost element, expense pool, and level information is available on the Standard Costs page. After you publish this standard cost, this cost is used to process product completion transactions in Cost Accounting.

Work orders that have multiple outputs will be costed based on the cost method assigned to the primary product and co-products. If both of these are costed using Standard Cost method, then the published standard cost will be used to cost the product completions as shown below.

Review Work Order Costs page

Any difference between the planned output (from the work definition) and the actual output will be reported as a yield variance at the time of work order close, as shown below.

Yield variance

This feature helps you to:

• Increase productivity: With the capability to yield multiple outputs from discrete work definitions, you can calculate the cost of your products to closely reflect your actual production process. This eliminates the need of any alternate configurations in the system, saving time and effort for your business users.

• Improve accuracy of financial reporting: With this new capability, the system can calculate the cost of your products accurately. With correct costs, your business users can accurately report on the actual production costs and inventory value of your enterprise.

• Enhance decision-making: If you use the Standard Cost method to value your inventory, you can analyze manufacturing variances in Cost Accounting to identify scope of improvement in your production processes and make better decisions for your enterprise.

Steps to Enable

Use the Opt In UI to enable this feature. For instructions, refer to the Optional Uptake of New Features section of this document.

Offering: Manufacturing and Supply Chain Materials Management  No Longer Optional From: Update 25A

Tips And Considerations

• If you've multiple products yielded from an operation in a work definition, the product with fixed cost allocation is assumed to be yielded first, irrespective of the output sequence number. This implies that the cumulative cost is first decremented by the output cost of the fixed cost product, and a percentage of the leftover cost is allocated to the product with cost allocation percentage.

• If you want to run the Roll up Costs process without selecting the Refresh Work Definitions option, ensure that after opting into this feature, you first rollup and publish the costs using work definitions that were modified to yield additional products, with the Refresh Work Definitions option selected. This step is required to ensure that cost planning has the latest snapshot of these modified work definitions with additional products which can be used for subsequent cost rollups.

Key Resources

• Oracle Fusion Cloud SCM: Implementing Manufacturing and Supply Chain Materials Management Guide, available on the Oracle Help Center.

• Oracle Fusion Cloud SCM: Using Supply Chain Cost 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:

• Perform Cost Rollup (CST_PERFORM_COST_ROLLUP)
• Review Rolled Up Costs (CST_REVIEW_ROLLEDUP_COSTS)
• Publish Standard Costs (CST_PUBLISH_STANDARD_COSTS)
• Create Cost Distributions (CST_CREATE_COST_DISTRIBUTIONS)
• Review Cost Distribution (CST_REVIEW_COST_DISTRIBUTIONS)