Defining the Cost of a Price Item or Price Item Bundle for a Division

Note: This topic is not applicable for the health insurance business.

Oracle Revenue Management and Billing enables you to maintain the different types of fixed and variable costs of a price item or price item bundle for each division. The system uses the fixed and variable cost information while calculating the cost of a price item or price item bundle in a deal. It considers the cost which is defined for the division to which the account or person belongs. It derives the fixed and/or variable cost which is effective on the deal start date.

The system enables you to maintain the following types of costs in different currencies:

  • Additional Fixed Cost

  • Additional Variable Cost

  • Fixed Third Party Cost

  • Fixed Internal Cost

  • Variable Internal Cost

  • Variable Third Party Cost

While calculating the cost of a price item or price item bundle in a deal, the system converts the cost in the deal currency when the cost currency is different from the deal currency. As the name implies, the fixed cost is an expense that does not change with the increase or decrease in the price item volume or commitments. Therefore, the total fixed cost is equal to the sum of fixed cost which is effective on the deal start date for the division. However, the variable cost is an expense that change with the increase or decrease in the price item volume or commitments. Therefore, the total variable cost is equal to the sum of multiplication of variable cost (which is effective on the deal start date for the division) and price item volume or commitments.

Let us understand this with the help of an example:

The following table illustrates how you can define division-specific costs for a price item:
Price Item Division Cost Type Cost Amount
PI1 201-NJ Fixed Third Party Cost $5
Fixed Internal Cost $3
Additional Fixed Cost $1
Variable Third Party Cost $0.1
Variable Internal Cost $0.65
Additional Variable Cost $0.5

If a deal is created for a person who belongs to the 201-NJ division and if the PI1 price item is assigned to the person in the deal and if the original volume and proposed commitment of the PI1 price item in the deal is set to 100 and 200, respectively, the system calculates the cost of the PI1 price item in the following manner:

The following table illustrates how the original and proposed cost is calculated for a price item in a deal:
Original Cost
Total Fixed Cost $5 + $3 + $1 = $9
Total Variable Cost (100*$0.1) + (100*$0.65) + (100*$0.5) = $10 + $65 + $50 = $125
Total Cost $9 + $125 = $134
Proposed Cost
Total Fixed Cost $5 + $3 + $1 = $9
Total Variable Cost (200*$0.1) + (200*$0.65) + (200*$0.5) = $20 + $130 + $100 = $250
Total Cost $9 + $250 = $259

Here, the assumption is the deal and cost currency is same (i.e. USD). The system then uses the total original and proposed costs for calculating the original and proposed profitability of the deal.

Prerequisites

To define the cost of a price item or price item bundle for a division, you should have:

  • Currencies defined in the application

  • Price items or price item bundles associated with the division to which the user (i.e. who is performing this action) belongs

Procedure

To define the cost of a price item or price item bundle for a division:

  1. Click the Divisions or Show All link in the Section pane when you are defining, editing, or copying a price item or price item bundle.
    The Divisions section appears.
  2. Click the Add (The Add Icon) icon in the Costs column corresponding to the division for which you want to define the costs of the price item or price item bundle.

    The following fields appear in a grid:

    Field Name Field Description Mandatory (Yes or No)
    Effective Date Used to specify the date from when the cost of the price item or price item bundle is effective for the division. Yes (Conditional)
    Note: This field is required while defining the cost of the price item or price item bundle for the division.
    Cost Type Used to indicate the type of cost incurred in the division for the price item or price item bundle. The valid values are:

    • Additional Fixed Cost

    • Additional Variable Cost

    • Fixed Third Party Cost

    • Fixed Internal Cost

    • Variable Internal Cost

    • Variable Third Party Cost

    		 Yes (Conditional)
    Note: This field is required while defining the cost of the price item or price item bundle for the division.
    Cost Value Used to specify the cost amount. Yes (Conditional)
    Note: This field is required while defining the cost of the price item or price item bundle for the division.
    Cost Currency Used to specify the currency in which you want to define the cost. The system does currency conversion when the cost currency is different from the deal currency.
    Note: The list includes only those currencies which are already defined in the system.
    		 Yes (Conditional)
    Note: This field is required while defining the cost of the price item or price item bundle for the division.
  3. Enter the required details in the Costs grid.
  4. If you want to define more than one cost of the price item or price item bundle for the division, click the Add (The Add Icon) icon and then repeat step 3.
    Note: However, if you want to remove the cost of the price item or price item bundle from the division, click the Delete (The Delete Icon) icon corresponding to the cost.
  5. Click Save.
    The cost of the price item or price item bundle is defined for the division.

Related Topics

For more information on... See...
How to define a price item or price item bundle Defining a Price Item or Price Item Bundle
How to edit a price item or price item bundle Editing a Price Item or Price Item Bundle
How to copy a price item or price item bundle Copying a Price Item or Price Item Bundle
How to associate a price item or price item bundle with a division Associating a Price Item or Price Item Bundle with a Division