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Oracle Work in Process User's Guide
Release 12.1
Part Number E13678-04
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Work in Process Costing

This chapter explains how costs are calculated and controlled in Work in Process.

This chapter covers the following topics:

Overview of Work in Process Costing

Oracle Work in Process provides a complete cost system to track and report your production costs.

WIP Accounting Classes

You use WIP accounting classes to establish your valuation and variance accounts. You can enter different accounts for each cost element within a WIP accounting class for maximum elemental account visibility. You can also enter the same account for more than one cost element. If you are assign the same account to more than one cost element, you can choose to have the values of these cost elements summarized before being transferred to General Ledger.

Multiple Cost Elements

Through the multiple cost elements (material, material overhead, resource, outside processing, and overhead) that you assign to your accounting classes, the system can track all your production costs to the correct valuation and variance accounts.

Costing Methods

All Oracle costing methods support Oracle Work in Process. However, you can only cost repetitive schedules using standard costs.

Job Costs

You can cost standard and non-standard asset discrete production by job. You can report job costs on a period-to-date and cumulative-to-date basis.

Project Costs

If you are using Oracle Project Manufacturing Costing, you can cost jobs by project. Project jobs can be specific to a single contract or a group of contracts for a specific customer.

Period Costs

You can cost and report your repetitive and non-standard expense production by period.

Repetitive Assembly and Line Costs

You can track your repetitive production costs by assembly on a line so you do not have to review your costs by individual repetitive schedule. You can also track repetitive costs by assembly across lines or by line so you can compare costs for your production lines.

Transaction Based Costs

You can track and report costs through the various stages of production. The system calculates all costs and reports move, issue, resource, overhead, completion, scrap, period close, and job close transaction costs.

Resource Charging

You can charge resources automatically or manually.

Overhead Charging

You can charge overhead automatically based on resource value charges, resource charges, or operation completions.

Fixed and Variable Resource, Outside Processing and Overhead Charging

You can set up resources, outside processing, and overheads with a basis of Lot for fixed charges per job or schedule, such as setup and teardown. You can use a basis of Item for resources, outside processing, and overheads that vary based on the job or repetitive schedule quantity.

Flexible Resource, Outside Processing, and Overhead Absorption

You can assign separate absorption accounts by sub-element, such as individual resources, outside processing resources, and overheads. As you charge resources, outside processing, and overheads, work in process valuation automatically absorbs your payroll, accounts payable accruals, and overhead cost pools. At period end, you can compare absorbed amounts with actual costs incurred in your general ledger cost pools and accounts.

Actual Labor Charging

You can charge resources at standard resource rates, standard employee rates, or actual rates.

Actual Purchase Price Charging

You can charge outside resources at predefined or actual purchase prices.

Period Close

When you close an accounting period, period close costs are calculated. The system costs and transfers all production costs by account to Oracle Financial products. You can transfer in summary and detail depending on your Oracle Inventory option.


You can track and report previous level usage variances for materials and this level efficiency variances for resources and overheads. The system calculates standard cost adjustment variances when the standard cost update is run.

Valuation Reporting

The system can provides complete valuation reporting including current balances, period to date charges, and cumulative to date charges. You can also report your work in process balances by cost element and level.

Related Topics

Work in Process Valuation

Work in Process Cost Variances

Overview of Standard Costing, Oracle Cost Management User's Guide

Overview of Average Costing, Oracle Cost Management User's Guide

Flow Manufacturing Costing, Oracle Cost Management User's Guide

Overview of eAM Costing, Oracle Enterprise Asset Management User's Guide

Overview of Lot Based Job Costing, Oracle Shop Floor Management User's Guide

Setting Up Work in Process Costing

Based on your manufacturing and accounting requirements, refer to the appropriate manufacturing (Inventory and Work in Process) section:

Check your WIP Require Scrap Account Parameter and Recognize Period Variance Parameter. See: Work in Process Parameters. If you are using average costing, also check your Costing Parameters.

Related Topics

Defining WIP Parameters

Defining WIP Accounting Classes

Defining Labor Rates

Work in Process Costs

You use standard and non-standard discrete jobs, project jobs, repetitive schedules, and flow schedules to collect the costs of production. For standard and non-standard discrete jobs, you value and report work in process costs based on jobs. For project jobs, you value work in process costs based on the projects that jobs are associated with. For repetitive schedules, you value and report work in process costs based on assemblies on a line in a period, not on specific repetitive schedules.

Costing Methods and Work in Process

You can cost standard discrete jobs, non standard discrete jobs, project jobs, and flow schedules in average costing organizations. You can cost repetitive schedules in standard costing organizations only. Costing methods are assigned in the Organization Parameters window in Oracle Inventory. See: Organization Parameters Window, Oracle Inventory User's Guide and Defining Costing Information, Oracle Inventory User's Guide.

The following table summarize which costing methods can be used with which manufacturing methods.

Manufacturing Method Standard Costing Organization Average. FIFO, LIFO Costing Organization,
Standard Discrete Jobs Yes Yes
Non-standard Expense Job Yes Yes
Non-standard Asset Jobs Yes Yes
Project Jobs Yes Yes
Repetitive Schedules Yes No
Flow Schedules Yes Yes
Project Flow Schedules No Yes

Related Topics

Work in Process Standard Cost Transactions, Oracle Cost Management User's Guide

Manufacturing Average Cost Transactions in the Cost Management User's Guide.

Work in Process Valuation and Variances

The value of work in process is maintained as transactions are processed. Work in process values include usage, efficiency, and standard cost adjustment variances.

Work in Process Valuation

Work in Process continually maintains the value of work in process, updating it with each transaction. This means that you can report work in process costs quickly and accurately.

Cost Elements

Work in Process maintains and reports work in process values by distinct cost element (material, resource, and so on) even if you assign the same general ledger account to each cost element. You can also report work in process value by cost element within specific WIP accounting classes.

Accounting Classes and Cost Elements

When you define WIP accounting classes you must assign accounts to the cost elements within that class. Accounting classes determine how costs are charged.

Note: The following discussion provides an overview of how discrete and repetitive costs are calculated and posted. For additional information on these topics and complete descriptions of the resulting accounting entries see the following topics:

Standard Discrete Job Costs

The WIP accounting class that you assign to a standard discrete job determines which valuation and variance accounts are charged. Valuation accounts are charged when material is issued to a job. When the job is closed, final costs and variances are calculated and posted to the variance and valuation accounts associated with the job. Standard jobs that have not been closed are automatically revalued by the standard cost update. Average cost updates and layer cost updates do not revalue jobs.

Non-Standard Discrete Job Costs

The WIP accounting class that you assign to a non-standard discrete job determines which valuation and variance accounts are charged. There are two types of accounting classes that can be assigned to non-standard discrete jobs: expense non-standard and asset non-standard.

Non-standard expense jobs are costed using period-based costing. Non-standard expense jobs are not revalued by cost updates. Conversely, non-standard asset jobs are costed much like standard discrete jobs and are revalued by cost updates. Non-standard expense and non-standard asset jobs do not earn material overhead when you complete assemblies. Instead material overhead at completion is posted directly to the subinventory material overhead account.

Repetitive Costs

When you enter a repetitive transaction, costs are charged to the assembly and line rather than to a specific schedule. This is known as flow charging and applies to all repetitive material, resource, and move transactions. Repetitive transactions are allocated to open schedules based upon date the first unit start date (FUSD) starting with the oldest schedule first.

Repetitive assemblies are costed using period-based costing. Period costs for a repetitive assembly are calculated by totalling the charges made to an assembly and line during the period and dividing by the number of assemblies you produced on that line during the period. Valuations and variances are calculated when you close a period. You do not need to close repetitive schedules.

Repetitive variances are calculated by comparing an assembly's period cost with its standard cost. Variances can occur due to scrap, additional resource and overhead charges, and changes in daily quantities.

The period close process writes the variance values to the variance accounts associated with the WIP accounting class you assigned to the repetitive line/assembly association. You can specify which repetitive schedule variances to post to the general ledger when you close an accounting period using the WIP Recognize Period Variances parameter. See: Repetitive Parameters.

Journal Entries

Whenever a job or schedule is changed, relieved, or closed, journal entries are created. When transactions are transferred to the general ledger or the accounting period is closed, these journal entries are transferred to the general ledger. See: Period Close, Oracle Cost Management User's Guide.

Related Topics

WIP Accounting Classes

WIP Accounting Class Elemental Costs

WIP Value Report

Discrete Job Value Report

Repetitive Value Report

Viewing WIP Value Summaries, Oracle Cost Management User's Guide

Work in Process Cost Variances

Work in Process provides usage, efficiency, and standard cost adjustment variances. Usage and efficiency variances result when the total costs charged to a job or schedule do not equal the total costs relieved from a job or schedule at standard. You can transact the following types of variances:

Related Topics

Work in Process Standard Cost Variances, Oracle Cost Management User's Guide

Viewing WIP Value Summaries, Oracle Cost Management User's Guide

Cost Reports

The following reports can be used to assist you in identifying your discrete and repetitive manufacturing costs: