E1: 31A: Work Center Costing or Variance by Work Center (R30812/R30835/R31802A/R31804) (Doc ID 955512.1)

Last updated on FEBRUARY 22, 2024

Applies to:

Purpose

Variance by work center compares the consumption at the work center, or the material issued and hours reported, to the standard material and hours established at the work center level. Variance by work center is available for standard costing in EnterpriseOne 8.9 and later releases.

The Cost by Work Center functionality was designed with Flex Accounting in mind, but will also operate with the current direct functionality.

Cost by Work Center is not supported with Engineer to Order. Cost by Work Center and ETO each have their own specific functionality for writing account numbers and they are in direct conflict with each other. If using Cost by Work Center for non-engineer to order work orders, they will need to be in different branch/plants so that constants can be set without Cost by Work Center for the ETO branch.

Overview

Fully understanding profit behavior is a critical component of any company’s success and even survival. Companies are forced to compete in very demanding markets, which take their price structures to the limit. The ability to evaluate and analyze their costs helps management discover non-value-added work and opportunities for improvements.

The emphasis here is on providing advanced functionality required by companies to become more profitable. To understand the profitability of products and to have access to manufacturing variances in more detail than it has been in the past. The level of detail supplied by this functionality will allow for accountability and cause-effective analysis.

Work Centers are associated with material by operation sequences. By matching the operation sequence number in the Bill of Material (P3002) to the operation sequence number in the Routing (P3003), the component (item number) is linked together. Similarly, the operation sequence number on the Parts List (P3111) links the component to the work order Routing (P3112).

Many Bill of Material operation sequences can be linked to a single work center.

Variances

Variances are a key component of manufacturing companies operating costs. They indicate how well companies are meeting their estimates or standards.

The Variances (R31804) UBE provides two ways to record variance at the work center level. The first method directly populates the business unit portion of the account with the work center in the Work Order Production Costs table (F3102). The second method uses Flex Accounting to populate any segment of the account with the work center.

R31804

The R31804 Variances populates the business unit portion of the account with the work center in the F3102, Work Center Production Costs table, directly under the following conditions:

· Business unit returned from AAI table is blank
· Flex Accounting, if enabled, does not populate any account segment (business unit, subsidiary, subledger, cost objects 1 - 4) with the work center.

This method requires additional account setup, since the work center will now be used as the business unit of the account.

Flex Accounting

Flex Accounting can be used to populate any segment of the account with the work center. If Flex Accounting returns a non-blank business unit, it will populate the business unit portion of the account, rather than the work center in the F3102. Similarly, if Flex Accounting populates the subsidiary, subledger or cost objects 1 – 4 with the work center and returns a blank business unit, the business unit will not be populated by the work center in the F3102 because the work center is being tracked in the subsidiary, subledger or cost objects. Using Flex Accounting to populate the subledger or cost objects with the work center provides greater flexibility in tracking variances and does not require additional account setup. Flex Accounting can be used to populate the business unit or subsidiary portion of the account, but may require additional account setup.

In these cases a blank business unit will use the default charge to cost center.

In order to properly understand the source of a manufacturing variance, it is necessary to know what work center a variance occurs in. The ability to calculate and record variances at the work center level means that the journal entries for the credit side accruals will also need to be done at the work center level.

This document explains how to set up and process Cost by Work Center from freezing costs through variance journal entries.

Scope

The reader has a working understanding of simulating and freezing costs, manufacturing and variance accounting, and Flex Accounting setup.

Details

My Oracle Support provides customers with access to over a million knowledge articles and a vibrant support community of peers and Oracle experts.