Questions about Reconciliation Using PMAC Actual Costing and Batches that Cross Periods

(Doc ID 2380286.1)

Last updated on MARCH 29, 2018

Applies to:

Oracle Process Manufacturing Financials - Version 12.1.3 and later
Information in this document applies to any platform.

Goal

ORIGINAL QUESTION

Customer is using the Actual cost method (PMAC) for Product cost calculation.
While most of the batch scenario's are properly reported and subledger Inventory can be reconciled to GL, there are some examples where
Item costs are updated unexpectedly.

For example, Item costs are updated incorrectly and reconciliation issues occured in the following scenario:

Scenario:
Ingredient consumption, By-Product yield and Product yield are recorded in Period 1. The batch costs are correctly calculated in Period 1 for the Product using all ingredient and by-product values.
Needless to say because the batch status is not relevant for the product cost - but it's 'WIP' in Period 1.

In Period 2 there's an update to the batch. A By-Product yield is recorded and the batch is completed and closed (no resource costs are used/setup). There's no additional product yielded in period2.
Even though there's no additional product yield in period 2, the actual cost process picks up the batch for calculation and re-calculates the Item costs of the product.

As with Actual costing there's no revaluation posting, this leads to reconciliation issues as the inventory amounts are updated but GL is not.
It is expected to have no update to the item costs because there's no additional product yield in period2. Instead all remaining WIP amounts should arrive at the CLS account.

Please explain in which scenarios this behavior can occur.

According to the business the program 'GMF Recreate Batch / Period Layers' was executed always before ACP ran.

NEW QUESTION AFTER EXPLAINING THIS IS WORKING AS INTENDED AND THAT BATCH CLOSE WOULD TYPICALLY BE MAPPED TO INVENTORY VALUATION ACCOUNT

In other environments, I’ve never mapped the CLS account to an inventory account and reconciliation was not an issue - but of course there are many scenarios and every customer is different.

In this particular example I agree. The mapping would resolve the variance for this item.

However, I see other areas where the proposed solution to map the close variances to INV accounts would lead to additional or other reconciliation issues. If there’s a solution to these points or something that requires correction, I appreciate to receive your input.

The following scenarios occur in my environment.

A) Product was yielded and sold in Period 1 but the batch was corrected in Period 2.
  In this case the product quantity of the prior month doesn’t exist and the period2 has no new product yield.
  I assume in this case there’s no re-calculation at all for the Product cost?
  We would record an update to the INV account in GL but not in inventory – reconciliation issue?

B) Product was scrapped completely and all ingredient quantity is yielded as by-product only.
  The value variance between ingredients consumed and by-products yielded will result in closing variances.
  Assigning them to the INV account will lead to reconciliation variances as this is a real loss and there’s no update to any Item cost
  involved.

C) SLA issue:
  Inventory values are posted to different accounts based on their item categories using ADR’s.
  The Batch close event is not specifically assigned to one item and the accounting entry cannot be assigned to the correct inventory
  account.
  Consequently a reconciliation for all inventory accounts in summary would be possible but not a detailed reconciliation anymore.

Only approx.. 10% of the closing variances are due to the batch corrections while the majority comes from scrapped batches. Taking the last month end close as an example the customer now recorded a reconciliation gap of 41 k RMB while if we map the CLS entries to an INV account we would record a gap of 240 k RMB.

Appreciate any hint you can provide to avoid the reconciliation issues I see.
 

Solution

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