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Cost Levels (CLEV)

The Inventory Cost Level field is on the Item Master (F4101) record for each item. This field controls the level of detail for which product cost is maintained for Sales, Inventory, and Purchasing. Based upon the Inventory Cost Level, Item Cost Ledger (F4105) records will be created for that item at one of three levels of detail:

Level 1: Item Only. The system maintains one overall inventory cost for the item, regardless of how many Branch/Plants, Locations or Lot Serial Numbers exist for the item.

Level 2: Item/Branch Only. The system maintains a different inventory cost for each branch/plant for the same item.

Level 3: Item/Branch/Location/Lot. The system maintains a different inventory cost for each location and lot within a branch/plant.

Note: Cost Level 1 cannot be used in a multi-currency environment.

The system maintains inventory costs in the Inventory Cost (F4105) table.

The Inventory Cost Level is selected when a new Item is setup in Item Master Information (P4101) off menu G4111.

Once an item is set up, the cost level cannot be changed to a lower value by modifying the Item Master (P4101) record. A change to a lower value will cause error 'Cost level update not allowed' (3755) to be displayed. To change the Cost Level, run the Item Cost Level Conversion (R41815) UBE.

Note: If Purchase Price Level is set to '3' (Inventory Cost Level), all costs must be the same for the conversion to work. For example if the user changes from Cost Level 3 to Cost Level 2, all the cost records for the various location/lot combinations must be the same in order to create new cost records at the Item/Branch Level. See Item Cost Level Conversion (R41815).

Changing the cost level to a higher value is not a problem. The system will simply take the cost and use it at the new level. For example, if the cost level is set to 2 (Item/Branch) then changed to a cost level 3 (Item/Branch/Location/Lot), the cost will simply be used for all location/lot combinations in a branch.

Cost Methods (LEDG)

Cost Methods are set up in the 40/CM UDC table. Cost Methods 01 through 19 are reserved for EnterpriseOne Software. Additional Cost Methods may be added to this UDC table.

Five of the Cost Methods have included functionality. They are:

• 01 - Last In Cost. See Explanation of Calculated Cost Methods
• 02 - Weighted Average Cost. See Weighted Average Cost (Doc ID 625564.1)
• 07 - Standard Cost. See E1: 30A: R30812 Setup and Use of Standard Cost Rollup (Doc ID 643052.1)
• 08 - Purchasing-Base Cost No Adds. See Explanation of Calculated Cost Methods
• 09 - Manufacturing Last Cost. See Actual Cost Setup for EnterpriseOne (Doc ID 798903.1)

The remaining Cost Methods are static in that they have no included functionality. This is also true for any Cost Methods that are added to the 40/CM UDC table.

Note: There is currently no way to update the inventory and purchasing cost methods of existing items without pulling up each individual item/branch/location record in P4105 and changing the cost method(s), which can be extremely time consuming. Bug 10848221 : UPDATE COST METHOD CSPO & CSIN - SAR: 7170889 has been entered as an enhancement requesting this change.

Cost Revisions (P4105)

The Cost Revisions (P4105) program off menu G4112 allows a cost to be added, changed, or viewed. It is also used to designate the Costing Method for Sales/Inventory and the Costing Method for Purchasing.

When setting up a new Item Number

If costing is at level 1 in the Item Master, the value for both the Costing Method - Sales/Inventory and Costing Method - Purchasing default into this screen based on the default values defined in Branch/Plant ALL in Branch/Plant Constants (P41001).

If costing at levels 2 or 3, the value for both the Costing Method - Sales/Inventory and Costing Method - Purchasing default in based on the defaults in the Branch/Plant Constants (P41001) for the Branch Plant entered in the Branch/Plant field.

When a new lot is received and there are already records in Item Cost File (F4105) for that item which has a costing level 2, the system will get the Cost Method for the new lot by searching in Item Cost File (F4105) table by following criteria: COCSIN = 'I' , item, branch, location = blank and lot = blank. If a record with this criteria is found, the system will get both Cost Method (Sales/Inventory and Purchasing) from that record and use them for the new lot. If the record with this criteria does not exist, the system will continue searching for the next records.

As a conclusion, if an item has records in Item Cost File (F4105), a new lot for that item will not get the Costing Methods from Branch/Plant Constants (P41001).

Only the fields that apply will be displayed. For example, when creating an Item set with costing level 1, only the Item field will display, all other fields will be hidden. If the Item entered is set to costing level 2, the Location and Lot/Serial fields will be hidden.

A cost method for an item can be deleted if it is no longer applicable. If trying to delete the sales, inventory, or purchasing cost method, the system displays a warning message, 3831 Warning – Deleting Cost Method. The system does not delete the cost method, but assigns a zero cost for the cost method. There is no way using an application to truly delete these cost records. The only way to actually delete and remove these records from the F4105 table is to use SQL to delete the records from the F4105 table.

Where Are Costs Stored?

Item Costs are stored in the Item Cost (F4105) file. If costing at level 1, there will be one Item Cost (F4105) record for each Cost Method for each Item. If costing at level 2, multiple Item Cost (F4105) records may exist for each Item/Branch. At level 3, multiple Item Cost (F4105) records may exist for each Item/Branch/Location/Lot combination. See Examples.

A supplier price for an item can also be defined in Supplier Catalog (P41061) for items having Purchase Price Level 1 or 2 in Item Master (P4101). The system will search in F41061 to retrieve the cost of an item. If not found, the system will also search in F4105. For items having Purchase Price Level 3 in Item Master (P4101), the system will search in F4105 only.

Note: Costs are always stored in the primary Unit of Measure. The Item Cost (F4105) file does not contain a field for Unit of Measure.

Which Cost Does the System Use?

There are two indicator flags in the Item Cost (F4105) file that tell the system which Item Cost (F4105) record to use to value the Inventory or to use in Purchase Orders. One Item Cost (F4105) record may be used for both.

Costing Method - Sales/Inventory

This data item (CSIN) is a flag in the Item Cost (F4105) file. When it is populated with an 'I', it indicates the Cost Method that is used to calculate the value of the Inventory. This cost defaults into Sales Orders and Inventory transactions.

Costing Method - Purchasing

This data item (CSPO) is a flag in the Item Cost (F4105) file. When it is populated with a 'P', it indicates the Cost Method that defaults into a Purchase Order.

Examples of Costing Methods

In the following charts, a highlight of blue indicates the current Purchasing Cost, yellow is the current Sales/Inventory Cost, and orange is for a Cost that is being used for both Purchasing and Sales/Inventory.

EXAMPLES PIC

Cardex: IB Transactions

If changing the current Sales/Inventory Cost for an Item, an IB transaction will be created in the Cardex (F4111). This transaction occurs because changing that Cost revalues the inventory. Journal entries are created using AAIs 4134 (debit) and 4136 (credit).

Changing a Cost for a Cost Method that is not the current Sales/Inventory Cost will not create an IB transaction. Additionally, only cost changes entered via P4105 will create an IB record. If the cost changes due to an inventory transaction or purchase order receipt, no IB record will be written for the cost change.

Note: The Cost Change IB record will not be entered if there is no inventory on-hand in the F41021 file. 'IB' is a hard coded document type and cannot be changed to a different document type at this time.

Updating Item Costs

Different cost applications or batches can be used to update costs for individual items or for multiple items in branch/plants, locations, and lots. Costs can be increased or decreased by an amount or percentage, or a new amount can be specified. Also, current costs can be replaced with future costs.

Updating Costs for an Item across Multiple Branch/Plants

Costs for a single item can be update across multiple branch/plants, locations, and lots. The cost method for which the item costs need to be updated can be selected within P41051 Speed Cost Maintenance application.

Use Speed Cost Maintenance (P41051) from G4123 menu to increase or decrease the cost for an item with an Amount (A), Percentage (%) or even override it using Override Amount (*) option.

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Note: The default value of Amount Type-"A"(alias CTT) field from the P41051/W41051B form does not come from the DD or any processing options, this is initialized in the event rules of P41051/W41051B form on Dialog is Initialized event.

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Update Costs for Multiple Items across Multiple Branch/Plants

Costs for numerous items can be updated across multiple branch/plants, locations, and lots. Item costs can be increased or decreased by a specific amount or percentage, or, a new cost can be populated using Batch Cost Maintenance (R41802) under Inventory Price & Cost Updates (G4123) menu.

The Batch Cost Maintenance program has the flexibility to update all cost methods, or specific cost methods defined in the Data Selection.

Both R41802 and R41052 (Future Cost Update) point to the accounts set up in DMAAIs 4172 / 4174. If the requirement is to write these journal entries to different accounts, then it’s possible to use different G/L Classes or Document Types (set in the processing options of either R41802 or R41052) and have DMAAIs 4172 / 4174 set up accordingly.

Updating Average Costs for Items

There are two methods that can be used to update average costs for items:

• Interactive (By activating the 'Update Average Cost On-Line' option in System Constants)
• Batch, through the Average Cost Update (R41811) program.

For more details, see Weighted Average Cost (Doc ID 625564.1).

Updating Current Item Costs with Future Costs

Current cost methods can be replaced with Future Cost (Cost Method 05) using Future Cost Update (R41052), which is found on the Inventory Price & Cost Updates menu (G4123).

Future Cost (05) is generally used to keep the cost that an item will have in the future. This Cost Method needs to be set up in Cost Revisions application (P4105) as per the Inventory Cost Level set for the item. In addition, the version of R41052 selected needs to match the Inventory Cost Level of the item being updated.

When the time comes to use that cost, R41052 can be run in order to replace the current value of any existing cost with the value from the Future Cost (05).

Note:  If Option #4 is set to 1, the F4105Future Cost (05) will be deleted.

Data Selection needs to include the cost method, along with desired selection criteria.

Updating Unit Cost at Receipts (P4312) and Voucher Match (P0411/P4314)

Certain programs within the Purchasing System update and/or create amounts for the first time for Cost Methods 01-08. Therefore, a unit cost can be updated or created regardless of what method is assigned to Purchasing Cost Method.

Cost Methods 01 (Last In), 02 (Weighted Average), 06 (Lot) and 08 (Purchasing - Base Cost No Adds) are updated by the P.O. Receipts (P4312) program. Cost Methods 02 (Weighted Average) and 08 (Purchasing - Base Cost No Adds) are also updated by the Voucher Match (P0411/P4314) program.

Explanation of Calculated Cost Methods

01 - Last In Cost

01 (Last In) Cost is updated by the Cost at P.O. Receipt (P4312), except for line types that don't interface with inventory (example: B, N, D, etc.). The 01 (Last In) Cost includes the Unit Cost plus Tax (there is no way to exclude tax from being included in this calculation) and can include Landed Cost if the Include In Unit Cost flag is set in the Landed Cost Revisions (P41291) program.

Note: For this cost to be updated properly, Landed Cost must be applied at time of receipt. If applying Landed Cost using Stand Alone Landed Cost (P43214), the cost will be updated to the Landed Cost value only. This is functioning as designed.

Freight Update (R4981) updates this cost for Inbound Shipments if processing option #4 on the Process tab is set to 1. However, Freight Update (R4981) must be run AFTER the item has been received into stock. If Freight Update is run while an item is in Receipt Routing, the cost will only reflect the cost of the item without including the freight costs.

01 (Last In) is not updated by Voucher Match (P0411/P4314).

02 - Weighted Average Cost

For additional information on this Costing Method, please refer to Weighted Average Cost (Doc ID 625564.1)

06 - Lot Cost

When 06 (Lot) cost is used, the P.O. Receipts (P4312) program will update the 06 cost if it is specified as the Sales/Inventory Costing Method. This will include tax and can include landed cost if the Include In Unit Cost option is set in the Landed Cost Revisions (P41291) program.

Note: For releases XE and 8.0, the Voucher Match (P0411/P4314) will not update this Cost unless the 43/VU UDC has Y in Description 02 field. In release 8.9 onward, this UDC has become obsolete and a new processing option has been added to the voucher match application. Processing option #11 on the Process tab of P4314, allows the option to update this cost at voucher match.

07 - Standard Cost

07 (Standard) Cost is not updated by any Distribution programs if already set up. However, inventory transactions (P4112, P4114 etc) will create a Standard Cost record in Item Cost Revisions for a standard cost item, if not setup.

Additionally, Cost Method 07 (Standard) cost may be updated by the Frozen Standard Cost Update (R30835) when Cost Components are used. Please refer to Detail Product Costing (Doc ID 626012.1) for more information.

08 - Purchasing - Base Cost No Adds

08 (Purchasing - Base Cost No Adds) Cost Method excludes any associated Landed Costs and Taxes. It is updated by P.O. Receipts (P4312) and Voucher Match (P0411/P4314) programs. The 08 cost record is only updated by these applications when the line type Inventory Interface is equal to 'Y' or 'C' for the order line.

Freight Update (R4981) updates this cost for Inbound Shipments if processing option #4 on the Process tab is set to 1. However, Freight Update (R4981) must be run AFTER the item has been received into stock. If Freight Update is run while an item is in Receipt Routing, the cost will only reflect the cost of the item without including the freight costs.

Item Cost Level Conversion (R41815)

To change the Cost Level, run the Item Cost Level Conversion (R41815) UBE.

Processing Options - Process tab

Processing Option 1 - Enter the Cost Level to update to.

Going from Cost Level 2 to 1

At Cost Level 2 costs are set for each Branch/Plant. When converting from level 2 to 1, specify which Branch/Plant's Costs to use in Processing Option 2.

Inventory Cost Level of 1 is not allowed with multi-currency, so the Cost Level Conversion (R41815) program will not allow the system to convert from Cost Level 2 (Item Branch Level) to Cost Level 1 (Item Level).

This is because Costs are not currency-sensitive. The Item Cost (F4105) file doesn't have a currency field. This is important to consider with multi-currency. The system, in Purchasing or Sales, will convert the cost defined in the Item Cost (F4105) file using the exchange rate in order to determine the foreign cost. The value of the cost is expressed in the base currency of the company that the item belongs to. Since the system needs to know the company where the item belongs, costs must be attached to an Item-Branch/Plant, so the system will know through the Branch/Plant what company the item belongs to and what currency to base it on. Please refer to Multi-Currency In Distribution (Doc ID 625458.1) for more information.

In a multi-currency environment, Cost Level 1 cannot be used. The reason this option is not allowed is because an item can be in multiple Branch/Plants, and Branch/Plants can belong to different companies with different currencies. The Item Cost Level Conversion (R41815) UBE will error if running in a multi-currency environment and attempting to change to Cost Level 1.

Going from Cost Level 3 to 2

At Cost Level 3, costs are set for each Location within each Branch/Plant. The Item Cost Level Conversion (R41815) will automatically use the costs associated with the primary location. All other locations' Sales/Inventory and Purchasing Costs must match the Sales/Inventory and Purchasing Costs of the primary location. If any location has one of these costs different than the primary location, the UBE will error ("Cost and/or Method Difference"). This is because when the Sales/Inventory Cost is changed, the value of the existing inventory is changed. The Item Cost Level Conversion (R41815) UBE does not write journal entries.

Example: Item is at Cost Level 2 going to Cost Level 1. Branch/Plant A has a Sales/Inventory Cost of $1.00 and Branch/Plant B has a Sales/Inventory Cost of $1.05.

To fix this, go into Cost Revisions (P4105) and change the Sales/Inventory Costs so that they are the same, then run the Item Cost Level Conversion (R41815) UBE.

Processing Option 2 - If updating to cost level '1', enter the branch to default the costs from. If updating from a cost level '3', leave the option blank. The costs will automatically default from the primary location.

Even though the Item Cost Level Conversion (R41815) will error if attempting to move up a level (3 to 2, 3 to 1, 2 to 1) when the Sales/Inventory Costs are different between branches or locations, it will run to completion where the Sales/Inventory Costs are identical but other costs are different (such as 01, 02, etc.).

Processing Option 3 - Enter a '1' to run in final mode and update files. If blank, no file updates will occur.

Processing Option 4 - Enter a '1' to print only exceptions on the edit report. A blank will print all affected cost records.

Note: When utilizing R41815 to update the inventory cost level only the cost methods defined in F4105 as the Inventory/Sales (F4105.CSIN = 1) and Purchasing (F4105.CSPO = 1) cost methods will be kept.  Records with other costing methods will be deleted.  Please see the Enhancement Bug 13004256 - R41815 DELETE COST METHODS.

Flexible Accounting on Item Cost Changes

When changing the current value of the Sales/Inventory Cost set for an Item, beside the creation of an IB record in the Item Ledger (F4111) table, journal entries are also created using AAIs 4134 and 4136 in order to account the changes.

Flexible Accounting can be set up for these AAIs, 4134 and 4136. For more information see Flexible Accounting for Distribution (Doc ID 756543.1).

First in First Out Inventory Costing (FIFO)

FIFO is not a costing method available in UDC 40/CM from either Branch/Plant Constants (P41001) or from Item Cost (P4105).

However it is possible to implement FIFO costing with Lot Controlled items using the following approach.

Setup the shippable item (end item) and component item (if FIFO is required at all levels) with:

1. Cost Ledger (P4105): Sales/Inventory Cost Method (CSMT) = 02 (weighted average)

   Note: Cost Method 06 (Lot) does not work with manufacturing accounting. Manufacturing accounting (R31802A) uses only cost methods 02, 07 (Standard) and 09 (Manufacturing Last Cost).

   Reference Knowledge document: E1: 31A: R31802A Manufacturing Accounting Setup and Use (Doc ID 625975.1)

2. Item Master (P4101): set Inventory Cost Level (CLEV) = 3 (Item/Branch/Location/Lot)
3. Item Branch (P41026): set Lot Process type (SRCE) = 1 (Lots Assigned using Date)

   This setup will enable FIFO type processing through the manufacturing component issue process (P31113) and end item completion (P31114) process.

Then, FIFO lot assignment can occur automatically at the time of Sales Order Entry (P4210) with the following steps:

1. Set the following P4210 processing options to select and hard commit a Lot at time of SO entry, using the item’s Commitment Method.
   1. Commitment tab, option #1 Activate Availability Checking = 1 (Activate, Notify, and backorder or cancel)
   2. Process tab, option #2 Subsystem Processing = 4 (Online Commitment R42997)
   3. Versions tab, option #13 Online Subsystem Commitment (R42997) = ZJDE0001
2. After saving the Sales Order, the Online Commitment (R42997) job is launched and assigns the lowest (First-In) lot number with the First In Lot Cost to the sales order line, assuming there is sufficient inventory in that lot to cover the order quantity.
3. If there was partial inventory available, the order line would split between the oldest lots with Inventory or a backordered line.
4. If there is a backordered quantity, that could be addressed by setting the Backorder Release Online Commitment processing option when inventory becomes available.
5. With this setup, the lowest lot number, with the First In Cost will always be assigned to the sales order line at the time Ship Confirm (P4205) is run.