To set up average costing:Follow the steps in this section to set up perpetual average costing.
Steps previously covered in the Setup Prerequisites or the Setup Checklist are mentioned here only if there is setup information that is specific to average costing.
The following steps are required when setting up average costing. Additional steps follow in the next section for those also using Bills of Material (BOM) alone or WIP and BOM together.
Overview of Setting Up Cost Management
Define organization parameters. See: Organization Parameters Window, Oracle Inventory User's Guide.
Costing Method is set to Average
Transfer Detail to GL is appropriately set
(Optional) Default Material Subelement account
Define material overhead defaults.
Define item and item costs, and establish item cost controls. See: Overview of Item Setup and Control, Oracle Inventory User's Guide.
Launch transaction managers.
To set up average costing:Set the Control Level for your items to Organization. Organizations cannot share average cost.
Define, at minimum, one cost type to hold the average rates or amounts for material overhead rates. See: Defining Cost Types.
Inventory valuation and transaction costing in an average cost organization involve two cost types: Seeded: Average and User-Defined: Average Rates.
Assign the cost type defined in the last step as the Average Rates Cost Type 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.
Set the TP: INV:Transaction Processing Mode profile option in Oracle Inventory to On-line processing.
When using average costing, you must properly sequence transactions so that the application uses the correct costs to value transactions and calculate unit costs. Proper transaction sequencing can only be ensured if all transaction processing occurs on line. See: Inventory Profile Options, Oracle Inventory User's Guide.