Defining Average Costing
Subinventory Transfers
You use subinventory transfers to move material from one subinventory to another subinventory in the same inventory organization. An entry is recorded but the same cost is used. You can move material from:
Asset Subinventory to Asset Subinventory
• In average costing, there is no accounting impact for such a move because all subinventories in an inventory organization share the same valuation accounts.
Expense Subinventory to Expense Subinventory
• In average costing, there is no accounting impact for such a move.
Asset Subinventory to Expense Subinventory
• In average costing, the accounting impact for such a move credits valuation accounts and debits expense accounts, writing off inventory to expense.
Expense Subinventory to Asset Subinventory
• In average costing, the accounting impact for such a move credits expense accounts of the expense subinventory and debits asset accounts at the current average cost of the item. As a result, inventory valuation increases while the current average cost of the item remains unchanged.
Miscellaneous Issues and Receipts
You use miscellaneous transactions to:
• Issue material from a subinventory to a general ledger account or to an account alias.
• Receive material to a subinventory from a general ledger account or from an account alias.
• Transfer onhand quantities into Oracle Applications from legacy systems and establish average costs via the same transactions.
Caution The system allows you to enter a transaction unit cost when performing a miscellaneous issue.
• Under average costing, you should not allow the transaction unit cost to be entered because entering a cost that is significantly different from the current average cost can cause large swings in the unit cost of remaining onhand inventory.
• Because the form used for entering miscellaneous issues is a folder form, the Unit Cost field is easily hidden, thereby prohibiting its use. If you choose to allow entry of the unit cost, impose tight security on its use for the reason stated
• Under average costing, you can enter a transaction cost for miscellaneous issues and for miscellaneous receipts.
• A transaction occurring at a cost other than the current average cost results in a recalculation of the item’s unit cost.
• A user-entered cost is apportioned to cost elements, based on the elemental breakdown of the current average cost. If no current cost exists, the entire amount goes to the material element (applies to receipts only).
