Oracle Project Costing - Cost Rate concepts

Cost Rates are defined in different places in Project Accounting.  Let us see which one is relevant for distributing the cost in project costing?
One of the common errors that you can see while running the cost distribution program is 'Missing Cost Rates'. As usual I am going to put this in a question and answer format

 

Question:  For what purpose do we need cost rates in the system ?

 

Answer:  We need cost rates for the following ( only the following):

• Usage Cost
• Labor cost

Question: Where do we define the cost rates in project costing for usage cost?

 

Answer: The cost rates for usage cost is defined only in the following places:

• Expenditure Types - In the expenditure types we can define the cost rates. Each Expenditure type can have a cost rate defined. You can have different cost rates for different Operating Unit and for the same expenditure type. When you run the PRC: Distribute Usage and Miscellaneous Costs, the program will pick up the cost rate mentioned at the expenditure type level, for the cost transaction. 
• Non-Labor Resource - If you need a rate at a resource level and want the system not to pick the cost rate mentioned in the expenditure types then you can set the cost rate overrides for the non-labor resource in the Non-Labor Resource setup screen.

 

Question: I have seen non-labor rates mentioned in the rate schedule, is it not also used for calculating the usage cost?

 

Answer: No, the rate schedule for non-labor is not used for cost purpose for usage cost calculation. It is used only for billing purpose.

 

Question:  Where do we define the cost rates in project costing for Labor cost?

 

Answer: Labor cost rates are picked from the rate schedules. It could be the rate schedule mentioned at the employee level or at the job level.

 

Question: When there are multiple rate schedule defined for labor, how does the system understand, from which rate schedule to pick the rate?

 

Answer: Under the Organization Labor Costing Rules ( Setup>> Costing>> Labor>> Organization Labor Costing Rules ), we mention which Cost Rate schedule should the system pick the rates. We can have different rate schedules assigned for transactions with different Expenditure Organization.

 

Question: Is rate schedule the only place where the rates are picked from for labor cost?

 

Answer: If we need a different rate for an employee ( relevant, if the rate schedule that is configured to pick up is a job rate schedule), then we can define labor  costing overrides ( Setup >> Costing>> Labor >>  Labor Costing Override) at the employee level. This will override the rates mentioned in the rate schedule.