Product Cost Planning-Material Ledger

8/4/2019 Product Cost Planning-Material Ledger

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Product Costing


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Product Costing Overv iew Acquire an overall perspective of Product Cost

Planning within R/3. Observe a product life cycle from the perspective of

Product Cost Planning. Acquire an overall perspective of product cost object

controlling within R/3. Understand the period oriented product cost

controlling.

Obtain an understanding of the functions in the

material ledger. Analysis of product costs.


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Material Ledger Ov erview

Obtain an understanding of the actual costingfunction in the material ledger.

Know how to revaluate inventories of semi finished

products, and finished products with calculated

actual costs or accrue variances.Analysis of actual product costs.


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SAP Modules - Overview

Sales &Distribution

SD

MM

PP

QM

PM

HR

FI

CO

AM

PS

OC

IS

MaterialsMgmt.

ProductPlanning

QualityMgmt.

Plant Maint.

HumanResources

FinancialAccounting

Controlling

Fixed AssetMgmt.

ProjectSystem

Office &Comm.

IndustrySolutions

SAP R/3


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Profitability Analysis

Profitability Analysis

ProfitCenterAccounting

Human

Resources

Financial

Accounting

FI

S&D

Sales andMaterials

Management

Materials

Management

COPA

COOM

EC -PCA

Distribution

CO C omponents

Cost Element Accounting

COCEL

HR MM SD

Financial

Accounting

Cost Element Accounting

Cost centers Internalorders

Profitabilitysegment

Asset RevenuesExpense

Activitytypes

Internal Orders

Company Code (9100 A Ltd)

Operating concern (9100 A Ltd)

Overhead Cost Controlling Product CostControlling

StandardCost Estimate

CO Production

Order

Controlling area (9100 A Ltd)


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Why utilize Product Costing?

Product Costing is the backbone of a strong standard cost

system. This is the process by which production activities

are recorded at standard values and variances from actual

costs are isolated.

For planning purposes, the corporation wants a preliminarytarget of what they think it will cost to produce X units of a

product.

To set attainable standards by which efficiencies within the

production operations can be measured.

To provide feedback to management on the actual

performance of the production process in relation to those

targets. Identified variances may indicate inefficiencies that

have to be investigated. Corrective action may have to be

taken.


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Product Costing

Improve and Control

Operations

Disposition &

Contain Product

Prepare

Production

Plan & Commit

Resources

Make

Product

Manage Process and

Product Documentation

OPTIMIZED

& FIRMSCHEDULE

Process

ends with

initial

containment

(packout)

Optimized Production Operations


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Costing Methodology

Material MasterMaterial Master

Price ControlPrice Control

Standard Price(S-Price)

- Constant- Recommended for all material

types

Moving average price(V- Price)

- Adjusted with every receipt- If at all, only to be used for raw

materials and materials procuredexternally


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Costing Methodology

The method of valuing inventory of a

material is determined whenextending/creating the material master.

Price that changes in consequence of usageand entry of invoices. Calculated bydividing the value of material by the quantityin stock. Automatically recalculated basedon activity.

Constant price without considering usage orinvoices. Material stock valued at the sameprice over an extended period. Pricevariances are posted to price differenceaccounts; not affecting the standard price.


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Posting Example: Moving average price 1

Stock GR/IR Account

Vendor

Procedure Stock Stock value V price

Begin. inventory: 100 PC at 2.00 100 200.- 2.00

Goods receipt: 100 PC at 3.00 200 500.- 2.50

Invoice receipt: 100 PC at 4.00 200 600.- 3.00

Goods issue: 150 PC at 3.00 50 150.- 3.00

12

3

300,- 2

400,-

300,-

4

31 200,-

300,-

100,-

2

4

3

450,-

Consumption

450,-4

If the invoice receipt isfor 100 units, the stock

coverageis 200 units:all differences stock

3

Stock Coverage

ok

Stock


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With a delayed invoice receiptOf 100 units:

a shortage of 50 units price differences despite MAP


Stock

Price difference

GR/IR account

Vendor

Procedure Stock Stock Value V Price

Begin. inventory: 100 200.- 2.00


Goods issue: 150 PC at 2.50 50 125.- 2.50


12

3

1 200.-

300.-

50.-

2

300.- 2

50.-

4

4400.-

300.-

4

Consumption

375.-3

3 375.-

4

4

Stock Shortage


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Procedure Stock Stock Value V Price

Begin. inventory: 100 200.- 2.00



Goods issue: 200 PC at 2.20 100 220.- 2.20



With multiple delayedinvoice receipts:Danger of Incorrect Valuation!

Even though allreceipts between2.- and 3.- were

valuated!

80.-in stock

60.-in stock

Stock Coverage


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Characteristics of Price Control V

+ The stock value is adjusted each time goods are received+ Real-time price fluctations are posted to stock

+ Price difference postings only take place in exceptional cases

- Price fluctuations cannot be adjusted to the finished products ofhigher levels (S price)

- Only recommended for raw materials or goods procured externally(real-time price for goods receipt known)

- False entries with severe consequences (compounded errors)- Danger of incorrect valuations with delayed invoice receipt

Moving average price


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Posting Example: Standard Price

Stock

Price difference

GR/IR account

Vendor

Procedure Stock Stock Value Standard Price

Initial situation: 100 200.- 2.00

Goods receipt: 100 at 2.40 200 400.- 2.00

Invoice receipt: 100 at 2.20200 400.- 2.00

1

2

3

1 200.-

200.-2240.- 2

2 40.-

3

3

320.-220.-

240.-


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Characteristics of Price Control S

+ All stock postings take place at the standard price

+ Prices remain constant throughout at least one period

+ Price fluctuations do not debit/credit the cost objects (e.g. orders) consistant controlling with the standard price as a bench mark

+ Calculation of the standard prices with cost component splits

+Recommended for all material types

- Price differences cannot be subsequently adjusted to the endinginventories or the consumed products (sales, production

withdrawals)

Standard Price


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Period-End Closing: Valuation Problems

Valuation Period

Distribution ofPrice Differences?

Actual Prices?

Finished Products

Ending Inventory:Raw Materials

Raw Materials II

Raw Materials I


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Costing Methodology

Valuation Method by Material:

Finished Goods Standard w/ ML

Intermediates Standard w/ ML

Raw Material Moving Average Actual

Packaging Moving Average Actual


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Organizational unit dividing up a company for thepurpose of valuating stocks in a standardized andconsistent manner.

Level at which material value is managed.

The valuation area may is defined:- by plant

Valuation Area


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Product Cost Flow

Plant Cost

View Sales & Mktg. ViewMfg. Cost Center

(Activity Types)

Utilities

Salaries

Supplies

Maintenance

DepreciationTraining

Direct

Conversion

Insur. & Taxes

Laboratory/QC

Waste Treatment

Shops & Stores

General Services

Indirect

Conversion

Total Product Cost

Mach. Hrs.

or

lbs.

Produced

Lab tests

Setup Hrs.

P A(Profitability Analysis)

Raw Matl 1 & 2 CostsPkg. Matl Costs

Costs to Produce

Product testing costs

Change Over costs(setup costs)

Routing

ProductUnit Cost

Cost of Goods Mfg.

Raw Matl 1 CostsRaw Matl 2 Costs

Pkg. Matl Costs

Routing

Mach. Hr. Costs

Lab Tests Costs

Mach. Setup Costs

Process Order

Raw Matl 1

Raw Matl 2

Pkg Matl

BOM

(Cost Component View) (SAP Value Fields)

Three Views Available:

1. Cost Component

2. Cost Element

3. Cost Itemization

Cost of Goods Sold

Fixed & Variable Cost Fixed & Variable Cost


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Product Costing A L td.


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Product Cost Planning: Overv iewFunctions of Product Cost Planning:

Product Cost Planning with reference to cost object Product cost planning with quantity structure with structures

provided by PP (Production Planning) module

Determination of the cost of goods manufactured

Product Cost Planning supplies information for othermodules: Update of prices in a material master

Update of the cost of good sold with the detailed structure of

cost component (grouped cost elements) Standard (material) cost estimate as the base for calculation

of production variances


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Product Costing: OverviewStandard Cost Estimate

(once a year)

Prepare Product Cost

Collector

Production Costs

Receive Finished Stocks

Month End Closing

Post Materials Costs

Debit Secondary cost

Credit Production Output

WIP Calculation

Variance Calculation

Settlement

Preliminary Costing

Create Cost Object

Release cost estimate with quantity structure

Mark cost estimate with quantity structure

Create Cost estimate with quantity structure


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What is a Product Cost Estimate?

Cost Estimate With Quantity StructureUtilizes a Bill of Material (BOM) and routing, I.e. Master Recipe forcosting purposes. Integrated with Production Planning (PP).

Additive

You use additive costing to enable you to manually add costs that cannotbe calculated by the system to a material cost estimate.

A tool for planning costs and establishing prices for

materials. It is used to calculate the cost of goods sold foreach product unit.

Cost Estimate WITHOUT Quantity Structure

Utilizes a material master data and activity types entered manually into cost

estimate.


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Product Cost Planning: Overv iew

Quantitystructure

Valuation

Cost estimateCost estimatewith quantitywith quantitystructurestructure

Cost estimateCost estimatewithout qtywithout qtystructurestructure

PricePrice

updateupdate

CostingCosting

variantvariant

Report

Material costs

Production costs

Overhead


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Product Cost Planning: Overv iew

Start of

Year 2

Ad hocNew

product

Start of

Year 1

Technical

change

SimulationCosting

Standard CostStandard CostEstimateEstimate

CurrentCurrent

Cost Est.Cost Est.ModifiedModified

Std Cost Est.Std Cost Est.

Inventory CostInventory Cost

EstimateEstimate

Standard CostStandard CostEstimateEstimate

Inventory CostInventory Cost

EstimateEstimate

TimeTime


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Product Costing: Overview

Standard Cost Estimate

(once a year)

Release cost estimate with quantity structure

Mark cost estimate with quantity structure

Create Cost estimate with quantitystructure


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Material cost e stimates with q. s .

Us

ed

for:

Used

for:

Standard CostStandard Cost

EstimateEstimate

Stock ValuationStock Valuation

Profit & LossProfit & Loss

StatementStatement

BOM RoutingRouting

Quantity StructureQuantity Structure

Costing ResultsCosting Results

Items

M MaterialE ActivityE ActivityG Overhead

CostElements

400000 Raw materials943201 Production hours943901 UT: Cooling Var.

CostingCosting

Values

600 000 SAR610 000 SAR612 000 SAR SAR

Purchase price

Activity Type PriceActivity Type Price

Overhead

ValuationValuation


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Material cost e stimates with q. s .

InternalActivity

OverheadsMaterial ExternalActivity

InternalActivity

Overheads-ExternalActivity

InternalActivity

OverheadsMaterialExternalActivity

InternalActivity

OverheadsMaterial ExternalActivity

- -Material -

Product WProduct W

Product ZProduct Z

Product SProduct S

WW

Z1Z1 Z 2Z 2

S1S1 S2S2 S3S3

Costing structure - TotalCosting structure - Total

Costing structure Upper levelCosting structure Upper level

Costing structure Lower levelCosting structure Lower level




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Costing Varia nt

ValuationValuation

VariantVariantQuantity StructureQuantity Structure

DeterminationDetermination

Costing Variant

PricesPricesQuantitiesQuantities

Cost of GoodsCost of Goods

ManufacturedManufactured


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Costing Varia nt

COSTINGCOSTINGVARIANTVARIANT

Strategy forStrategy for

transfer oftransfer ofthe existingthe existing

cost estimatescost estimates

Determination of :Determination of :

- Bills of MaterialBills of Material- RoutingRouting

Defaulted dates forDefaulted dates for

costingcosting

Costing SheetCosting Sheet

Determination of:Determination of:- prices updateprices update

in material masterin material master

Valuation control for:Valuation control for:

- materialsmaterials

- internal activities- internal activities- external activities- external activities

- subcontracting- subcontracting

- overheads via- overheads via

costing sheetcosting sheet


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Quantity Structure fo r P roduct CostPlanning


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Quantity S tructure for Pr oduct CostPla nning Material master data

Accounting views Costing views

MRP views

BOM - Bill of Material BOM type & identification

BOM header

Material data

Routing - tasks list Routing type & identification

Routing header

Operation data

Master Recipe

Recipe header Operations

Materials list

Work Centers / Resources Basic data

Costing

Production Version Validity Period

Production line


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Quantity S tructure: Mate ria l Ma sterDataMaterial Master Data:

Material Master Data is an object in SAP R/3 that

consists all relevant data for raw materials, semi-

finished and finished products divided into views.

Views:

Purchasing

Storage

Sales

Accounting

Costing MRP

-Valuation class

-Price control-Price determination

-Price-Stock-Value of the stock

-

-Plan price

-Cost estimate results-Periodic unit price-


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Material cost e stimates - quantitystruc.Product cost planning with quantity structure:

Materials Cost Centers / Activity Types

Primary Costs

Quantity * material price =cost of goods manufactured

due to the consumption of

raw materials.

Quantity * activity price =cost of goods manufactured

due to the internal activities

during the production

process.

Cost of goods manufactureddue to the manually entered

cost elements or

mathematical operation.

USE:

- for the products (materials) in the system

without PP module

- in case of external MRP system

- to update standard price


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Quantity Structure: Production Version

Product

Bill of Material Usage Alternative

Routing Group Group counter

Production Version ID, Production line, Validity period.

Product Cost

Estimate

Quantity structure determination for cost estimate

Validity period definition


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Costing vs. Qu antity S tructure

Consumables

Maintenance

Labor

Depreciation

RAW MATERIALS

Electricity SERVICECOST CENTER

BILLS

OFMATERIAL

PRODUCTIONCOST

CENTER

Utilities OverheadACTIVITY TYPES

WORK CENTER /RESOURCE

ROUTING

PRODUCTCOST

ESTIMATE


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Costing Structure

-

-

Costing Structure for Product Cost Planning

Master Data

+

+

Materials

Activity Types

+ Cost Elements

+ Cost Component Structure

+ Cost Centers


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Costing Structure fo r P roduct C ostPla nning Material master data

Accounting views Costing views

Cost Centers

Validity period Category

Functional area

Activity Types Validity period

Activity unit

Allocation cost element

Cost Elements

Validity period Category


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Costing Structure

Cost Center

CostElements

A cost centers is an organizational unit within a controlling

area that represents a clearly delimited area ofresponsibility where costs are monitored against a plan.

They represent a defined location of cost incurrence.

Items in a chart of accounts that are relevant to cost, are

referred to as cost elements. They are used for entering allcosts within the entire cost accounting system.

Secondary costs elements are used exclusively in CO toidentify internal cost flows such as assessments or

settlements. They do not have corresponding general

ledger accounts in FI and are defined in CO only.


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Pla nning Overv iew

Profitability Segment

CompanyGeneral

Service

C .Center

ExecutiveManagement

Admin.C. Center

Maintenance

Prod.Support

ProductionC. Center

ProductCost

EstimateCOGS

Projects


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Costing Structure

Activity Type

Activity types define the type of activity that can be provided

by a cost center (work activity, production hours, and so on).


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Cost center

h

Cost center:R&T

Planned costs:

430000 (salaries) 44,000

440000 (miscl.) 10,000473120 (telephone) 30,000

Plan activity qty: 100 h

Planned costs: 84,000

CalculatedPrice: 840

Activity Price Calculation:Apportionment of cost center coststo activity types according toparticular criteria

Activity Pr ice Calculatio n

1PDH01

1

2100


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Costing Structure

Steam service

1203004

943954 UT: Steam fix

Product22000057 - TEG

Product

22000058 - LLDPE

1203000

..

..

..

Distribution

Activ

ity

Allo

catio

n

9439

54

via

Routin

g

Cost SplittingPlanning1203000

Utilities (Common)

ProductCost Estimate

Activity Types Used:1UTSTF Steam - fixed

Original

CE

1UTSTF Steam - fixed

1UTSTV Steam var.

2

3

5

Primary costs planning on allCost Centers.

1Planned Price Calculation

Prices for 1UTSTF arecalculated.

4

1. Assign CC 1203004 to SplittingStructure U4 Steam service

2. Perform cost splitting


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Cost Component Structure

Used

for:

Used

for:

Standard CostStandard Cost

EstimateEstimate

Stock ValuationStock Valuation

Profit & LossProfit & Loss

StatementStatement

Costing ResultsCosting Results

ID

101110111

CostComponent

Raw MaterialsCatalystChemicals

CostingCosting

ValuesFixed & Variable

600 000 SAR0 SAR0 SAR SAR

Purchase price

Activity Type PriceActivity Type Price

Overhead

ValuationValuation

x QuantityQuantity


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Cost Component Structure

Raw Materials

Utilities

Personnel Exp.

Depreciation

Raw Materials

VariableProduction

Primary cost elements

Product Cost Planning

Structure ofmanufacturingcosts

Cost Centers

Utilities

Personnel Exp.

Depreciation

Structure of primarycosts

CO-PC

CO-OM

Raw Materials

InternalActivityAllocation

Structure ofprimarycosts

FixProduction

Z9-Primary

ZZProcess view


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(once a year)

Release cost estimate with quantitystructure

Mark cost estimate with quantitystructure

Create Cost estimate with quantity structure


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Pric e update Standard price Only one validated standard price per product per period,

The price represents most desired (or most likely) costs

Only one price per product over the year (recommended)

Determined during costing runs - standard cost estimate is

populated in appropriate valuation views Includes variable and fix cost elements

Base for variances calculation; which is then posted to FI and CO-

PA

Used for stock valuation of finished goods and semi-finished

products

Stored in material master data (accounting view) in Legal, Group

and Profit Center valuation views after releasing the cost estimate


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Pric e update Future price Future standard price

Stored in material master data (accounting & costing view) in Legal,

Group and Profit Center valuation views after marking the cost

estimate.

Previous price Replaced standard price by current one due to releasing the cost

estimate

Stored in material master data (accounting & costing view).


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Pr ice updateMaterial Master DataMaterial Master Data

Standard Price

Future Current Previous

1010

Future Current PreviousMarking StandardMarking Standard

Cost EstimateCost Estimate 1015

Future Current Previous

101515

Stock RevaluationStock Revaluation

Releasing StandardReleasing Standard

Cost EstimateCost Estimate

Analysis of Costing Results


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Pric e update procedures

MM & CO postingsMM & CO postings- Various analysis available- Various analysis available

Product CostingProduct Costing- SPC1 SPC3 cost estimates, verification, save- SPC1 SPC3 cost estimates, verification, save

- Organizational measures: marking and releasing- Organizational measures: marking and releasing

- Cost estimate marking- Cost estimate marking- Cost estimate release- Cost estimate release

Master & control data definitionMaster & control data definition

- Material Master Data- Material Master Data- CO Production Order incl. Unit Costing- CO Production Order incl. Unit Costing

Period-end closing tasksPeriod-end closing tasks- Work-in-process postingsWork-in-process postings- Inventory deviations postingsInventory deviations postings- Variances processing and analysisVariances processing and analysis

- Settlement processing- Settlement processing


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Costing run Costing run

You can use the costing run to process mass data. It enables youto cost, mark, and release more than one material at the same

time.

Every processing step involved in costing with quantity structure is

performed by the costing run, from the same screen.

Costing run consists of: General data (organizational units, selection criteria)

Selected materials

Exploded BOMs Costing run results

Price update results


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Costing run

Marking and releasing costing run results(price update)

Execute costing run

Selectionof

all materials

Partial selection

of materials

BOM explosion

Costing Run CreationCosting Run Creation

Company CodeCosting variantDates

CostingRun

$

$ $

$

$

$

$

$ $

Materials


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Prepare Cost Object

Production Costs

Receive Finished Stocks

Month End Closing

Post Materials Costs

Debit Secondary cost

Credit Production Output

WIP Calculation

Variance Calculation

Settlement

Preliminary costing

Create cost object


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Cost Ob ject C ontrollin g: Overv iew

Functions of Cost Object Controlling:

Supporting make-or-buy decisions

Determining price floors

Performing complex cost analysis Determining inventory values


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Cost Object Controlling Scenarios:

Product Cost by Period Product Cost by Period is used for recurring periodic cost

control of products that are manufactured in the same wayover a longer period of time.

Product Cost by Order Product Cost by Order is mainly used to control the costs of

individual production lots.


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Cost Ob ject C ontrollin g: Overv iew Product Cost by Orderor by Period

Full settlement (by Order)

Periodic settlement ( by Period)

Actual costs =

Work in process

Actual costs -

Goods receipts =

Work in process

Actual costs -

Goods receipts =

Variances

Releasing anorder

Partial delivery Delivered /Technicallycompleted

Actual costs -

Goods receipts =

Work in process +

Variances

Period 1 Period 2 Period 3

Actual costs -

Goods receipts =

Work in process +

Variances

Actual costs -

Goods receipts =

Work in process +

Variances

TimeTime

TimeTime


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Product Cost by Order

Type of settlementrule

Work-in-Process

Variances

Settlement

Hierarchy ofCost Objects

FULL PERIODIC

WIP calculated on baseof actual costs

Variance = Actual Costs -

Goods Receipts


Goods Receipts - WIP

Should be periodically

Impossible Possible

FunkcjeFunctions Product Cost by Period

WIP calculated on baseof target costs

Must be periodically


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Cost Ob ject C ontrollin g: Overv iewFunctions of Product Costs by Period:

Create product cost collectors.

Create a preliminary cost estimate for product cost

collectors.

Calculate and analyze target costs and actual costs for

product cost collectors.

Calculate or update the work-in-process inventory and

the finished goods inventory.

Calculate and analyze variances for each period.

Transfer data to: Financial Accounting, Profitability

Analysis, Profit Center Accounting and Material

Ledger.


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Cost Object C ontroll ing: Overv iew

Production postings (backflush)Production postings (backflush)

- Various analysis available- Various analysis available

Product CostingProduct Costing

- SPC1 SPC3 costing run, verification, save- SPC1 SPC3 costing run, verification, save- Organizational measures: marking and releasing- Organizational measures: marking and releasing

- Cost estimate marking- Cost estimate marking

- Cost estimate release- Cost estimate release


- Material Master Data, BOMs and Routings- Material Master Data, BOMs and Routings- Product Cost Collectors incl. PREM costing- Product Cost Collectors incl. PREM costing

Period-end closing tasksPeriod-end closing tasks

- Inventory deviations postings- Inventory deviations postings- Variances processing and analysis- Variances processing and analysis



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Actual Ove rview

Profitability Segment

CompanyGeneral

CommonServices

ExecutiveManagement

SBU /Sales

C. Center

R&TC. Center

Maintenance

ProductionC. Center

ProductCost

CollectorVariances

Projects

Overhead

Variances


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Prepare Cost Object

Preliminary costing

CreateProduct Cost Collector


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Objects i n Cost Object Controllin g Product cost collectors in the following production

environments:

In order-related production (that is, when you are using

production orders) when you want to analyze the costs by

period rather than by lot

In process manufacturing (that is, when you are using process

orders) when you want to analyze the costs by period rather

than by lot

In repetitive manufacturing you always use product cost

collectors as the cost objects.


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Objects i n Cost Object Controllin g

Product

Bill of Material Usage Alternative

Routing Group Group counter

Production Version ID, Production line, Validity period.

Product Cost

Collector

Product Cost Collector


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Objects i n Cost Object Controllin g

MasterRecipe

ProductionVersion

PROCESS ORDER 2

OperationList/Routing

MaterialsList/BOM

ResourceRequirements

Operation 10

Operation 20

Phase AMaterial Y

Material X

Product Cost

Collector

PROCESS ORDER 1Product

Preliminary costing


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Preliminary costing








- Material Master Data, BOMs and Routings- Material Master Data, BOMs and Routings- Product Cost Collectors with Preliminary costing (PREM)- Product Cost Collectors with Preliminary costing (PREM)




Preliminary costing


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Preliminary costing

Costing variant PREM - preliminary costing:

Created during product cost collector creation Created per each production version

Provides split and balanced information of cost items, quantitiesand prices that are planned to occur during production of a product

Variable costs coming from BOM and routing

Result used mainly for actual activities postings May be used for further analysis up to cost management

requirements

May be changed all the time in the way of changing (updating)Product Cost Collector; i.e. different quantity structures allowed

over the period Changes in BOMs take effect immediately, i.e. cost estimate updatenot required

Changes in routings take effect after cost estimate update

Preliminary costing


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Preliminary costing

Product Cost CollectorItem Plan Actual

Materials 4.000

Internal activities 2.500

Overheads 1.500

EDC 0.500

Ethylene 2.000

Caustic Soda 1.500

Total 8.000

Simultaneous costing actual costs


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S u ta eous cost g actua costs








- Material Master Data, BOMs and Routings- Material Master Data, BOMs and Routings- Product Cost Collectors with Preliminary costing (PREM)- Product Cost Collectors with Preliminary costing (PREM)




Simultaneous costing actual costs


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g


Materials 4,000 4,600

Internal activities 2.500 2.800

Overheads 1.500

EDC 0.500 0.600

Ethylene 2.000 2.200

Caustic Soda 1.500 1.800

Total 8.000 7.400

Confirm orderoperation

Record consumption &output

Record process data &batch characteristics

Final Confirmation &Back Flush

Production output &Back Flush

Deal with Back Flush& transaction errors

Adjust theoretical yield &consumption to actual

Conf irmati on Types & Functi ons - P rocess


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Orders

Individual confirmation Collective confirmation Milestone confirmation Progress confirmation Order confirmation Confirmation with reference

Individual order confirmation Collective confirmation Milestone confirmation

Confirmation types

Partial confirmation Final confirmation

Partial confirmation Final confirmation

Confirmation statusConfirmation status

Order headerOrder header

OperationsOperations

ComponentsComponents

Costs MaterialLabor...

Costs MaterialMachineUtility

20

50100

Confirm with goods movement Defaults for remaining time Check operation sequence Check delivery tolerances

Plant data collection interface Backflushing Reduce capacity requirements Determine actual costs

Output goods receipt

Determine actual costs

Confirmation functions

Backflush components

BackflushutilitiesReduce capacity requirements

Back Flushing (R epetitive Orders )


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Warehouse

Order quantity = 10 PC

Required qty = 20 PC

Operation 30

Component XY

Back Flushing

Operation 30Yield = 5 PC

10 PC of Component XYto be back flushed

Goods issue

Component XY = 10 PC

Fi nal Conf irmat ion & Techni cal Com plet ion


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Final confirmation

Settlement can be carried out

Technical completion

Production orderstatus:Delivered

Order status:

Delivered

Order header



PRTsPRTs

CostsCosts 2050100

Production orderstatus:

Technicallycompleted

Order status:

Technicallycompleted

Order header



PRTsPRTs

CostsCosts 2050100

Faile d Tr ansactions and Corrections


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x Incorrect or missing data for components and activities

prevents processing of the back flush transactionx These errors must be corrected before postings can be

made for materials and activitiesx When the errors have been eliminated, the theoretical yield

and consumption may be adjusted and the results recorded

Summary


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Non-feedstock raw materials are staged daily to the

production area for planned manufacture As each production quantity is confirmed, a back flush of

the proportional quantities of raw materials and utilities

consumed is recorded

The results from the output receipts, plus material &

resource consumptions, update the stock records and

provide valuation of production according to standard cost

approach.

List o f Transactions


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Simultaneous costing transactions:

MF60 Stage Materials

MFBF Back Flushes

MF41 Month-End Corrections

COR6 Confirm Orders & Back Flush COR2 Reverse Confirmations

Actual costs


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CO Production Order

Step 6 Goods Receipt from Order into Warehouse- Actual Postings

Status PARTIALLY DELIVERED

MaterialOrder

430004 + 5.000,-943201 + 7.500,-

100 * 50 = 5.000,-

quantity * price = value of the goods receipts

from order

Production

Output

462001

Finished

Products119430

5.000,-

5.000,-

400000 + 1.100,-

462001 - 5.000,-

FI

CO

Actual costs - Su mmary


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The results from the output receipts, plus material &

resource consumptions, update the stock records andprovide valuation of production according to standard cost

approach.



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Month End Closing

Settlement

Variance

Calculation

WIPCalculation

Period and year-end closing


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Period-end closing:

Product Cost Collectors are only included in the period-end closing

process if the status of the order is not one of the following: LKD(Locked), CLSD (Closed), DLFL (Deletion flag), DLT (Deleted).

If you dont enter a production process in the individual processing

mode of the period-end closing transaction, but only enter the data

for the material and plant, this period-end closing transaction will be

performed for all production processes for that material.

Functions available in period-end closing: overhead calculation,

WIP calculation, variance calculation, settlement.



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Product Cost by Order

Type of settlementrule

Work-in-Process

Variances

Settlement

Hierarchy ofCost Objects

FULL PERIODIC

WIP calculated on baseof actual costs


Goods Receipts


Goods Receipts - WIP

Should be periodically

Impossible Possible

FunkcjeFunctions Product Cost by Period

WIP calculated on baseof target costs

Must be periodically



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CO Production Order

Step 7 Work-in-Process Calculation- Period-end closing

Status RESULTS ANALYSIS CARRIED OUT

MaterialOrder

430004 + 5.000,-943201 + 7.500,-400000 + 1.100,-

462001 - 5.000,-

WIP Report:

Work-in-Process

13.600 - 5.000 = 8.600



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CO Production Order

Step 8 Settlementof - Period-end closing

Status RESULTS ANALYSIS CARRIED OUT

MaterialOrder

430004 + 5.000,-943201 + 7.500,-400000 + 1.100,-

462001 - 5.000,-

Work In

Progress

(WIP)

462201

Work In

Progress

(WIP)119460

8.600,-

FI

8.600,-

CO

WIP is being updated on theorder as statistical value forinformation purposes.



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CO Production Order new period

Step 9 Repetition of the steps from 3 to 7- Actual Postings

Status PARTIALLY DELIVERED or DELIVERED

Order

As a result of the actualpostings in the new periodthere is a new balance on theorder.

Material

430004 + 5.000,-943201 + 7.500,-400000 + 1.100,-

462001 - 5.000,-

400000 + 5.000,-

462001 - 7.000,-



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CO Production Order period 2

Step 10 Work-in-Process Calculation (variant 1)- Period-end closing

Status PARTIALLY DELIVERED

WIP Report (cumulated):Work-in-Process

18.600 - 12.000 = 6.600

Work-in-Process

in previous period

13.600 - 5.000 = 8.600Cumulative: 15.200

OrderMaterial

430004 + 5.000,-943201 + 7.500,-400000 + 1.100,-

462001 - 5.000,-

400000 + 5.000,-

462001 - 7.000,-



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CO Production Order Period 2

Step 11 Settlement (variant 1)- Period-end closing

Status RESULTS ANALYSIS CARRIED

Material

OrderWork In

Progress

(WIP)119460

Work In

Progress

(WIP)

462201

FI

6.600,-

6.600,-

CO

430004 + 5.000,-943201 + 7.500,-400000 + 1.100,-

462001 - 5.000,-

400000 + 5.000,-

462001 - 7.000,-

As WIP is reported ascumulative value.



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CO Production Order period 2

Step 12 Calculation of Variances and Settlement (variant 2)- Period-end closing

Status TECHNICALLY COMPLETEDPrice

Difference -

Production

Difference

464018

Production

Output462001

FI

6.600,-

6.600,-

Material

Order CO

430004 + 5.000,-943201 + 7.500,-400000 + 1.100,-

462001 - 5.000,-

400000 + 5.000,-

462001 - 7.000,-

Negative variance:

Actuals > Plan.

As a result of a posting thebalance of the order wasposted to productiondifference account andcumulated WIP wasreversed.

WIP462201 WIP119460

8.600 8.600



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Variance: Integration

MaterialsMaterials

LabourLabourDepreciationDepreciation

Goods ReceiptGoods ReceiptVarianceVariance

800800

1.2001.200400400

2.4002.400

- 2.000- 2.000

400400

MaterialMaterial CATALYSTCATALYST

Quantity prod.:Quantity prod.: 1010 pcspcs

Actual CostsActual Costs

Product Cost CollectorProduct Cost Collector

Material MasterMaterial Master

Accounting ViewAccounting View

Standard PriceStandard Price200200

SettlementSettlement

Target Cost Ver. 0

Price 150Quantity 50Structure 200

ProfitabilityAnalysis

Variance 400

CO-CO-PAPA

Accounting

Stock Price difference

2.000 400

FIFI

StockMMMM

CO-CO-PCPC

MaterialsMaterials

600600LabourLabour

1.1001.100DepreciationDepreciation

300300


10pcs * 200



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VarianceCategory

PA Assignmentlines

Value FieldCost Element Group

+

+

+



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CO-CO-PCPC

Material: MEGQuantity: 10 pieces

Actual costs 2.400,-

Goods receipt -2.000,-

Variances/WIP 400,-

Actual costs

CO-PC

Product cost collector

Period accounting

Revenue

Sales deductions

Overheads plus Variances

+/- Change in Stock

= Result of a periodResult of a period

Company Code

PrCtr 1PrCtr 1

Profit CenterFI

EC-PCA

Cost of goods sold

Revenue

Sales deductions

Manufacturing costs by

standard price

(Contribution margin I)

Variances


Company Code Profitability

SegmentCO-PA

SettlementFI



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Materials 4,000 4,600

Internal activities 2.500 2.800

Overheads 1.500 1.600

EDC 0.500 0.600

Ethylene 2.000 2.200

Caustic Soda 1.500 1.800

Total 8.000 9.000

Revaluation

Process costs

Overheads

Periodic Costs

% %



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Work-in-Process

Overheads

Process costs

Revaluation

Periodiccosts

Calculationsand

analysis

PostingsFI/CO

Settlement

Scrap

Variances

Period-end closingPeriod-end closing



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CO-CO-PCPC

Material: MEGQuantity: 10 pieces

Actual costs 2.400,-

Goods receipt -2.000,-

Variances/WIP 400,-

Actual costs

CO-PC

Product cost collector

Period accounting

Revenue

Sales deductions

Overheads plus Variances

+/- Change in Stock


Company Code

PrCtr 1PrCtr 1

Profit CenterFI

EC-PCA

Cost of goods sold

Revenue

Sales deductions

Manufacturing costs by

standard price

(Contribution margin I)

Variances


Company Code Profitability

SegmentCO-PA

SettlementFI



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VarianceCategory

PA Assignmentlines

Value FieldCost Element Group

+

+

+

Material Ledger: Overvie w


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Functions of Material Ledger:

Cost accounting using actual prices Storing values of stockin three different valuations

(legal valuation, valuation for reporting purposes, and

profit center valuation) in multiple currencies.

Material Ledger: Overvie w


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Functions of Material Ledger:

Cost accounting using actual prices Storing values of stockin three different valuations

(legal valuation, group valuation for reporting purposes,

and profit center valuation) in multiple currencies.

What is the Material Ledger/Actual CostConcept?


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p

The Material Ledger(ML) is a tool within the COModule that collects all transactional data formaterials whose master data is stored in thematerial master. It acts as a subledger for selectedmaterials that captures all goods movements,invoice values, transfers and price changes. Onthe basis of this data, the material ledgercalculates and maintains the actual cost for thesematerials. This actual cost can then be utilized tovaluate the material stock accounts.

Objectives of the Material Ledger


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1.Actual Costing.

During the period, valuation of all goods movements is donewith the preliminary valuation price which is normally thestandard price. All variances from the preliminary valuation aremaintained in the ML. At period end, revaluation of endinginventory can be performed with the determined actual price.This is not mandatory. Actual prices can be calculated for

statistical purposes only.

2.Parallel currencies and/or valuations of material stocks.

All goods movements in the ledger can be maintained in 3

currencies. The values are translated into other currencies

using the historical exchange rates. Prerequisite for usage of

transfer pricing functionality.

Benefits of the Material Ledger


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Variances of Finished Goods

Variances from external procurement (purchase orders) as wellas from production activities are rolled up from raw and semi-finished materials to the finished goods level.

To provide support for procurement related decisions.

Detailed reporting for procurement processes and sources

possible. Make vs.. Buy, Vendor A vs.. Vendor B. Price History.

Combines the benefits of Moving Average and Standard Price

Stable prices used for controlling purposes (standard) and actualprices used for valuation purposes (average).

Easy to use display and error finding by consolidating the views.

Allows quick access to detailed views of material master,standard costs and documents

Benefits of the Material Ledger


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Relatively simple configuration and set up

True Cost of Sales Accounting

Purchasing and production variances for unsold stocks areinventoried.

Contribution Margin with Actual Costs of Sales

By utilizing multi-level settlement, actual values for your costcomponent split can be attained. This can be transferred to PA

as of release 4.6C

Single Level Settlement


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Single Level Settlement

Production

Production

LevelLevel

LevelLevel

LevelLevelExternal Procurement

External Procurement

LevelLevel

Multi - Level Settlement


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Production

Production

LevelLevel

LevelLevel

LevelLevel

MultiMulti-Level-Level



LevelLevel



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External Procurement External Procurement

Production

Production

Material Valuation withMaterial Valuation withMulti-Level ActualMulti-Level Actual

CostingCosting

Preliminary ValuationPreliminary Valuation

During the PeriodDuring the Period

Revaluation at PeriodRevaluation at Period

End with Actual PriceEnd with Actual Price

The ML updates the Material Master


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p

The Integrated Material Ledger Display


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The Integrated Material Ledger Display

Material Ledger Ov erview


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Material LedgerMATERIAL STOCK

Parallel CurrenciesTranslation at historic rates

(up to three)

Parallel Valuations(Transfer Prices)

Group Legal

Profit Center

Actual CostingRevaluation of stock at

actual prices or accrual ofvariances.

ML Ov erview Pa ra lle l Currencies


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Material Ledger(Valuation Area / Plant)

10 Local currency

30 Group currency

Financial Accounting(Company Code)

10 Local currency

30 Group currency

Controlling(Controlling Area)

10 Local currency

30 Group currency

Pr ice control


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Price ControlMoving average price

(V Price)

Changed after every receipt

Recommended for raw andexternally procured

materials.

Standard Price(S Price)

Stable for long period

Recommended for finishedand semi-finished

products.

MaterialMaster

Pr ice control


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Moving average price

The stock value is adjusted each time are received

Real-time price fluctuations are posted to stock

Price difference postings only takes place in exceptional cases

Price fluctuations can not be adjusted to the finished products of higherlevels (in case S price)

Only recommended for raw materials or goods procured externally (real-time price for goods receipt known)

False entries with severe consequences (compounded errors) Danger of incorrect valuations with delayed invoice receipt

Pr ice control


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Standard Price

All stock postings takes place with the standard price

Price remains constant by at least one period

Price fluctuations do not debit / credit the cost object

Consistent controlling with the standard price as a bench mark

Estimations of the standard prices with cost component split

Recommended for all materials types

Price differences can not be subsequently adjusted to the ending

inventories or the consumed products (very important in the Cost of GoodsSold accounting)

Pr ice determin ation contro l


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Multiple currencies/valuations

ML can record up to 3 different

currencies / valuations. This is a

requirement for transfer price

Actual Costing

Revaluation of stock at actual

price

SS VV

Standard

price

Movingprice

2Transaction based

Price control

Price determination

3Single-/ multilevel

price determination

StandardStandard

price

periodicUnit

price

Cannot

be

activated

manually

Pr ice determin ation contro l


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Cost centers Internal

orders

Activitytypes

Orders


orders

Activitytypes

Orders

ExternalProcurement

Level 3

Level 2

Level 1

V

S

S3

3

2

Actual Values Ov erview


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Actual data -> Actual Costing

Overview Preliminary valuation price

Actual Costing

Price differences

Updating single-level variances

Single-level price determination

Multilevel price determination



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Actual Costing

Price differences




Prelimin ary v aluation price


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orders

Activitytypes

Orders


orders

Activitytypes

Orders

ExternalProcurement

Level 2

Level 1

Actual Costs Preliminary valuation

V

S

S



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Actual Costing

Price differences




Actual Costing


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Price differences

...arise

through

Stock transfers

(standard price in another plant)

External procurement(purchase order or invoice value)

Internal production

(order settlement)



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Actual Costing

Price differences




Updating S ingle-Leve l Variances


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orders

Activitytypes

Orders


Activitytypes

Orders

ExternalProcurement


V

S

S

Pr. .Inven.. Price diff..

Pr. .Inven.. Price diff..

462001 464018

464018462001

V



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Actual Costing

Price differences




Sin gle-Level Pr ice Determinatio n


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orders

Activitytypes

Orders


Activitytypes

Orders

ExternalProcurement


V

S

S

End.Inven.. Price diff..


119490 464017

464017119430

Price

differencesare notapplicable



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Actual Costing

Price differences




Mult ilevel Pric e Determin ation


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orders

Activitytypes

Orders


Activitytypes

Orders

ExternalProcurement


V

S

S


End Inven.. . Price diff..

119490 464017

464017119490

Price

differencesare notapplicable

Perio d En d Overvie w


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Actual Costing Period End Closing Procedure Collecting price differences

On price difference accounts or in material ledger within categories Period closing program

Open new period in MM (transaction MMPV)

Determining prices

Single-level, later multilevel

V price is calculated

Making closing entry

Must be made for each period

Posting to prior period is no longer possible

Reversal if required

With revaluation

Price differences are proportionally posted to the remaining stock -> Priceindicator V

Without revaluation

Price differences are proportionally posted to the accruals account -> Priceindicator S

Marking future price

Perio d En d Overvie w Closing En try(1 )

With Revaluation


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Beginning inventory (BI): 1000 PC / 250 SAR

Goods receipt/purchase order : 1000 PC / 260 SAR

Invoice receipt : 1000 PC / 280 SAR

Consumption: 1300 PC / 325 SAR

Ending inventory: 700 PC

Material: ACT-LCD##

VB 325

Material stock (119400)325250

250

GR/IR allocation

260 260

Vendor

280

Price difference (464017)

10

20

Status: Closing entry performed

Price control: V (only old periods)V price: 26.50 SAR / 100 units

ML accrual (119610)

10.5

Stock value :

185.5 SAR

(700 PC * 26.50/100)

10.5CL

CL

locked

Material consumption(400002)

Perio d En d Overvie w Closing En try(2 )

Without Revaluation


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Beginning inventory (BI): 1000 PC / 250 SAR

Goods receipt/purchase order: 1000 PC / 260 SAR

Invoice receipt: 1000 PC / 280 SAR

Consumption: 1300 PC / 325 SAR

Ending inventory: 700 PC

Material: ACT-LCD##

325

Material stock (119400)325250

250

GR/IR allocation

260 260

Vendor280

Price difference (464017)

1020

ML accrual (119610)

Stock value:175 SAR

10.5CL CL

Status: Closing entry performed

Price control: SS price: 25.00 SAR / 100 units

locked

10.5

Material consumption(400002)

Perio d En d Overvie w Periodic Un itPrice


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ReceiptsReceiptsPeriod openedPeriod opened(( beginningbeginning inventoryinventory

Single-Single- levellevelprice determinationprice determination

Variances

Cumulative inventory (prelim. valuation) + Cumulative variances

Cumulative inventory

= Periodic unit price

Periodicunit

price

+

-

In fo rmatio n System Overv iew


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DetailedReports

ObjectList

Object

Comparisons

Materialsto be

costed

SummarizedAnalysis

Product Cost

PlanningReports

Report Selection


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The Report Tree can be used to select Reports in the Information System. The ReportTree is the central collection point and hierarchical outline of all Reports in an

application component.

The standard Report Tree supplied by SAP should not be changed. A personalized Report

tree can be created to which standard Reports as well as one's own creations can beassigned.

Report


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The Report can be used to

Report


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Report


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Report


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M t i l



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DetailedReports

ObjectList

Object

Comparisons

Materialsto be

costed

SummarizedAnalysis

Product Cost

PlanningReports



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DisplayingDocuments

Material

LedgerReports

ObjectList Reports

Detailed

Materials



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DetailedReports

ObjectList

Object

Comparisons

Materialsto be

costed

SummarizedAnalysis

Product Cost

PlanningReports

Report Selection


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The Report Tree can be used to select Reports in the Information System. The Report

Tree is the central collection point and hierarchical outline of all Reports in an

application component.

The standard Report Tree supplied by SAP should not be changed. A personalized Report

tree can be created to which standard Reports as well as one's own creations can beassigned.



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DisplayingDocuments

Material

Ledger

Reports

ObjectList Reports

Detailed

Report Output Types Variable output areas


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Graphical report-output Variable output areas

HTML-header

Navigation by drag and drop andcontext menu

Object List (ALV)

Various leads columns

Standard ALV Functions

Product Costing In formation System


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Overview of Reporting Tools

SAP REPORTING TOOLS

For executing existing reports and queries For creating new queries

(Human Resource Information System (HIS

(Manager's Desktop (MDT

Info systems in the SAP Easy Access Menu

Ad Hoc Query

SAP Query

BUSINESS INFORMATION WAREHOUSE

For executing existing queries For creating new queries

Business Explorer Browser Business Explorer Analyzer

Product Cost Planning ReportingSAP Standard Reports


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:SAP report Employee List

:SAP report Birthday List

:SAP report Events

:SAP report Org. Units

:SAP report Telephone List

Customer report: Vehicles

:Customer reportDistribution Channels

Customer report: Buildings

Customer report: Insurance

Ad Hoc Queries Custom-built Reports

Cost Ob ject R eporting


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SAP Standard Reports

Organizational managementstandard reports menu path

Organizational managementstandard reports

Mate rial Ledger R eport ing S St d d O i ti l M t R t id tifi d f


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Some Standard Organizational Management Reports identified forSabic are:

Structure Display/Maintenance

Existing Organizational units

Existing Positions

Existing Unoccupied Positions

Product Cost Planning-Material Ledger

Documents

Transcript of Product Cost Planning-Material Ledger