ProductCosting Material Ledger
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Transcript of ProductCosting Material Ledger
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Product Costing & Material Ledger
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Product Costing Overview
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. -
Material Ledger Overview
Obtain an understanding of the actual costing function 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. -
SAP Modules - Overview
Sales &
Distribution
SD
MM
PP
QM
PM
HR
FI
CO
AM
PS
OC
IS
Materials
Mgmt.
Product
Planning
Quality
Mgmt.
Plant Maint.
Human
Resources
Financial
Accounting
Controlling
Fixed Asset
Mgmt.
Project
System
Office &
Comm.
Industry
Solutions
SAP R/3
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CO Components
Profitability Analysis
Profitability Analysis
Profit Center Accounting
Human
Resources
Financial
Accounting
FI
S&D
Sales and
Materials
Management
Materials
Management
CO
PA
CO
OM
EC
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PCA
Distribution
Cost Element Accounting
CO
CEL
Financial
Accounting
Cost Element Accounting
Cost centers
Internal
orders
Profitability
segment
Asset
Revenues
Expense
Activity
types
Internal Orders
Company Code (9100 A Ltd, 9200 A1 Ltd)
Operating concern (9100 A group)
Overhead Cost Controlling
Product Cost
Controlling
Standard
Cost Estimate
CO Production
OrderControlling area (9100 A group)
HR
MM
SD
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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 preliminary target 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. -
Product Costing
Process ends with initial containment (packout)
Optimized Production Operations
Improve and Control
Operations
Disposition &
Contain Product
Prepare
Production
Plan & Commit
Resources
Make
Product
Manage Process and
Product Documentation
OPTIMIZED
& FIRM
SCHEDULE
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Costing Methodology
Material Master
Price Control
Standard Price
(S-Price)
-Constant
-Recommended for all material
typesMoving average price
(V- Price)-Adjusted with every receipt
-If at all, only to be used for raw
materials and materials procured
externally -
Costing Methodology
The method of valuing inventory of a material is determined when extending/creating the material master.
Price that changes in consequence of usage and entry of invoices. Calculated by dividing the value of material by the quantity in stock. Automatically recalculated based on activity.
Constant price without considering usage or invoices. Material stock valued at the same price over an extended period. Price variances are posted to price difference accounts; not affecting the standard price.
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Posting Example: Moving average price 1
Stock
GR/IR Account
Vendor
ProcedureStockStock valueV price
Begin. inventory: 100 PC at 2.00 100200.-2.00
Goods receipt: 100 PC at 3.00200500.-2.50
Invoice receipt: 100 PC at 4.00200600.-3.00
Goods issue: 150 PC at 3.00 50 150.-3.00
1
2
3
300,-
2
400,-
300,-
4
3
If the invoice receipt is for 100 units, the stock coverage
is 200 units:
all differences stock
3
Stock Coverage
ok
Stock
1
200,-
300,-
100,-
2
4
3
450,-
Consumption
450,-
4
The example above demonstrates how the material stock value and material price can mirror the actual prices of a material with a valuation at the Moving average price (V).
With the scenario of invoice receipt after goods receipt, the GR/IR account is charged with the goods receipt amount (300-) as an offsetting entry to the inventory posting during goods receipt.
The GR/IR clearing account is settled at the purchase price during a good receipt, while the vendor account is updated at the invoice price (400-).
During both receipt postings (goods receipt and invoice receipt), the Moving average price (V) in the material master is adjusted (2.00 to 2.50 to 3.00)
If a goods issue occurs now, this is valuated with the current Moving average price (3.00).
The Moving average price (V), therefore, is more useful if you want your material stock values and material prices to reflect the most up-to-date data.
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With a delayed invoice receipt
Of 100 units:
a shortage of 50 units
price differences despite MAP
Posting Example: Moving average price 2
Stock
Price difference
GR/IR account
Vendor
ProcedureStockStock ValueV Price
Begin. inventory:100200.-2.00
Goods receipt: 100 PC at 3.00200500.-2.50
Goods issue: 150 PC at 2.50 50 125.-2.50
Invoice receipt: 100 PC at 4.00 50175.-3.50
1
2
3
1
200.-
300.-
50.-
2
300.-
2
50.-
4
4
400.-
300.-
4
Consumption
375.-
3
3
375.-
4
4
Stock Shortage
In both cases, however, the use of the Moving average price (V) can lead to price difference postings in the material master.
The main disadvantage of using the moving average price is that the price used to valuate a material consumption is almost completely dependent on the time at which the goods issue is posted in the system. If, for example, an invoice receipt is posted for an externally procured material after a goods issue was entered, that invoice value is not reflected in the value of the material issued. For this reason, the issued material is not valuated at its actual procurement costs.
This case of stock shortage is illustrated in the posting example above. The invoice receipt (4) in this example is first posted after the material was already issued (3). After a subsequent system-internal stock coverage check, the price difference of 100.- is only partially debited to the material (50.-). The rest (50.-) flows into a price difference account.
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Posting Example: Moving average price 3
ProcedureStockStock ValueV Price
Begin. inventory:100200.-2.00
Goods receipt: 100 PC at 2.20200420.-2.10
Goods receipt: 100 PC at 2.40300660.-2.20
Goods issue: 200 PC at 2.20 100 220.-2.20
Invoice receipt: 100 PC at 3.00100300.-3.00
Invoice receipt: 100 PC at 3.00100360.-3.60
With multiple delayed
invoice receipts:
Danger of Incorrect Valuation!
Even though all receipts between 2.- and 3.- were valuated!
80.-
in stock
60.-
in stock
Stock Coverage
In particular, the Moving average price (V) can lead to unrealistic material prices in cases of multilevel production or when there are variances that do not appear immediately. Such unrealistic prices occur, for example, when, in the context of stock coverage, a subsequent adjustment to the material stock occurs using an incorrect base quantity.
In the current period, there are a number of goods receipts for a material that are valuated with the Moving average price (V).
Afterwards, a goods issue occurs for 200 units of this material.
Then, the invoice receipts for the goods receipts above are posted whose invoice price varies from the purchase order price in both cases.
Because there is a stock coverage at the time of invoice receipt in both cases (stock quantity is at least as large as the invoice quantity) , the price variances of all invoices are completely adjusted to stock. The existing stock quantity is adjusted with a variance of 140.
This results in a valuation of the remaining material stock and material consumption at an unrealistically high price (3.60).
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Characteristics of Price Control V
The stock value is adjusted each time goods are receivedReal-time price fluctations are posted to stock Price difference postings only take place in exceptional casesPrice fluctuations cannot be adjusted to the finished products of higher 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 receiptMoving average price
The illustrated situation demonstrates how the decision to use the Moving average price (V) in order to have your material stock values and material prices reflect the most up-to-date data can be a mistaken one.
For this reason, SAP recommends only using the Moving average price (V) for material valuation with raw materials and trading goods, because the delivered prices for these are usually known close to the time of the goods receipt.
For materials produced in-house, such as semi-finished and finished products, there is a great risk that, at period-end closing, a large number of variances from order settlements (follow-up costs) are posted to a relatively small stock which can lead to either price variances or faulty valuations.
A further disadvantage of the Moving average price (V) is that incorrect entries (i.e. typing errors during posting) that are only first recognized later can lead to an unrealistic stock value. Subsequent goods issues would then be valuated with these incorrect prices (error compoundment).
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Posting Example: Standard Price
Stock
Price difference
GR/IR account
Vendor
ProcedureStockStock ValueStandard Price
Initial situation:100200.-2.00
Goods receipt: 100 at 2.40200400.-2.00
Invoice receipt: 100 at 2.20200400.-2.00
1
2
3
1
200.-
200.-
2
240.-
2
2
40.-
3
3
3
20.-
220.-
240.-
The following applies to valuation at the standard price:
All stock postings occur at the standard price.
Variances are posted to price difference accounts.
Variances are updated.
Price changes can be observed.
If a material has standard price control, the value of the material is calculated with the standard price For subsequent goods movements or invoice receipts with a price that varies from the standard price, the differences are posted to a price difference account. These variances are not included in the material valuation.
This situation is illustrated in the slide. A goods receipt posting with a price of (2.40) that is not the same as the standard price (2.00) leads to price variances that are carried on a price difference account (+40.-). The subsequent invoice receipt with a varying price (2.20) is also not posted to material stock; instead, the variance is written to the price difference account (-20.-).
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Characteristics of Price Control S
All stock postings take place at the standard pricePrices remain constant throughout at least one periodPrice fluctuations do not debit/credit the cost objects (e.g. orders)
consistant controlling with the standard price as a bench markCalculation of the standard prices with cost component splitsRecommended for all material types
Price differences cannot be subsequently adjusted to the ending inventories or the consumed products (sales, production withdrawals)Standard Price
If material valuation takes place at the standard price, all goods movements are valuated at this same price. The standard price control makes a consistant controlling of the production process possible; variances within production are transparent. The use of a periodic price is particularly recommmended for periodic controlling.
The standard price can also be used as a benchmark by which you can measure different methods of production, or compare the contribution margins of a material in different market segments in Profitability Analysis (CO-PA).
One disadvantage of standard price control is that the variances or price differences cannot be allocated to the subsequent production levels. This is becomes increasingly problematic with each additional production level in multilevel production. In this case, a time-relevant cost controlling for the finished product cannot be guaranteed.
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Period-End Closing: Valuation Problems
Valuation Period
Distribution of
Price Differences?Actual Prices?
Finished Products
Ending Inventory:
Raw MaterialsRaw Materials II
Raw Materials I
D
While the danger exists of an incorrect valuation carried out with the moving average price, both valuation strategies lead to variances, the assignment of which causes problems, particularly at period-end. The material stock value does not reflect the current procurement costs, as variances from the standard price are collected in a price difference account in Financial Accounting and do not lead to a correction of the material stock account.
With multilevel production, the variances can no longer be assigned to the products that should carry them. The assignment of these price differences to the ending inventories of raw materials, semi-finished products and finished products is just as impossible as a corresponding assignment to the sold or discontinued goods.
With a multilevel production structure, variances can appear on different objects due to fluctuations in external procurement and internal production costs. Because these variances of a standard cost accounting cannot be posted to the material stock, they are, as a rule, posted to Profitability Analysis at period-end. Even though they can be divided into different variance categories ( price variances, quantity variances, etc.) in Profitability Analysis, they cannot, however, be assigned to their corresponding products.
In Financial Accounting, these variance categories correspond to the balance of a price difference account that, from an external accounting point of view, cannot be proportionally allocated to ending inventory (assets) or consumption (period expense).
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Costing Methodology
Valuation Method by Material:
Finished GoodsStandard w/ ML
IntermediatesStandard w/ ML
Raw MaterialMoving Average Actual
PackagingMoving Average Actual
-
Organizational unit dividing up a company for the purpose of valuating stocks in a standardized and consistent 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
BOM
Routing
CO-
CCA
CO-
PA
CO-
PC
Act1
Act2
Cost
ObjectCost
Center X
Cost
Center 1
Cost
Center2
F. Goods
Inventory
Production
orders
MAT
Manufacturing Cost
MM: RM
Cost
Center Y
Cost
Center 3
Production
Cost Center
VAR.
VAR...
VAR...
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Product Cost Flow
Plant Cost View
Sales & Mktg. View
Mfg. Cost Center
(Activity Types)
Utilities
Salaries
Supplies
Maintenance
Depreciation
Training
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 Costs
Pkg. Matl Costs
Costs to Produce
Product testing costs
Change Over costs
(setup costs)
Routing
Product Unit Cost
Cost of Goods Mfg.
Raw Matl 1 Costs
Raw 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 At A Grp
-
Product Costing At A Grp
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Product Costing At A Grp
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Product Costing At A Grp
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Product Cost Planning: Overview
Functions of Product Cost Planning:
Product Cost Planning with reference to cost objectProduct cost planning with quantity structure with structures provided by PP (Production Planning) moduleDetermination of the cost of goods manufacturedProduct Cost Planning supplies information for other modules:Update of prices in a material masterUpdate 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 variancesOverview
As a vital element of Product Cost Controlling, Product Cost Planning is gaining in importance. The material cost estimate can be used as a tool for cost planning and the pricing of materials in order to determine the cost of goods manufactured or the cost of goods sold.
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Product Costing: Overview
Standard Cost Estimate
(once a year)
Prepare Product Cost
CollectorProduction 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 Structure
Utilizes a Bill of Material (BOM) and routing, I.e. Master Recipe for costing purposes. Integrated with Production Planning (PP).
Additive
You use additive costing to enable you to manually add costs that cannot be 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 for each 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: Overview
Quantity structure
Valuation
Cost estimate
with quantity
structurePrice update
Costing
variantReport
Material costs
Production costs
Overhead
Cost estimate
without qty
structureOverview
Product Cost Planning is positioned at the interface between the Logistics (only MM in that scenario) and Controlling modules, and accesses the relevant data from both.
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Product Cost Planning: Overview
Start of
Year 2Ad hoc
New
productStart of
Year 1Technical
changeSimulation
CostingStandard Cost
EstimateCurrent
Cost Est.Modified
Std Cost Est.Inventory Cost
Estimate
Standard Cost
EstimateInventory Cost
EstimateTime
You can cost a material in different ways during planning and production, depending on the purpose of costing. The different cost estimates are represented in Customizing by different costing variants.
The cost estimates and their purposes are as follows:
Simulation Costing calculates the costs of a cost object without access to BOMs and routings, and without using the data in the material master. The base object cost estimates in this component are used for simulation purposes and as a template.
Standard cost estimate. Updates the standard price of a material.
Modified standard cost estimate. Valuates a costing structure that has changed during the production process. Uses the same prices as the standard cost estimate
Current cost estimate. Valuates a structure that has changed during the production process, but uses the current prices
Inventory cost estimate. Valuates the materials in inventory for the commercial and tax balance sheets.
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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 quantity
structure -
Material cost estimates with q. s.
Used for:
BOM
Routing
Quantity Structure
Costing Results
Items
M MaterialE Activity
E ActivityG Overhead
Cost
Elements400000 Raw materials
943201 Production hours
943901 UT: Cooling Var.Costing
Values
600 000SAR
610 000SAR
612 000 SARSAR
Purchase price
Activity Type Price
Overhead
Valuation
Standard Cost
EstimateStock Valuation
Profit & Loss
StatementStandard cost estimate with quantity structure:
Created during costing run for each finished good and semi-finished product
Provides split and balanced information of cost items, quantities and prices that are planned to occur during production a product
Variable and fixed costs coming from BOM and routing
The special procedure of save/ mark/ release
Result saved as standard price in material master record
Base for quantity, price and resource variance analysis
May be changed once a period (month) before any material posting;
Only one quantity structure (mixed quantity structure) assigned is valid over the period
Changes in quantity structure do not influence cost estimate released
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Material cost estimates with q. s.
Internal
ActivityOverheads
Material
External
ActivityInternal
ActivityOverheads
-
External
ActivityInternal
ActivityOverheads
Material
External
ActivityInternal
ActivityOverheads
Material
External
Activity-
-
Material
-
Product W
Product Z
Product S
W
Z1
Z 2
S1
S2
S3
Costing structure - Total
Costing structure Upper level
Costing structure Lower level
Costing structure - Total
Costing structure - Total
Costing structure of a material cost estimate can be exploded through the manufacturing levels.
The purpose of cost rollup is to include the cost of goods manufactured of all the materials in a multilevel production structure within the costs of the material located at the top of the structure. The costs are rolled up automatically using the costing levels.
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Costing Variant
Valuation
VariantQuantity Structure
DeterminationCosting Variant
Prices
Quantities
Cost of Goods
ManufacturedCosting Variant is a key that determines how a cost estimate is performed and valuated.
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Costing Variant
COSTING
VARIANTStrategy for
transfer of
the existing
cost estimatesDetermination of :
Bills of Material RoutingDefaulted dates for
costingCosting Sheet
Determination of:
prices update
in material masterValuation control for:
- materials
- internal activities
- external activities- subcontracting
- overheads via
costing sheetDepending on the object being costed, either the functions of either unit costing (without quantity structure) or product costing (with quantity structure) can be used.
In a cost estimate with a quantity structure, the costing variant determines the following:
Which dates are valid for the cost estimate itself and for exploding and valuating the quantity structure
How the BOMs and routings are selected to create the quantity structure
Which prices are selected to valuate the quantity structure
How overhead is calculated
Cost Component Structure
A costing variant is linked to the following control parameters:
Costing type (which price and valuation view) is to be updated
Valuation variant (how to valuate materials, internal and external activities, assignment of costing sheet)
Date control (date defaults)
Quantity structure control (BOM and Routing determination)
Transfer control (strategy sequences for transfer of the existing cost estimates into one under calculation).
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Quantity Structure for Product Cost Planning
Data that is stored in the database for long periods of time is referred to as master data
This permanent (yet changeable) data is created for:
Materials, Work Centers, etc.
Accurate master data reduces:
Creation time for documents
Amount of errors in the process
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Quantity Structure for Product Cost Planning
Material master dataAccounting viewsCosting viewsMRP viewsBOM - Bill of MaterialBOM type & identificationBOM headerMaterial dataRouting - tasks listRouting type & identificationRouting headerOperation dataMaster RecipeRecipe headerOperationsMaterials listWork Centers / ResourcesBasic dataCostingProduction VersionValidity PeriodProduction lineMaster data are maintained within defined time frame. Changes to the crucial fields are time dependent.
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Quantity Structure: Material Master Data
Material 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:PurchasingStorageSalesAccountingCostingMRPValuation classPrice controlPrice determinationPriceStockValue of the stockPlan priceCost estimate resultsPeriodic unit priceMaterial Master Data:
Contains data specific to materials
Contains data vital for Product Costing
Is the central source of information about a material
The material master record comprises business-functional views of material master data such as:
Sales
Purchasing
Logistics
Production
Finance
Quality
For Production Planning SABICs model, the relative views are MRP, Accounting and Costing views.
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Material cost estimates - quantity struc.
Product cost planning with quantity structure:
Materials Cost Centers / Activity Types Primary CostsQuantity * 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 manufactured due 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 priceThe cost estimate without quantity structure is a tool for planning costs and establishing prices for materials without reference to quantity structure data from Production Planning (PP and PP-PI). It is intended for materials with insufficient or no quantity structure data.
Material costing without a quantity structure enables you to:
Plan costs for raw materials, internal activities, and external activities for a product in the form of a unit cost estimate
Assign overheads to the product in the production and material areas
Assign the calculated costs to the cost components as well as when saving them
Group the costs of the materials used for semifinished products into cost components
A cost estimate without quantity structure can access data in the following modules:
Materials Management (MM), such as material master records and services
Production Planning (PP), for example work centers and resources
Controlling (CO), such as cost centers and activity types
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Costing Variant
COSTING
VARIANTStrategy for transfer of
the existing cost estimatesDefaulted dates for
costingCosting Sheet
Determination of:
prices update
in material masterValuation control for:
- materials
- internal activities
- external activities- subcontracting
- overheads via
costing sheetCosting Variant is a key that determines how a cost estimate is performed and valuated.
Depending on the object being costed, either the functions of either unit costing (without quantity structure) or product costing (with quantity structure) can be used.
In a cost estimate with a quantity structure, the costing variant determines the following:
Which dates are valid for the cost estimate itself
Which prices are selected to valuate the structure
How overhead is calculated
Cost Component Structure
A costing variant is linked to the following control parameters:
Costing type (which price and valuation view) is to be updated
Valuation variant (how to valuate materials, internal and external activities, assignment of costing sheet)
Date control (date defaults)
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Quantity Structure: Production Version
Product
Bill of Material
Usage AlternativeRouting
Group Group counterProduction Version
ID, Production line, Validity period.Product Cost Estimate
Quantity structure determination for cost estimateValidity period definitionProduction versions combine a specific BOM alternative with a specific rate routing/recipe.
For one material, you can have several Production Versions for various validity periods and lot-size ranges
Production versions facilitate different situations:
Production using different resources
Production using different processes or procedures
Production versions are valid for an Affiliate plant, so different versions can apply to different Affiliates
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Quantity Structure: Procurement Alternatives
Quantity structure determination for mixed cost estimate.Procurement alternatives are used in case of:
Different processes to manufacture a product
Different sources for procuring a material
These different manufacturing processes or supply sources can produce different prices for the same material. You can avail yourself of mixed costing to determine a price for this material. To be able to create the mixed price, there must exist a procurement alternative for each of the production processes (production versions) or supply sources.
-
Quantity Structure: Mixing Ratios
Product
Mixed Product Cost Estimate
Quantity structure determination for mixed cost estimateValidity period for mixing structureIn order to calculate a mixed price for the material, you must create procurement alternatives for the individual manufacturing processes and procurement options.
The mixed price is created by weighting the procurement alternatives using equivalence numbers. This section tells you how to define mixing ratios for the procurement alternatives.
-
Costing vs. Quantity Structure
RAW MATERIALS
BILLS
OF
MATERIALPRODUCTION
COST
CENTERUtilities Overhead
ACTIVITY TYPESWORK CENTER /
RESOURCEROUTING
PRODUCT COST
ESTIMATEConsumables
Maintenance
Labor
Depreciation
Electricity
SERVICE
COST CENTERLogistic data (quantity structure) together with controlling data (valuation structure) create a base for product cost valuation (costs of goods manufactured).
-
Costing Structure
-
-
Costing Structure for Product Cost Planning
Master Data
+
+
Materials
Activity Types
+
Cost Elements
+
Cost Component Structure
+
Cost Centers
Data that is stored in the database for long periods of time is referred to as master data
This permanent (yet changeable) data is created for:
Cost centers, activity types, cost elements, etc.
Accurate master data reduces:
Creation time for documents
Amount of errors in the process
-
Costing Structure for Product Cost Planning
Material master dataAccounting viewsCosting viewsCost CentersValidity periodCategoryFunctional areaActivity TypesValidity periodActivity unitAllocation cost elementCost ElementsValidity periodCategoryData that is stored in the database for long periods of time is referred to as master data
This permanent (yet changeable) data is created for:
Material, Cost Centers, etc.
Accurate master data reduces:
Creation time for documents
Amount of errors in the process
-
Costing Structure: Material Master Data
Material 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:PurchasingStorageSalesAccountingCostingMRPValuation classPrice controlPrice determinationPriceStockValue of the stockPlan priceCost estimate resultsPeriodic unit priceMaterial Master Data:
Contains data specific to materials
Contains data vital for Product Costing
Is the central source of information about a material
The material master record comprises business-functional views of material master data such as:
Sales
Purchasing
Logistics
Production
Finance
Quality
For Production Planning SABICs model, the relative views are MRP, Accounting and Costing views.
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Costing Structure
Cost
Elements
A cost centers is an organizational unit within a controlling area that represents a clearly delimited area of responsibility 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 all costs within the entire cost accounting system.
Secondary costs elements are used exclusively in CO to identify internal cost flows such as assessments or settlements. They do not have corresponding general ledger accounts in FI and are defined in CO only.
Cost Center
Cost Center
The cost center master record represents the main organizational unit in
Controlling. A grp department units will have their own cost center number. Each
department will plan and monitor their yearly budget / expenditure on their
respective cost centers.
Cost Element
Before you can create primary cost elements in CO, you first need to create them
as G/L accounts in FI. To be able to post to a primary cost element, you require a
cost-carrying object (such as a cost center) to identify the origin of the costs.
Examples of primary cost elements are material costs and salary costs.
Secondary costs elements are used exclusively in CO to identify internal cost flows
such as internal activity allocation between production cost centers and product cost
collectors. They do not have corresponding general ledger accounts in FI and are defined in CO only. -
Planning Overview
Profitability Segment
Company
GeneralService
C. Center
Executive Management
Admin.
C. CenterMaintenance
Prod. Support
Production C. Center
Product Cost Estimate
COGS
ProjectsPrimary Cost Pools Cost Centers - collect primary expenses which are not attributed to a particular cost object e.g. Communication, Medical expenses, Rents, Insurance, Housing Maintenance etc. The accumulated primary cost will be distributed to the receiving objects on appropriate bases.
Executive Cost Centers - includes the cost of senior management of the affiliate, legal office,internal audit, strategic planning and other expenses associated with these functions. Executive Overheads are assessed to appropriate Profit Centers (at Product group level per company Code) for PCA Reporting.
Administrative Support Cost Centers - all administrative cost centers in the affiliates (except executives, legal, strategic planning, internal audit) are included in the product cost. The admin overheads are allocated to cost centers via indirect activity allocation based on appropriate basis.
Service Cost Centers - examples are, Maintenance, Utility Facilities,Engineering etc, they usually exchange services between each others also. The direct service cost is allocated to receiver objects (e.g. cost centers, product cost collectors) based on unit of consumption or other appropriate bases via direct activity allocation.
Production Support Cost Centers - are fully dedicated for production, but serve more than one production cost centers. The costs are allocated (distributed) in full to receivers based on unit of consumption or other appropriate bases.
Production Cost Centers - include all direct overheads of the production unit that are not charged directly to product cost collector via production orders. The cumulated cost is charged to production order based on consumption, production volume via direct activity allocation.
-
Costing Structure
Activity types define the type of activity that can be provided
by a cost center (work activity, production hours, and so on).
Activity Type
Activity Types
Activity types define the type of activity that can be provided by a cost center (work
activity, machine hours, and so on). Activity outputs supplied by one cost center (the
sending cost center) to other cost centers, orders, product cost collectors, or processes, represent the
utilization of resources for this sending cost center. You valuate activities using a
price calculated on the basis of certain business or management information.
-
Cost center
h
Cost center:
MachinePlanned costs:
430000 (salaries) 44,000
440000 (miscl.)
10,000
473120 (telephone) 30,000
Plan activity qty: 100 h
Planned costs: 84,000
Calculated
Price: 840Activity Price Calculation
:
Apportionment of cost center costs
to activity types according to
particular criteria
Activity Price Calculation
1PDH01
1
2
100
Even if you have planned prices manually, you may still be interested to know to what extent this price corresponds to a price that was calculated by the system on the basis of the planned activity of the cost center. To this end, you can carry out a price calculation. However, before you can achieve satisfactory results, there are certain things to consider and certain settings that need to be make and these can only be sketched very briefly here.
Under planned cost splitting, activity-independent planned costs belonging to a cost center are assigned to the individual activity types. The activity-independent costs need to be split between the activity types to enable the price of the activity units to be calculated. At its simplest, planned cost splitting involves the use of an equivalence figure.
During price calculation, the SAP R/3 system automatically calculates the plan prices for productive and non productive hours for defined cost centers. You can have the system calculate plan activity types for every cost center and activity type. The R/3 System calculates the price by, for example, dividing the plan costs by the plan activity.
-
Costing Structure
Steam service
1203004943954 UT: Steam fix
Product
22000057 - TEGProduct
22000058 - LLDPE..
Distribution
Activity
Allocation
943954
via
RoutingCost Splitting
Planning
1203000
Utilities (Common)Product
Cost EstimateActivity Types Used:
1UTSTF Steam - fixed
Original CE
1UTSTF Steam - fixed
1UTSTV Steam var.
2
3
5
Primary costs planning on all
Cost Centers.
1
Planned Price Calculation
Prices for 1UTSTF are
calculated.
4
1. Assign CC 1203004 to Splitting
Structure U4 Steam service
2. Perform cost splitting
1203000
..
..
Methods of allocation costs, such as: distribution, indirect activity allocation and direct activity allocation are used in A grp since there is a need to keep track of primary costs for cost component views in Product Costing (CO-PC).
Assessment is used for allocations without any relations to production cost centers or support / service cost centers. Mostly applicable for non-manufacturing affiliates.
In an internal activity allocation, the quantity of the activity, such as the number of steam tones, is entered into the R/3 System. The system calculates the associated cost based on the activity price and generates a debit to the receiver and a credit to the sender for both the quantity and costs. Internal activity is allocated using secondary cost elements, which are stored in the master data of the activity types as default values.
You can restrict the use of the activity type to certain types of cost centers by entering the allowed cost center categories in the activity type master record. You can enter up to eight allowed cost center categories, or leave the assignments "unrestricted" by entering an asterisk (*).
The activity type category is used to determine whether, and how and activity type is entered and allocated. For example, you can allow some activities to be allocated directly, but specify for others that they are either not allocated, or allocated indirectly only.
-
Cost Component Structure
Used for:
Costing Results
ID
101110
111Cost Component
Raw Materials
Catalyst
ChemicalsCosting
Values
Fixed & Variable600 000SAR
0SAR
0SARSAR
Purchase price
Activity Type Price
Overhead
Valuation
x
Quantity
Standard Cost
EstimateStock Valuation
Profit & Loss
StatementCost component structure controls how the results of activity price calculation or material costing are stored.
The cost component structure groups cost elements into cost components to show the following information:
Activity prices for an activity type
Cost of a process
Planned cost of a product
In Product Cost Controlling (CO-PC), the cost component structure determines the attributes for passing on the following costs:
Material costs passed on to material valuation as the standard price or inventory price
Cost of goods manufactured passed on to Profitability Analysis
-
Cost Component Structure
Raw Materials
Utilities
Personnel Exp.
Depreciation
Primary cost elements
Product Cost Planning
Cost Centers
Utilities
Personnel Exp.
Depreciation
Structure of primary
costsCO-
PC
CO-
OM
Raw Materials
Internal
Activity
AllocationStructure of primary
costsZ9
A Grp-PrimaryCost components group cost elements that:
Makes the costs of a material, an activity type, or a process transparent
Groups the costs of a material according to the requirements for material valuation and profitability analysis
There are to cost component structures:
Structure of primary costs A Grp - Primary Cost Component Split)
Primary Cost Component Split groups the planned costs of a product according to primary costs.
Plan and actual splitting the primary costs is carried out in the same way as the cost component split for costs of goods manufactured : the costs are divided into cost components, to which intervals of primary costs are allocated.
Cost component structure is assigned to the costing variant.
-
Product Costing: Overview
Standard Cost Estimate
(once a year)
Release cost estimate with quantity
structureMark cost estimate with quantity
structureCreate Cost estimate with quantity structure
-
Price update
Standard priceOnly 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 for Z9P1 costing variants - 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
-
Price update
Future priceFuture standard price
Stored in material master data (accounting & costing view) in Legal, Group and Profit Center valuation views after marking the cost estimate.
Previous priceReplaced standard price by current one due to releasing the cost estimate
Stored in material master data (accounting & costing view).
-
Price update
Material Master Data
Standard Price
10
10
15
Future Current Previous
10
15
Analysis of Costing Results
Future Current Previous
Future Current Previous
Marking Standard Cost Estimate
Stock Revaluation
Releasing Standard Cost Estimate
Once you have carried out a cost estimate for a material, you can transfer the costing results to the material master as above prices in described sequence.
-
Price update procedures
MM & CO postings
- Various analysis available
Product Costing
- SPC1 SPC3 cost estimates, verification, save
- Organizational measures: marking and releasing
- Cost estimate marking
- Cost estimate release
Master & control data definition
- Material Master Data
- CO Production Order incl. Unit Costing
Period-end closing tasks
Work-in-process postings Inventory deviations postings Variances processing and analysis- Settlement processing
The price update is one of many crucial elements in the Product Costing process flow.
-
Costing run
Costing runYou can use the costing run to process mass data. It enables you to 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
-
Costing run
Marking and releasing costing run results
(price update)Execute costing run
Selection
of
all materialsPartial selection
of materialsBOM explosion
Costing Run Creation
Company Code
Costing variant
Dates
Costing
RunMaterials
$
$
$
$
$
$
$
$
$
-
Product Costing: Overview
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
-
Cost Object Controlling: Overview
Functions of Cost Object Controlling:
Supporting make-or-buy decisionsDetermining price floorsPerforming complex cost analysis Determining inventory valuesOverview
As a vital element of Product Cost Controlling, Cost Object Controlling is gaining in importance.
The Cost Object Controlling component is designed to answer the question: "What costs have been incurred for which objects?" To answer this question, the component assigns the costs incurred in the company to the companys output. The output of a company can consist of materials manufactured in-house, individual orders, or intangible goods.
This component offers real-time cost management functions that determine the cost of goods manufactured in all plants.
The Cost Object Controlling component enables you to determine the cost of goods manufactured or the cost of goods sold for the manufacturing or service output of the company.
-
Cost Object Controlling: Overview
Cost Object Controlling Scenarios:
Product Cost by PeriodProduct Cost by Period is used for recurring periodic cost control of products that are manufactured in the same way over a longer period of time.Product Cost by OrderProduct Cost by Order is mainly used to control the costs of individual production lots.In Product Cost by Order, the manufacturing orders themselves are the cost objects. Costs charged to manufacturing orders are usually analyzed and settled by lot. This means that variances can only be analyzed after the entire planned production quantity has been put into inventory.
In contrast to Product Cost by Order in which you analyze costs by lot, in Product Cost by Period you analyze costs by period. This means that you collect the costs on a cost object over an extended period of time, and analyze the debits and credits in each period.
You can also combine both approaches: costs by manufacturing orders and costs by period. In such an approach you will assign production or process orders to product cost collectors and deal with incurred costs as in Product Cost by Period.
-
Cost Object Controlling: Overview
Product Cost by Order or by PeriodFull settlement (by Order)Periodic settlement ( by Period)Actual costs =
Work in processActual costs -
Goods receipts =
Work in processActual costs -
Goods receipts =
VariancesReleasing an order
Partial delivery
Delivered /
Technically completedActual costs -
Goods receipts =
Work in process +
VariancesPeriod 1
Period 2
Period 3
Actual costs -
Goods receipts =
Work in process +
VariancesActual costs -
Goods receipts =
Work in process +
VariancesTime
Time
As you use Product Cost by Order the Full settlement rule is used for production orders.
As you use Product Cost by Period the Periodic settlement rule is used for product cost collectors.
-
Cost Object Controlling: Overview
Product Cost by Order
Type of settlement
ruleWork-in-Process
Variances
Settlement
Hierarchy of
Cost ObjectsFULL
PERIODIC
WIP calculated on base
of actual costsVariance
=
Actual Costs
-
Goods Receipts
Variance
=
Actual Costs
-
Goods Receipts
-
WIP
Should be periodically
Impossible
Possible
Funkcje
Functions
Product Cost by Period
WIP calculated on base
of target costsMust be periodically
-
Cost Object Controlling: Overview
Functions 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.A preliminary cost estimate for a product cost collector can calculate the costs for the production process (that is, on the basis of a particular production version or for a particular combination of BOM and routing). In repetitive manufacturing, you can therefore create cost estimates for specific production versions.
During the period, all transactions involving products produced in-house in the Logistics module are valuated using the results of the standard cost estimate. If a material with standard price control is delivered to stock, for example, inventories of this material are valuated with the standard price determined by the standard cost estimate.
The results of the standard cost estimate can also be used to determine the following data for each production order or product cost collector at the end of the accounting period: variances, scrap and work in process.
-
Cost Object Controlling: Overview
Production postings (backflush)
- Various analysis available
Product Costing
- Z9P1, Z9P2, Z9P3 costing run, verification, save
- Organizational measures: marking and releasing
- Cost estimate marking
- Cost estimate release
Master & control data definition
- Material Master Data, BOMs and Routings
- Product Cost Collectors incl. PREM costing
Period-end closing tasks
- Inventory deviations postings
- Variances processing and analysis
- Settlement processing
Functions of Product Costs by Period
-
Actual Overview
Profitability Segment
Company
GeneralCommon
Services
Executive Management
SBU / Sales
C. CenterR&T
C. Center
Maintenance
Production C. Center
Product Cost Collector
Variances
ProjectsOverhead
VariancesPrimary Cost Pools Cost Centers - collect primary expenses which are not attributed to a particular cost object e.g. Communication, Medical expenses, Rents, Insurance, Housing Maintenance etc. The accumulated primary cost will be distributed to the receiving objects on appropriate bases.
Executive Cost Centers - includes the cost of senior management of the affiliate, legal office,internal audit, strategic planning and other expenses associated with these functions. Executive Overheads are assessed to appropriate Profit Centers (at Product group level per company Code) for PCA Reporting.
Administrative Support Cost Centers - all administrative cost centers in the affiliates (except executives, legal, strategic planning, internal audit) are included in the product cost. The admin overheads are allocated to cost centers via indirect activity allocation based on appropriate basis.
Service Cost Centers - examples are, Maintenance, Utility Facilities,Engineering etc, they usually exchange services between each others also. The direct service cost is allocated to receiver objects (e.g. cost centers, product cost collectors) based on unit of consumption or other appropriate bases via direct activity allocation.
Production Support Cost Centers - are fully dedicated for production, but serve more than one production cost centers. The costs are allocated (distributed) in full to receivers based on unit of consumption or other appropriate bases.
Production Cost Centers - include all direct overheads of the production unit that are not charged directly to product cost collector via production orders. The cumulated cost is charged to production order based on consumption, production volume via direct activity allocation.
-
Product Costing: Overview
Prepare Cost Object
Preliminary costing
Create
Product Cost Collector -
Objects in Cost Object Controlling
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 lotIn process manufacturing (that is, when you are using process orders) when you want to analyze the costs by period rather than by lotIn repetitive manufacturing you always use product cost collectors as the cost objects.Product cost collector is a cost object in the Product Cost by Period component.
-
Objects in Cost Object Controlling
Product
Bill of Material
Usage AlternativeRouting
Group Group counterProduction Version
ID, Production line, Validity period.Product Cost Collector
Product Cost CollectorProduct cost collector is a cost object in the Product Cost by Period component that collects the periodic actual costs incurred in the production of a material. When you use a product cost collector, the product becomes the main cost object.
Product cost collectors are independent of the production type.
For Controlling (CO) purposes in Finance, a product cost collector is created to collect production costs by period, rather than by production order confirmation
It may be a requirement for the PP Master Data Controller to work with the CO Master Data Controller to create and maintain this cost collector
-
Objects in Cost Object Controlling
Master
Recipe
Product Cost Collector
Product
Production
Version
PROCESS ORDER 2
Operation List/Routing
MaterialsList/BOM
Resource
RequirementsOperation 10
Operation 20
Phase A
Material Y
Material X
PROCESS ORDER 1
Process Orders assigned to one Product Cost Collector via the same Production Version.
This scenario is applicable for process manufacturing (that is, when you are using process orders) when you want to analyze the costs by period rather than by lot.
Process Orders in such a case is not debited and credited although scrap determination is still conducted on a process order. All postings are transferred directly to an assigned product cost collector and this object is taken into consideration during period-end closing.
Linking the manufacturing order to the product cost collector at this point is only possible if the manufacturing order does not yet have any actual costs.
A product cost collector may already exist, but because the production version or the BOM/routing combination in the manufacturing order has changed, you need to link the manufacturing order to a different product cost collector. In this case a new linkage is only possible if no costs have been caused by the product cost collector.
-
Preliminary costing
Production postings (backflush)
- Various analysis available
Product Costing
- SPC1 SPC3 costing run, verification, save
- Organizational measures: marking and releasing
- Cost estimate marking
- Cost estimate release
Master & control data definition
- Material Master Data, BOMs and Routings
- Product Cost Collectors with Preliminary costing (PREM)
Period-end closing tasks
- Inventory deviations postings
- Variances processing and analysis
- Settlement processing
Preliminary costing with a relation to whole process.
-
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, quantities and 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 update not required
Changes in routings take effect after cost estimate update
-
Preliminary costing
Product Cost Collector
Item Plan Actual
Materials 4.000
Internal activities2.500
Overheads 1.500
EDC 0.500
Ethylene 2.000
Caustic Soda 1.500
Total8.000
A preliminary cost estimate for a product cost collector can calculate the costs for the production process (that is, on the basis of a particular production version or for a particular combination of BOM and routing). In repetitive manufacturing, you can therefore create cost estimates for specific production versions.
-
Simultaneous costing actual costs
Production postings (backflush)
- Various analysis available
Product Costing
- Z9P1 Z9P3 costing run, verification, save
- Organizational measures: marking and releasing
- Cost estimate marking
- Cost estimate release
Master & control data definition
- Material Master Data, BOMs and Routings
- Product Cost Collectors with Preliminary costing (PREM)
Period-end closing tasks
- Inventory deviations postings
- Variances processing and analysis
- Settlement processing
Simultaneous costing with a relation to whole process.
In Cost Object Controlling, actual costs for cost objects are recorded during simultaneous costing.
-
Simultaneous costing actual costs
Product Cost Collector
Item Plan Actual
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
Total8.000 7.400
Confirm order operation
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
During the repetitive production process, the backflush takes place whereby raw materials and utilities consumed are automatically issued according to the standards in the BOM and recipe/routing.
If there are any failed postings when the backflush of material consumption takes place (for example, because of stock record errors), the cause of the error is dealt with and the posting re-submitted.
A process order is partially confirmed during production
When the process order is complete, a final confirmation of output and resource usage is made.
Where process measures are defined in the process order, the operator records any required data in the order
Any waste or scrap lost during the process is recorded via goods receipt.
Where the output of packaged product is not a full pallet/container, the output of loose bags / part containers is not recorded. The loose bags are retained until the next run when a full pallet can be made up and recorded.
Any differences in consumption between the standard quantities in the order ( standard quantities are copied from the BOM and routing/recipe) and the actual quantities reported from the process meters will be manually corrected.
The true output from the bulk process is adjusted after the packaging operation when the yield is accurately known.
The results from the output & resource consumption updates the stock records of materials and bulk product, creates the valuation of production, and posts SAP reporting data.
-
Confirmation Types & Functions - Process Orders
Order header
Order header
Operations
Operations
Components
Components
n
n
Backflush components
Backflush utilities
Reduce capacity requirements
n
n
Individual confirmation
n
Collective confirmation
n
Milestone confirmation
n
Progress confirmation
n
Order confirmation
n
Confirmation with reference
n
Individual order confirmation
n
Collective confirmation
n
Milestone confirmation
Confirmation types
n
Partial confirmation
n
Final confirmation
n
Partial confirmation
n
Final confirmation
Confirmation status
Confirmation status
Costs Material
Labor
...
Costs Material
Machine
Utility
20
50
100
n
Confirm with goods movement
n
Defaults for remaining time
n
Check operation sequence
n
Check delivery tolerances
n
Plant data collection interface
n
Backflushing
n
Reduce capacity requirements
n
Determine actual costs
n
Output goods receipt
n
Determine actual costs
Confirmation functions
Partial operation confirmation is done on a daily basis until whole order is completed.
This is similar to the REM back flush activity.
The confirmation triggers good receipt and issue of components by an order operational back flush.
Final confirmation is conducted when all operations in the order are completed.
-
Back Flushing (Repetitive Orders)
Order quantity = 10 PC
Required qty = 20 PC
Operation 30
Component XY
Back Flushing
Operation 30
Yield = 5 PC
10 PC of Component XY
to be back flushed
Goods issue
Component XY = 10 PC
Warehouse
Backflush takes place daily. At the end of the month, make corrections for any of the following;
Total quantity received
Total components issued
Total activities or utilities posted
The correction procedure is to choose the last back flush performed for the material, and reverse it
The last back flush is performed again but adjusting quantities needed to complete the mass balance for the month.
For example:
During the month a total yield of 6000 tonnes was back flushed, but at the month-end only 5980 tonnes was measured. The last back flush of 600 tonnes is reversed, and resubmitted as 580 tonnes.
Similarly, if the total component quantity issued was measured at month-end to be 1000 KG but only 800KG has been recorded by back flush, then the last back flush is reversed and resubmitted with the component quantity increased by 200KG.
Utilities can be adjusted in the same way.
If there is no need to change a production quantity by reversal of the back flush but additional components were used in production, then a component back flush only can be used to post additional quantities.
Values may be calculated from the BOM or Routing.
-
Final Confirmation & Technical Completion
Final confirmation
Settlement can be carried out
Technical completion
Production order
status:
Delivered
Order status:
Delivered
Order header
Operations
Operations
Components
Components
PRTs
PRTs
Costs
Costs
20
50
100
Production order
status:
Technically
completed
Order status:
Technically
completed
Order header
Operations
Operations
Components
Components
PRTs
PRTs
Costs
Costs
20
50
100
Final confirmation is made when every operation in the order has been completed.
confirmations can be reversed if required
Technical completion is used if the order is terminated prematurely. Technical completion prevents further activities being posted to the order; however the order is still open for financial settlements.
Technical completion may also be reversed.
As we use process orders assigned to product cost collectors production costs are settled on periodic basis.
System first checks the status of the manufacturing order and then the status of the product cost collector. The status of the product cost collector overrides the status of the manufacturing order. The relevant status for period-end closing in Cost Object Controlling is the status of the product cost collector.
-
Failed Transactions and Corrections
Incorrect or missing data for components and activities prevents processing of the back flush transaction
These errors must be corrected before postings can be made for materials and activities
When the errors have been eliminated, the theoretical yield and consumption may be adjusted and the results recorded
Failed transactions most frequently occur because of stock record error. After correcting the error, the failed transaction can be resubmitted
-
Summary
Non-feedstock raw materials are staged daily to the production area for planned manufactureAs 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 of Transactions
Simultaneous costing transactions:MF60 Stage Materials
MFBF Back Flushes
MF41 Month-End Corrections
COR6 Confirm Orders & Back Flush
COR2 Reverse Confirmations
Demonstrate how to stage material for preparation before production using transactions: MF60_01, MF60_02 and MF60_03
THEN
Demonstrate production receipts by back flush (repetitive manufacturing) and confirmation (process orders) using transactions: MFBF_01 and COR6
THEN
Show how to handle errors and failed transactions using transactions: MF41, MFBF_02 and MFBF_03
THEN
Demonstrate how to reverse confirmations using transactions: COR2_01 and COR2_02
Product: MEG 22000055; Plant: 1200; Storage locations:1200 to 1204.
-
Actual costs
Material is assigned to a CO Production Order
Material
STATUS CREATED
CO Production Order
This status does not allow for any actual postingsStep 1 Order creation
- Maintenance of Master Data
Status - CREATED -
Actual costs
CO Production OrderStep 2 Order release
- Maintenance of Master Data
Status - RELEASEDMaterial
STATUS - RELEASED
This status allows for actual postings -
Actual costs
CO Production OrderStep 3 FI postings
- Actual Postings
Status - RELEASEDMaterial
Order
Outside Services
430004430004 + 5.000,-
5.000,-
FI
CO
-
Actual costs
CO Production OrderStep 4 Direct activity allocation
- Actual Postings
Status - RELEASEDMaterial
Order
430004 + 5.000,-
Cost Center / Activity
943201 - 7.500,-
943201 + 7.500,-
150 * 50 = 7.500,-
quantity * price = cost -
Actual costs
CO Production OrderStep 5 Goods Issue to Order
- Actual Postings
Status GOODS MOVEMENT POSTEDMaterial
Order
430004 + 5.000,-
943201 + 7.500,-
100 * 11 = 1.100,-
quantity * price = costRaw Materials Consumed
400000Inventory Raw Materials
119400
1.100,-
1.100,-
400000 + 1.100,-
FI
CO
-
Actual costs
CO Production OrderStep 6 Goods Receipt from Order into Warehouse
- Actual Postings
Status PARTIALLY DELIVEREDMaterial
Order
430004 + 5.000,-
943201 + 7.500,-
100 * 50 = 5.000,-
quantity * price = value of the goods receipts from orderProduction Output
462001Finished Products
1194305.000,-
5.000,-
400000 + 1.100,-
462001 - 5.000,-
FI
CO
-
Actual costs - Summary
The results from the output receipts, plus material & resource consumptions, update the stock records and provide valuation of production according to standard cost approach. -
Product Costing: Overview
Month End Closing
Settlement
Variance Calculation
WIP
Calculation -
Period and year-end closing
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.
-
Period and year-end closing
Product Cost by Order
Type of settlement
ruleWork-in-Process
Variances
Settlement
Hierarchy of
Cost ObjectsFULL
PERIODIC
WIP calculated on base
of actual costsVariance
=
Actual Costs
-
Goods Receipts
Variance
=
Actual Costs
-
Goods Receipts
-
WIP
Should be periodically
Impossible
Possible
Funkcje
Functions
Product Cost by Period
WIP calculated on base
of target costsMust be periodically
-
Period and year-end closing
CO Production OrderStep 7 Work-in-Process Calculation
- Period-end closing
Status RESULTS ANALYSIS CARRIED OUTMaterial
Order
430004 + 5.000,-
943201 + 7.500,-
400000 + 1.100,-
462001 - 5.000,-
WIP Report:
Work-in-Process
13.600 - 5.000 = 8.600 -
Period and year-end closing
CO Production OrderStep 8 Settlement
of - Period-end closing
Status RESULTS ANALYSIS CARRIED OUTMaterial
Order
430004 + 5.000,-
943201 + 7.500,-
400000 + 1.100,-
462001 - 5.000,-
Work In Progress (WIP)
462201Work In Progress (WIP)
1194608.600,-
FI
8.600,-
CO
WIP is being updated on the order as statistical value for information purposes.
-
Period and year-end closing
CO Production Order new periodStep 9 Repetition of the steps from 3 to 7
- Actual Postings
Status PARTIALLY DELIVERED or DELIVEREDOrder
As a result of the actual postings in the new period there is a new balance on the order.
Material
430004 + 5.000,-
943201 + 7.500,-
400000 + 1.100,-
462001 - 5.000,-
400000 + 5.000,-
462001 - 7.000,-
-
Period and year-end closing
CO Production Order period 2Step 10 Work-in-Process Calculation (variant 1)
- Period-end closing
Status PARTIALLY DELIVEREDWIP Report (cumulated):
Work-in-Process
18.600 - 12.000 = 6.600Work-in-Process
in previous period
13.600 - 5.000 = 8.600
Cumulative: 15.200Order
Material
430004 + 5.000,-
943201 + 7.500,-
400000 + 1.100,-
462001 - 5.000,-
400000 + 5.000,-
462001 - 7.000,-
-
Period and year-end closing
CO Production Order Period 2Step 11 Settlement (variant 1)
- Period-end closing
Status RESULTS ANALYSIS CARRIEDMaterial
Order
Work In Progress (WIP)
119460Work In Progress (WIP)
462201FI
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 as cumulative value.
-
Period and year-end closing
CO Production Order period 2Step 12 Calculation of Variances and Settlement (variant 2)
- Period-end closing
Status TECHNICALLY COMPLETEDPrice Difference - Production Difference
464018Production Output
462001FI
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 the balance of the order was posted to production difference account and cumulated WIP was reversed.
WIP
462201WIP
1194608.600
8.600
-
Period and year-end closing
Variance: IntegrationMaterials
Labour
Depreciation
Goods Receipt
Variance
800
1.200
400
2.400
- 2.000
400
Material CATALYST
Quantity prod.: 10 pcs
Actual Costs
Product Cost Collector
Material Master
Accounting View
Standard Price
200
Settlement
Target Cost Ver. 0
Price 150
Quantity 50
Structure 200
Profitability Analysis
Variance400
Accounting
Stock
Price difference
2.000
400
FI
Stock
MM
CO-
PC
Materials
600
Labour
1.100
Depreciation
300
Standard Cost Estimate
10pcs * 200
CO-
PA
-
Period and year-end closing
Variance
Category
PA Assignment
linesValue Field
Cost Element
Group
+
+
+
You can settle (transfer) the production variances calculated in Product Cost Controlling for product cost collectors (settled periodically) and CO production orders to CO-PA. The individual variance categories (such as material price variance, material quantity variance, etc.) are transferred separately.
The PA transfer structure A1 consists of items called assignment lines. In these assignment lines you assign a cost element group and a variance category to a value field of the operating concern. To assure correct settlement to Profitability Analysis, you must assign each combination of the cost element group and the variance category to one value field in the operating concern.
Note the following when you use a PA transfer structure:
Every debit cost element must be in the PA transfer structure. You can either group all cost elements into a cost element group or define a number of groups for materials, internal activities, business processes, other overhead costs, etc. These groups are entered under the section cost elements.
Every variance category must be represented in the PA transfer structure. The variance categories are specified by the system and are entered under the source section.
Each debit cost element or combination of cost element group and variance category can only be assigned to one value field (n:1 relation).
The PA transfer structure A1 is assigned to the settlement profile PP01 which is defaulted for order types: RM01 - PCC for Repetitive Manufacturing, RM02 - PCC for Process Orders and CP01 -).
-
Period and year-end closing
CO-
PC
Material: MEG
Quantity: 10 pieces
Actual costs 2.400,-
Goods receipt -2.000,-
Variances/WIP 400,-
Actual costs
Product cost collector
Period accounting
Revenue
Sales deductions
Overheads plus Variances
+/- Change in Stock
= Result of a period
Company Code
Profit Center
Cost of goods sold
Revenue
Sales deductions
Manufacturing costs by
standard price
(Contribution margin I)Variances
= Result of a period
Company Code
Profitability
SegmentSettlement
CO-
PCPrCtr 1
PrCtr 1
FI
EC-
PCA
CO-
PA
FI
-
Period and year-end closing
Product Cost Collector
Item Plan Actual
Materials 4,000 4,600
Internal activities2.500 2.800
Overheads 1.500 1.600
EDC 0.500 0.600
Ethylene 2.000 2.200
Caustic Soda 1.500 1.800
Total8.000 9.000
Revaluation
Process costs
Overheads
Periodic Costs
%
%
-
Period and year-end closing
Work-in-Process
Overheads
Process costs
Revaluation
Periodic
costs
Calculations
and
analysisPostings
FI/COSettlement
Scrap
Variances
Period-end closing
-
Period and year-end closing
CO-
PC
Material: MEG
Quantity: 10 pieces
Actual costs 2.400,-
Goods receipt -2.000,-
Variances/WIP 400,-
Actual costs
Product cost collector
Period accounting
Revenue
Sales deductions
Overheads plus Variances
+/- Change in Stock
= Result of a period
Company Code
Profit Center
Cost of goods sold
Revenue
Sales deductions
Manufacturing costs by
standard price
(Contribution margin I)Variances
= Result of a period
Company Code
Profitability
SegmentSettlement
CO-
PCPrCtr 1
PrCtr 1
FI
EC-
PCA
CO-
PA
FI
Variances are written of f at this stage which will be adjusted during Material Ledger closing.
-
Period and year-end closing
Variance
Category
PA Assignment
linesValue Field
Cost Element
Group
+
+
+
You can settle (transfer) the production variances calculated in Product Cost Controlling for product cost collectors (settled periodically) and CO production orders to CO-PA. The individual variance categories (such as material price variance, material quantity variance, etc.) are transferred separately.
The PA transfer structure A1 consists of items called assignment lines. In these assignment lines you assign a cost element group and a variance category to a value field of the operating concern. To assure correct settlement to Profitability Analysis, you must assign each combination of the cost element group and the variance category to one value field in the operating concern.
Note the following when you use a PA transfer structure:
Every debit cost element must be in the PA transfer structure. You can either group all cost elements into a cost element group or define a number of groups for materials, internal activities, business processes, other overhead costs, etc. These groups are entered under the section cost elements.
Every variance category must be represented in the PA transfer structure. The variance categories are specified by the system and are entered under the source section.
Each debit cost element or combination of cost element group and variance category can only be assigned to one value field (n:1 relation).
The PA transfer structure A1 is assigned to the settlement profile PP01 which is defaulted for order types: RM01 - PCC for Repetitive Manufacturing, RM02 - PCC for Process Orders and CP01 - Standard CO production order (SABIC).
-
Material Ledger: Overview
Functions of Material Ledger:
Cost accounting using actual pricesStoring values of stock in three different valuations (legal valuation, valuation for reporting purposes, and profit center valuation) in multiple currencies.Overview
As a vital element of Product Cost Controlling, Material Ledger is gaining in importance.
The material ledger is a tool that collects data for materials whose master data is stored in the material master. On the basis of this data, the material ledger calculates prices for the valuation of these materials. The material ledger creates the basis for actual costing and makes stock valuation in up to three currencies and/or valuations possible.
-
Material Ledger: Overview
Functions of Material Ledger:
Cost accounting using actual pricesStoring values of stock in three different valuations (legal valuation, group valuation for reporting purposes, and profit center valuation) in multiple currencies.Overview
As a vital element of Product Cost Controlling, Material Ledger is gaining in importance.
The material ledger is a tool that collects data for materials whose master data is stored in the material master. On the basis of this data, the material ledger calculates prices for the valuation of these materials. The material ledger creates the basis for actual costing and makes stock valuation in up to three currencies and/or valuations possible.
-
What is the Material Ledger/Actual Cost Concept?
The Material Ledger(ML) is a tool within the CO Module that collects all transactional data for materials whose master data is stored in the material master. It acts as a subledger for selected materials that captures all goods movements, invoice values, transfers and price changes. On the basis of this data, the material ledger calculates and maintains the actual cost for these materials. This actual cost can then be utilized to valuate the material stock accounts.
-
Objectives of the Material Ledger
1. Actual Costing.
During the period, valuation of all goods movements is done with the preliminary valuation price which is normally the standard price. All variances from the preliminary valuation are maintained in the ML. At period end, revaluation of ending inventory 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
Variances of Finished GoodsVariances