SAP Product Costing Configuration SAP R/3 ENTERPRISE ECC6 Published by Team of SAP Consultants at SAPTOPJOBS Visit us at www.sap-topjobs.com Copyright 2009-11@SAPTOPJOBSAll rights reserved. No part of this publication may be reproduced,stored in a retrieval system, or transmitted in any form, or by anymeans electronic or mechanical including photocopying, recordingor any information storage and retrieval system without permissionin writing from SAPTOPJOBS.
TABLE OF CONTENTS1. INTRODUCTION 72. PRODUCT COST PLANNING 82.1 Basic Settings for Material Costing 102.2 Maintain Overhead Cost Elements 112.3 Define Calculation Bases 162.4 Define Percentage Overhead Rates 202.5 Define Quantity-Based Overhead Rates 232.6 Define Credits 242.7 Define Origin Groups (Optional) 282.8 Define Costing Sheets 302.9 Define Overhead Keys 332.10 Define Overhead Groups 352.11 Define Cost Component Structure 37 2.11.1 Create a cost component structure 40 2.11.2 Define the cost components. 42 2.11.3 Assign the cost elements to these cost components. 51 2.11.4 Cost elements for Additive costs / without quantity structure 52 2.11.5 Transfer structure 53 2.11.6 Cost component views 53 2.11.7 Assign org units to cost component structure 56 2.11.8 Cost component split 57 2.11.9 Cost component structure 583. MATERIAL COST ESTIMATE WITH QUANTITY STRUCTURE 603.1 Define Costing Types 613.2 Define Valuation Variants 733.3 Define Date Control 813.4 Define Quantity Structure Control 843.5 Define Transfer Strategy 893.6 Define Reference Variants (Optional) 93
3.7 Define Costing Variants 974. SELECTED FUNCTIONS IN MATERIAL COSTING 1094.1 Activate Cross-Company Costing (optional) 1094.2 Activate Cost Component Split in Controlling Area Currency (Optional) 1114.3 Define Quantity Structure Types for Mixed Costing (optional) 1134.4 Define Costing Versions (optional) 1164.5 Define Source Structure in Joint Production (optional) 1185. COST OBJECT CONTROLLING 1235.1 Product Cost by Order – Manufacturing Order Check costing variants. 1245.2 Check Order Types 1405.3 Define Goods Received Valuation for Order Delivery 1425.4 Work in Process – Define Results Analysis Keys 1445.5 Define Cost Elements for WIP Calculation 1465.6 Define Results Analysis Versions 1525.7 Define Valuation Method (Actual Costs) 1565.8 Define Line Ids 1605.9 Define Assignment 1625.10 Define Update 1655.11 Define Posting Rules for Settling Work in Process 1695.12 Define Number Ranges 1736. VARIANCE CALCULATION 1746.1 Define Variance Keys 1746.2 Define Default Variance Keys for Plants 1766.3 Check Variance Variants 1776.4 Define Valuation Variant for WIP and Scrap (Target Costs) 1816.5 Define Order type dependent parameters 1826.6 Define Target Cost Versions 184
6.7 Define Number Ranges for Variance Documents 1917. SETTLEMENT 1927.1 Create Settlement Profile 1927.2 Create PA Transfer Structure 1957.3 Maintain Number Ranges for Settlement Documents 1988. PRODUCT COST BY PERIOD 2018.1 Check costing variants for Product cost collectors 2018.2 Check Order Types 2298.3 Define Cost-Accounting-Relevant Default Values for Order Types and Plants 2388.4 Check Control Data for Repetitive Manufacturing Profiles 2418.5 Activate Generation of Cost Log in Repetitive Manufacturing 2458.6 Define Goods Received Valuation for Order Delivery 2469. WORK IN PROCESS 2479.1 Define Results Analysis Keys 2479.2 Define Cost Elements for WIP Calculation 2489.3 Define Results Analysis Versions 2489.4 Define Valuation Method (Target Costs) 2499.5 Define Valuation Variant for WIP and Scrap (Target Costs) (Optional) 2529.6 Assignment of Valuation Variant for WIP (Optional) 2539.7 Define Line Ids 2549.8 Define Assignment 2549.9 Define Update 2549.10 Define Posting Rules for Settling Work in Process 2549.11 Define Number ranges 25410. VARIANCE CALCULATION 25510.1 Define Variance Keys 255
10.2 Define Default Variance Keys for Plants 25510.3 Define Variance Variants 25510.4 Define Target Cost Versions 25510.5 Define Number Ranges for Variance Documents 25511. SETTLEMENT 25611.1 Create Settlement Profile 25611.2 Create PA Transfer Structure 25611.3 Maintain Number Ranges for Settlement Documents 25612. PRODUCT COST BY SALES ORDER 25712.1 Control of Sales-Order-Related Production/ Product Cost by Sales Order 257 12.1.1 Check Account Assignment Categories 257 12.1.2 Check Requirements Classes 259 12.1.3 Check Requirements Types 262 12.1.4 Check Control of Requirements Type Determination 264 12.1.5 Check Planning Strategies (selection of reqt. type through MRP group) 265 12.1.6 Check Strategy Groups (selection of reqt. type through MRP group) (optional) 26812.2 Preliminary Costing and Order BOM Costing 269 12.2.1 Check Costing Type 269 12.2.2 Check Costing Variants for Product Costing 27212.3 Results Analysis 280 12.3.1 Create Results Analysis Keys 280 12.3.2 Define Cost Elements for Results Analysis 280 12.3.3 Define Results Analysis Versions 280 12.3.4 Define Valuation Methods for Results Analysis 280 12.3.5 Define Line IDs 280 12.3.6 Define Assignment for Results Analysis 280 12.3.7 Define Update for Results Analysis 280 12.3.8 Define Posting Rules for Settlement to Financial Accounting 280 12.3.9 Maintain Number Ranges for Results Analysis Documents 28012.4 Settlement 281 12.4.1 Create PA Transfer Structure 281 12.4.2 Create Settlement Profile 28413. INFORMATION SYSTEM 28613.1 Maintain Summarization Hierarchies 28614. APPENDIX 29214.1 Customizing settings in OBYC 292
1. INTRODUCTIONA Warm Welcome Friends. You are going to love this book and we havetaken great efforts to ensure that we present the configuration in a verysimple yet detailed manner.Product costing module of SAP has eased out all hassles of costinga manufactured product. Product costing module uses data for valuationfrom the Production planning (PP) module.The Product Planning Module maintains the Bill of Material and Routing orthe Master Recipe. Product Cost consists of Material Cost, Labor cost andOverhead costTo arrive at the material cost, SAP picks up the quantity of raw andpacking material required from the Bill of Material. It then valuates thisquantity with the various prices available in the material master inaccordance with the strategy specified in customizing.In a like manner it does the same to arrive at the labor cost. The timerequired for each operation is specified in the routing or recipe. Thisquantity is multiplied by the activity prices maintained in the cost centeraccounting module. W e will cover all this and more in this documentW e will also cover product cost planning, cost object controlling byperiod (repetitive manufacturing), cost object controlling by order,cost object controlling by sales order and configuration settings for coproduct costing.W e had configured controlling area 1100, in the document on costcenter accounting. We will now do the product costing configuration incontrolling area 1100.
2. Product Cost PlanningFor doing the configuration we will use the following path on theSAP application screen:-Menu PathSAP Menu Tools AcceleratedSAP Customizing SPRO -Edit ProjectProduct Cost Planning is a planning tool that helps you predict thecosts Incurred when you manufacture a product or provide aservice.Organizations use it to: • Set prices for the valuation of finished and semi finished goods in the Materials Management application component • Set prices for finished and semi finished goods in the Sales and Distribution application component • Calculate the cost of goods manufactured or the cost of goods sold for the Profitability Analysis function in Controlling • Set a standard to measure production efficiency in Cost Object ControllingProduct Cost Planning shows you: • The cost composition of each product • The value added in each manufacturing step • The value added in each overhead process
You can also create an inventory cost estimate at the end of yourfiscal year to provide alternative valuations of your inventory forbalance sheet Purposes.Other functions include reference and simulation costing, whichallow you to simulate the cost impact of changing one productionfactor or modifying the amount of overhead allocated to a product.
2.1 Basic Settings for Material CostingThe company A Ltd for its plant 1100 requires the followingoverheads:-1) Material overhead2) Production overheadIt should be calculated as follows:-On materials 5 % material overhead should be calculated and onWages 4 % Production overhead should be calculated.Let us go about configuring the costing sheet from steps below.We will now see how to create a costing sheet for the purpose ofoverhead calculation.
2.2 Maintain Overhead Cost ElementsMenu PathIMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing OverheadMaintain Overhead Cost ElementsPurpose of ConfigurationTo allocate overhead to products, you need to define overhead costelements.The SAP system then posts the overheads to these overhead costelements.The cost center is credited with the overhead cost element and theproduct or the production order is debited with the overhead costelement.Let us now create secondary cost elements for overhead.Create secondary cost elements of type 41 (overhead).Update the following:-
Click on SaveCreate another overhead cost element for production overheads
2.3 Define Calculation BasesMenu PathIMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing OverheadCosting Sheet: Components Define Calculation BasesPurpose of ConfigurationThe calculation base determines to which cost elements overhead isapplied together.We will define 2 bases on which overheads will be calculated:- 1) Materials 2) WagesProceed as follows:-Click on and update the following:-
Click on SaveSelectDouble clickUpdateClick on and Update the following:-The Raw material consumption is booked to cost elements 400000,400013 and 400700. This is created as a cost element group11RMPM.
We update this as base for our calculation of overhead.Click on SaveSelectWages are booked under the primary cost element 420003 and420506 and also wages allocation from other cost center isallocated using secondary cost element 943201.Therefore we specifythis as base.Double click and Update the following:-Click on
2.4 Define Percentage Overhead RatesMenu PathIMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing OverheadCosting Sheet: Components Define Percentage Overhead RatesPurpose of ConfigurationWe want to calculate 5 % overhead on Material and 2% on wages.But the condition is that, it should be only calculated for plant1100.To fulfill the above requirement we need to select the dependencyoverhead type/ plant. Thus the system will only calculateoverhead rate for plant 1100. In the Std. SAP system there are quitea number of dependencies available such as plant, order type,overhead type, overhead key, company code etc.Here we can calculate Plan and actual overhead. Plan overhead rateis required for the purpose of planning the cost of the product(standard cost estimate). Actual overhead rate is required for thepurpose of charging it to the production order.In this step we will create the overhead rate, attach thedependency and define the overhead rate. Further we will alsodefine whether it is plan or actual.Click on and update the following:-
Overhead type – 1 is actual overhead rateOverhead type – 2 is planned overhead rateClick on SaveClickSelectDouble clickClick on and update the followingClick onTo maintain a new dependency the path is as follows:-Menu Path
IMG Controlling Cost Center Accounting Actual Postings Period-End Closing Overhead Costing Sheet: ComponentsExtras: Dependencies / Condition Tables Define ConditionTables/ Define Dependencies.Create a new Condition table with table name as 999You need to select fields Controlling area, Overhead type. Profitcenter and plant.Create a new dependency.Create a new access sequence. In this access sequence you willassign the condition table. 2.5 Define Quantity-Based Overhead RatesMenu PathIMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing OverheadCosting Sheet: Components Define Quantity-Based OverheadRatesPurpose of ConfigurationIn addition to percentage-based overhead rates, you can also definequantity-based overhead rates, for example, 100 USD per tonne).You can determine overhead rates in the plan and actual. Here tooyou need to attach the dependency.We will not configure a quantity overhead.
2.6 Define CreditsMenu PathIMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing OverheadCosting Sheet: Components Define CreditsPurpose of ConfigurationBy defining the credit key you are crediting the cost center anddebiting the product or the production order. The credit on the costcenter happens with the overhead cost element which we createdearlier 1101101 Material overhead and 1101104 productionoverhead.Here we attach the overhead cost center which is to be credited.You can also define what percentage of the overhead is to beallocated as fixed costs.Therefore we will create 2 credit keys one for material overhead andother for the production overhead.
Click on and update the following:-Click onSelectDouble clickUpdate the following:-
Click onWe update the cost center which is to be credited using theoverhead cost element.Click onSelectDouble clickClick on
2.7 Define Origin Groups (Optional)Menu PathIMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing Define OriginGroupsPurpose of ConfigurationOrigin groups are created to subdivide the material costs further.Materials assigned to the same cost element by automatic accountdetermination can be separated into origin groups. If an origin group is entered in the costing view of the material master record, the combination of origin group and cost element is updated in the Controlling module. If the Material origin indicator in the costing view of the material master record is specified in addition to the origin group, the costs are updated under the combination of material number and cost element in the Controlling component.Therefore you can do the following for each cost element and origingroup: Calculate OverheadIf you have maintained origin groups for the raw materials, you candefine a calculation base in the costing sheet for each group of rawmaterials. This enables you to define different overhead surchargesfor each group of raw materials.
Make assignments to cost componentsIf you have maintained origin groups for the raw materials, you cancreate separate cost components for important materials or groupsof materials.We will not configure origin groups.
2.8 Define Costing SheetsMenu PathIMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing OverheadDefine Costing SheetsPurpose of ConfigurationThe costing sheet integrates all elements of overhead costingdefined earlier such as calculation base (Z110Material, Z111Wages), overhead rates (Z113 Material overhead, Z115production overhead) and the credit key (Z01,Z02).Let us create a new costing sheet.The overhead is dependent on the plant.Material overhead @ 5% is calculated on Material costs andproduction overheads @ 4 % are calculated on wages.Click on and Update the following:-
Click on SaveSelectDouble click onClick on and update the following:-
Click on SaveClickClick to check the costing sheet.
2.9 Define Overhead KeysMenu PathIMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing OverheadDefine Overhead KeysPurpose of ConfigurationOverhead keys need to be configured if you have defined thedependency of overhead key.In our current scenario we are not using overhead key dependency,nevertheless we still understand it.You can use overhead keys for individual order calculation ormaterial-related calculation of an overhead percentage rate.To determine an overhead percentage rate through the overheadkey, you must• Assign a costing sheet to your production order, Enter in the assigned costing sheet, overheads that use the overhead key field.• Assign the overhead key to an overhead group.• Enter the overhead group in the material master record for the material to be produced.The Std. overhead keys are as follows:-
2.10 Define Overhead GroupsMenu PathIMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing OverheadDefine Overhead GroupsPurpose of ConfigurationHere we create overhead groups so that you can define conditionsin the costing sheet for the calculation of overhead that apply onlyto certain finished or semi finished products.These conditions are linked to overhead keys. The overhead key isselected through an overhead group specified in the material masterrecord of the material to be costed.ExampleSuppose you want to apply an overhead rate of 10% to one group ofmaterials and an overhead rate of 20% to another group ofmaterials. To do this, you create two overhead groups and twooverhead keys:Overhead Group Overhead key PercentageSAP10 SAP10 10%SAP20 SAP20 20%You enter overhead group SAP10 in the master records of thematerials in the first group, and overhead group SAP20 in themaster records of all materials in the second group.The costing sheet for overhead calculation is selected through thevaluation variant. You create two lines in this costing sheet. In the
first line, you link the percentage 10% to the overhead key SAP10.In the second line you link the percentage 20% to the overhead keySAP20.In our current scenario we are not using overhead groups; we stillsee the standard SAP configuration.
2.11 Define Cost Component StructureMenu PathIMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing Define CostComponent StructurePurpose of ConfigurationIn Product Costing, the costing results are displayed and savedusing a structure which is termed as Cost Component Structure.Cost component structure controls how the results of activity pricecalculation or material costing are stored.The cost component structure groups cost elements into costcomponents to show the following information: - Activity prices for an activity type Planned cost of a productIn the cost component structure, we assign cost elements to costcomponents to define a cost component split to our specificrequirements. We normally assign a number of cost elements to acost component.We are defining the cost component structure as a primary costcomponent split. As a result primary costs from cost centers areincluded in the cost estimate.
There are various configuration settings to be defined for theindividual cost component.We will briefly discuss each of them here:- 1) Cost share – Whether the cost component is relevant only for variable cost or Fixed and Variable costs. 2) Roll up cost component - The "Roll up" indicator determines, for example, that the costs for the usage of a raw material in a semifinished product are displayed in the cost estimates of the higher-level semifinished products and of the finished product. Always select this. 3) Filter criteria – Whether the cost component is cost of good manufactured or Sales and administration costs. 4) Inventory valuation – Whether the cost component is relevant for inventory valuation or not, or only relevant for variable costs or relevant for both fixed and variable costs.Cost Component ViewsYou can display the results of the cost estimate in the followingviews: Cost of goods manufactured Sales and administration costs Inventory (commercial)The cost component views are created using the attributes of thecost components in the cost estimate. When you create a costestimate, you can display the costs in the cost component viewsdefined.Cost Component GroupsYou can create cost component groups for example in order togroup together all production costs or all raw material costs. Thesecost component groups can be evaluated in the costed multilevelBOM or in the custom-programmed reports.
For each cost component, you can assign two cost componentgroups.Click on and Update the following:-Let us create a cost component structure for the following:- Cost Components Source Raw Material and BOM SFG (Materials) BOM Packing Material (Materials)Material Overheads Cost Sheet Salaries and Routing/Co Wages st Center Production Cost Sheet Overhead Depreciation Cost Sheet Other Costs Cost Sheet
2.11.1 Create a cost component structureEnter an alphanumerical key and a name for the cost componentstructure, and specify whether the cost component structure is aprimary cost component split.
2.11.2 Define the cost components.Enter the cost component structure, a key and a name for the costcomponent. Define the attributes of the cost component. Forexample, specify if the cost component contains variable or full costs production, distribution or administrative costs relevant for the stock evaluationDouble clickClick onUpdate the following:-
Roll up cost component – Selecting this makes the cost of Rawmaterial to roll up to the next level of finished good.Click on to create another cost component
Click on SaveClickThese are the cost components created.
Now we need to attach the cost component structure to the costelements
2.11.3 Assign the cost elements to these cost components. For each cost component, enter the cost component structure, the chart accounts, and the relevant cost element interval.SelectDouble clickClick onUpdate the following:-Click on Save
2.11.4 Cost elements for Additive costs / without quantity structureHere you can define which cost elements or cost elements andorigin groups are proposed in cost estimates without quantitystructure or when additive costs are entered when you enter a costcomponent.We are not configuring the Update of additive costs which is similarto above maintenance.
2.11.5 Transfer structureThe transfer structure transfers the costs from one cost componentstructure to the cost components of another cost componentstructure.If you want to transfer data from a primary cost component split inCost Center Accounting and the primary cost component split usesa different cost component structure, assign the cost components ofthe source cost component structure to the cost components of thetarget cost component structure.We are not configuring the Transfer structure2.11.6 Cost component views
We want only a single cost component view i.e. Costs of goodsmanufacturedDouble clickDouble click
2.11.7 Assign org units to cost component structureAssign the cost component structure to the relevant organizationalunits, and specify when the assignment is valid and whether youwant to have an auxiliary cost component split in addition to themain cost component split.Double clickClick onWe are masking the company code, plant and costing variant to thecost component structure. You can even specify actual entriesinstead of masking.We can attach one more cost component split (called as theauxiliary cost component split) which is for statistical purpose. Youneed to first configure the auxiliary cost component split.
2.11.8 Cost component splitYou can group the cost component split into Cost componentgroups. You create cost component groups in this step and thenattach these cost component groups to the individual costcomponent structure. A possible cost component group could beBOM, Routing, BOM & Routings.We are not configuring anything over here. In case you need toconfigureDouble click and maintain the entries.
2.11.9 Cost component structureWhen the cost component structure is no longer in the creationphase, activate it.After configuring all the above you need to activate the costcomponent structure. To activate click on ActiveDouble clickClick
3. Material Cost Estimate with Quantity StructureIn the steps below we will configure a costing variant.A costing variant has various components within it like costingtype, valuation variant, date control, quantity structure control,transfer strategy etc.We will first see the components within it and finally the costingvariant. Costing variant is a link between application andcustomizing and enables us to cost a product (mainly Finishedgoods and Semi-finished goods).
3.1 Define Costing TypesMenu PathIMG Controlling Product Cost Controlling Product CostPlanning Material Cost Estimate with Quantity Structure Costing Variant: Components Define Costing TypesPurpose of ConfigurationThis key is used for internal control of costing application. This keydetermines which object is to be costed, how the data is saved andwhat type of costing (Product costing using BOM/Routing or Unitcosting without BOM/Routing). It is recommended to use SAPstandard types for global design.Standard cost estimate as the standard price or the fieldcommercial price.You can also specify that no update takes place in the materialmaster.Further you define here which valuation view is costed. Legal,Group or profit center (in case material ledger is activated)
Double clickWe will use the standard costing type 01 the configuration of whichis as follows:-
• Whether the cost estimate should be saved with a date : without date With date With start of period For the standard cost estimate, you must update automatic costing with the With start of period indicator. This ensures that the results of the standard cost estimate can be used as the standard price for that period.
For the other costing types, you can update the costing results with the With date indicator, for example. In this case the current date becomes part of the key.Here you define on what basis overhead is calculated:-You enter a cost component view. i.e. cost of goods manufactured,sales and administration costs etc.We are calculating overheads not on the basis of cost componentview but on other bases. Therefore nothing is configured here.
Since we are using Material Ledger we will also require costingtype for group and profit center valuation.Standard costing type for Group valuation and Profit centervaluation are available. If they are not available you can create yourown costing types.Let us see the configuration for these standard costing types:-Double click
ClickChange the description of the costing type from toClick on SaveLet us now the see configuration for profit center cost estimateDouble click
ClickChange the description fromtoClick on Save
3.2 Define Valuation VariantsMenu PathIMG Controlling Product Cost Controlling Product CostPlanning Material Cost Estimate with Quantity Structure Costing Variant: Components Define Valuation VariantsPurpose of ConfigurationThrough this key we determine which value from material master(based on BOM) is used for costing, which activity price (based onrouting data) is used. It is recommended to use SAP standardvalues.Let us create a valuation variant with key Z11. We will discuss theconfiguration required for each of the tabs.Click on and update the following:-In the tab Material valuationWe define the sequence in which the system searches for pricesfrom the accounting view or costing view of the material masterrecord to valuate materials. You can also access prices frompurchasing info records and condition types.We have defined the following sequence:-Planned price1 is manually maintained in the costing view of thematerial master. System while searching prices for raw and packingmaterial first accesses planned price 1. In case no planned price ismaintained, then system looks for the valuation price according toprice control in the material master. Thus in case of raw & packingmaterial the price control is V (moving average) it looks for a movingaverage price. In case no moving average price is maintained in thematerial master, the 3rd strategy will be used i.e. system will look for
standard price in the material master. The fourth strategy is usedin case a material is valuated with standard price and fails all thefirst 3 criteria.The Inc. additive costs is also selected (this selection is optional)in case you manually want to maintain additional price for freightin another transaction called as maintain additive cost. In the tab Activity Types / Processes Here we define the sequence in which the system searches for prices in activity type planning in Cost Center Accounting Costing to valuate the utilized activity types. You also specify which plan/actual version is used.
The plan/actual version is maintained in the controlling area, wehave maintained in the controlling area 1100 in the e-book costcenter accounting. We will select the plan average price of allperiods i.e January to December.In case you want to have different activity prices for group andprofit center view. You need to create further 2 valuation variantsand assign CO version D01 and D02 to the valuation variant. (Applicable only where material ledger is activated)Else the same valuation variant can be assigned to the 3 costingvariants(Legal, Group, Profit Center valuation) In the tab Subcontracting Here we define the sequence in which the system searches for prices in the purchasing info record.
In purchasing, quota arrangements are used to create a mixedprice for materials that are manufactured with externalvendors with parts provided by the customer.You can specify whether the quota of the individual vendorsthat are entered in the source list for the material to beprocessed should be determined through the planned quotaarrangement or the actual quota arrangement.In the tab External processingHere we define the sequence in which the system searches forprices in the purchasing info record or routing operation forvaluation of the external activities.
In our configuration we have defined that the system will search for price from operation (which is manually maintained in the routing), in case no price is maintained the system will search for info records maintained in the system (net quotation price)In the tab Overhead costsHere we link the costing sheet Z1100 Costing sheet of A Ltdcreated by us earlier, to the valuation variant.We can also specify whether overhead is calculated forsubcontracted materials in material costing. We do not require thisso we will not configure this.
Important noteIf you want to use different valuation strategies or differentoverhead rates in plants that belong to the same company code, youcan define plant-specific valuation variants by assigning a valuationvariant to a plant. Choose the push button Valuation variant/plant.If you dont do this, the valuation variants apply to all your plants.In the tab Misc.
ClickThis is Indicator for relevancy to costing; it controls the extent towhich a BOM item, operation, or sub operation in the routing isincluded in costing.It is used for the standard cost estimate and the calculation ofplanned costs and actual costs for a work order, this indicatordetermines whether the item is included in costing.Examples • A BOM item or operation for which the indicator for relevancy to costing is X is fully relevant to costing. • A BOM item or operation without an indicator for relevancy to costing is not relevant to costing at all.
The configuration shown below is the standar setting in SAP. Thecosting relevancy indicator 1, 2 and 3 indicates the relevance forcosting purpose. If these indicators are selected in BOM or routingthey become applicable.ClickClick onClick
3.3 Define Date ControlMenu PathIMG Controlling Product Cost Controlling Product CostPlanning Material Cost Estimate with Quantity Structure Costing Variant: Components Define Date ControlDate control, controls the dates on which the quantity structureand the value structure are created. The dates determine thefollowing parameters: • For product costing ( material cost estimate with quantity structure, sales order costing) The validity period of the cost estimate The date on which the quantity structure is determined (quantity structure date) The date on which the quantity structure is valuated (valuation date)Date control determines which dates are proposed or displayedwhen a cost estimate is created, and whether these dates can bechanged by the user.The standard system contains predefined date control IDs. You canuse these without making any changes.We will use the standard SAP date control PC01.We will see the configuration for the standard
3.4 Define Quantity Structure ControlMenu PathIMG Controlling Product Cost Controlling Product CostPlanning Material Cost Estimate with Quantity Structure Costing Variant: Components Define Quantity StructureControlPurpose of ConfigurationQuantity structure control is used in cost estimates with quantitystructure to specify for each plant how the system searches for validalternative BOMs and alternative routings to create a quantitystructure for multilevel BOMs. The search is carried out on thebasis of two parameters: • Application of BOMs to determine alternatives automatically This key determines how the system should choose the suitable alternative for the different company areas in which the BOM is used. • Selection ID for selecting alternative routings This key determines the priority given to routings during routing selection.Let us use the standard setting PC01We will display the settings of PC01
Selection ids for routingHow the routings are selected. The selection id is 01 and theselection procedure is numbered 1, 02, 03, 04, 05, 06 07. Type (thetask list type the routing types for e.g. Routings, Referenceoperation sets, Rate routings, Reference rate routings, Standardnetworks, Rough cut planning profiles)
3.5 Define Transfer StrategyMenu PathIMG Controlling Product Cost Controlling Product CostPlanning Material Cost Estimate with Quantity Structure Costing Variant: Components Define Transfer ControlPurpose of ConfigurationThe purpose of this setting is to prevent the system from creating anew cost estimate for a material when costing data already exists.Instead, the existing costing data is simply transferred into the newcost estimate. This improves performance. • Single-Plant Transfer If cost estimates for certain materials already exist in the individual levels of the BOM, they are not recosted. Rather, the existing costing data is transferred into the cost estimate in accordance with the transfer control. If you always want to recost, choose the transfer control No transfer. • Cross-Plant Transfer The following special procurement types are taken into account for transfer into material cost estimates: Transfer from other plant Production in other plant If you have entered one of these special procurement types in the costing view of the material master record, the system proceeds as follows:
o In the plant from which the material component is withdrawn according to the special procurement type, the system looks for existing costing data and transfers that data into the cost estimate.Strategy Sequences for Single-Plant and Cross-Plant TransferThe strategy sequence determines the order in which the systemsearches for costing data. If the system cannot select a costestimate even after reaching the end of the strategy sequence, itexplodes the BOM of the material and creates a new cost estimate.You can define up to three strategies for single-plant transfer andthree strategies for cross-plant transfer.You limit the search further by setting the following indicators: • Within current fiscal year Here the costing dates must lie within the current fiscal year. • Age (periods) Here you can specify how many periods the system should search for costing data in. If the indicator within current fiscal year is set, the number of periods that you enter here is limited to the fiscal year. If you turn on the indicator Transfer only with collective requirements material. the transfer depends on the requirements indicator of the material component. • For materials in the individual requirements the system creates a new cost estimate even if a cost estimate for the material exists according to the strategy sequence. • For materials in collective requirements, the existing cost estimates are transferred into the new cost estimate.Let us use the standard PC01 – Transfer w/plant change
We will see the configuration and change it to No transfer, whichmeans that every time a new product is costed using some existingsemi-finished goods, system will explode and cost all the semifinished goodsIn cross plant we will keep the following strategy sequence:-Future standard cost estimateCurrent standard cost estimatePrevious standard cost estimateFurther the indicator within fiscal year is selected, so that systemsearches the above costs only in the current fiscal year.
3.6 Define Reference Variants (Optional)Menu PathIMG Controlling Product Cost Controlling Product CostPlanning Material Cost Estimate with Quantity Structure Costing Variant: Components Define Reference variantsPurpose of ConfigurationReference variants allow you to create material cost estimates orcosting runs based on the same quantity structure for the purposeof improving performance or making reliable comparisons.The following are examples of situations where reference variantsare useful: • With a reference variant, the system can use the quantity structure of the existing standard cost estimate when it calculates the inventory cost estimate without having to predetermine the quantity structure. In the reference cost estimate, you specify that the overhead for the inventory cost estimate should still be calculated differently.We are not using reference variant.The SAP standard reference variant is shown below:-
3.7 Define Costing VariantsMenu PathIMG Controlling Product Cost Controlling Product CostPlanning Material Cost Estimate with Quantity StructureDefine Costing VariantsPurpose of ConfigurationCosting Variant is the key that determines how cost estimate iscarried out and valuated. Typically, for every type of object(Material, Production order, Maintenance order etc) a uniquecosting variant is created.Through Costing variant we decide How BOM /Routing selection isdone, which price (standard, moving average etc) is used for costingand whether the calculated cost is to be updated in the master dataof the object.This is done by linking Costing variant to other control parametersas defined in Costing type, Valuation variant, Date control, quantity structure determination, and transfer control. Costing Variant: - The costing variant contains all the control parameters for Product Costing.
Controls Control Description ParametersCosting Type Price Indicator that determines Update in whether the Costing Material results are written to the Master material .Costing results can be written to :- Standard Price Field- used in Standard Costing No update –When performing Simulation CostingValuation Material Strategy sequence thatVariant Valuation determines the valuation Strategy of the materials used in the Cost estimate. For example ,material valuation has the following strategy sequence :- 1 Planned Price 1 2 Standard Price If the system finds a value in the planned Price 1 field, this value is taken as the value for valuating the material. If the system does not find a value, the value in the standard price field is used. Activity Strategy sequence that Type determines how activity Strategy types is valuated in Costing.
For example, Activity Type has the following strategy sequence :- 1 Plan Price – average for the whole year 2 Plan price for the period If the system finds a plan average price for the activity type, this price is used for valuating the activity type. If the system cannot find a plan average price, it looks for a plan price for the period. Quantity BOM Strategy Sequence that Structure determines which BOM Determination usage is selected in Costing :- e.g.Production BOM will be used for Costing Routing Strategy Sequence that determines which Routing usage is selected in Costing :-You can copy an SAP standard costing variant PPC1 to create anew costing variant.In case you need to change valuation variant and costing typeit is not possible. Therefore start from scratch to create a newcosting variantClick and update the following.
Use the costing type, valuation variant configured earlier and thestandard date control PC01, quantity structure control PC01,transfer control PC01In tab Qty. StructIf the Pass on lot size indicator is selected, the system determinesthe costing lot size using the lot size of the highest material in theBOM and the input quantities of the components.The various selections for Pass on lot size indicator are as follows:-1) Do not pass on lot size
If this indicator is not selected, the materials further down in thestructure are costed in accordance with the lot size in the costingview of the material master record. When the materials in the next-highest costing level are costed, the costing results of thesemifinished materials are converted to the lot size of the finishedmaterial to calculate the material costs for the finished product.2) Pass on lot size only with individual requirementIn the MRP view of the material master record, you can specify thata material is planned as an individual requirement. If such amaterial is added to another material, costing uses the lot size ofthe highest material.3) Always pass on lot sizeHere, the costs for all the materials in a multi-level BOM arecalculated using the costing lot size of the highest material. Thisfunction is used principally in sales order costing.Here we have selected not to pass on lot size.
In tab Additive CostsFollowing configuration is decided:- • Whether we can transfer the cost components that were entered in the form of an additive cost estimate • Whether the additive costs for materials with the special procurement types stock transfer or production are included in another plantWe want to include additive cost (costs manually created suchas freight) and also to include them in stock transfers
In the tab AssignmentsWe determine the following: • Which cost component structure is used for the cost estimate • Which costing version is used • Whether the cost component split can be saved in the controlling area currency in addition to the company code currency • Whether you can cost across company codes with this costing variant
You will get messagePress enter to continue.Click on Save to save costing variantClick on to check the costing variantSimilarly you need to configure Z1P2 and Z1P3 for Group and Profitcenter valuation.In Z1P2 you will select the costing type created for group valuation
Rest of the configuration will be same as Z1P1.For Z1P3 selecting costing type created for profit center valuation.
Rest of the configuration will be the same as Z1P1
4. Selected Functions in Material Costing 4.1 Activate Cross-Company Costing (optional)Menu PathIMG Controlling Product Cost Controlling Product CostPlanning Selected Functions in Material Costing ActivateCross-Company CostingPurpose of ConfigurationHere we specify that costing across company codes is allowed.Costing across company codes means that: • Material costing can access information in more than one company code • Additive costs for costs such as transportation charges can be taken into account with planned stock transfers • The costing results can be released for all company codes in the controlling areaThis step is only for costing types that are defined for the legalvaluation view. The settings do not affect the group view or theprofit center view.Costing across company codes requires that the same costcomponent structure be used in all company codes in a givencontrolling area. Otherwise, the total value of the cost estimate willbe used instead of the individual cost components.Click onUpdate the following: -
4.2 Activate Cost Component Split in Controlling Area Currency (Optional)Menu PathIMG Controlling Product Cost Controlling Product CostPlanning Selected Functions in Material Costing Activate CostComponent Split in Controlling Area CurrencyPurpose of ConfigurationHere we specify that the cost components of material cost estimate,are updated not only in the currency of the company code but alsoin the currency of the controlling area. This requires that the Allcurrencies indicator be set as the control indicator for thecontrolling area.If the controlling area currency is not the same as the companycode currency, the following are always updated: • Cost component splits in company code currency • Itemizations in both currencies (provided that the costing variant allows itemizations to be saved)This step is only relevant if the following applies: • The controlling area currency is not the same as the company code currency • You want to calculate variances in period-end closing of cost object controlling • Your system is not set up for group costing.To activate updating the cost component split in a second currency,proceed as follows: 1. Choose New entries.
2. Enter a company code for which a currency has been maintained that is not the same as the controlling area currency. 3. If necessary, enter a costing type and a valuation variant.We will not activate cost component split in controlling areacurrency.
4.3 Define Quantity Structure Types for Mixed Costing (optional)Menu PathIMG Controlling Product Cost Controlling Product CostPlanning Selected Functions in Material Costing Mixed Costing Define Quantity Structure TypesPurpose of ConfigurationThis should be configured only if you are planning to work withmixed cost estimate.A mixed cost estimate is basically used where more than oneproduction versions are used.Mixed cost estimate is thus a weighted average of the mix ofproduction versions.For e.g.Cost of Finished goods as per production version 1 is 100 USDper kgCost of Finished goods as per production version 2 is 120 USDper kgThe production version mix will be during the year:-production version A is 60% and production version B is 40%Based on this mix, the mixed cost estimate is as follows:-100 USD * 60 = 6000120 USD * 40 = 4800=====================Total 10800
Mixed cost estimate = 10800/100 = 108 /kgThe quantity structure category controls how mixed costing isapplied and how it is executed. It determines which procurementalternatives are to be costed with which mixing ratios for thematerials in the cost estimate.Double ClickClick onUpdate the following: -You can have time dependency as follows:-
4.4 Define Costing Versions (optional)Menu PathIMG Controlling Product Cost Controlling Product CostPlanning Selected Functions in Material Costing DefineCosting VersionsPurpose of ConfigurationThis should be configured only if you are planning to work withmixed cost estimate.Costing versions enable you to create multiple cost estimates for thesame material and analyze the different results in the informationsystem.You can make the following changes: • Exchange rate type for currency translation If you dont use costing versions, the exchange rate type is determined through the valuation variant specified in the costing variant. If you use costing versions, you can specify that a different exchange rate type should have priority. • Quantity structure type for mixed costing Mixed cost estimates are created with reference to a costing version. You can create more than one mixed cost estimate for the same material; such cost estimates are differentiated by their costing versions. Here we attach the quantity structure mix to the costing version, since we will work with costing mixed costing
Click on new entries and update the following:-.
4.5 Define Source Structure in Joint Production (optional)Menu PathIMG Controlling Product Cost Controlling Product CostPlanning Selected Functions in Material Costing Costing inJoint Production Define Source StructurePurpose of ConfigurationApplicable if you have co-product. In our scenario we have a co-product therefore we configure it.You only need a source structure for costing co-products if youwant to distribute the costs to the co-products using cost elements.If you dont want to distribute the costs using cost elements, thecosts will be distributed on the basis of the apportionmentstructure in the material master record. In this case you do nothave to process this step.A source structure contains several source assignments, each ofwhich contains the individual cost elements or cost elementintervals to be settled using the same distribution rules.The quantity structure of the material is determined by means ofentries in the material master record. If none of these entries exists,the quantity structure is determined by means of the quantitystructure determination ID specified in the costing variant.Here we assign cost elements to assignment structure.Click onUpdate the following: -
Click on SaveSelectDouble ClickClick onUpdate the following: -
Click on SaveSelectDouble ClickClick onUpdate the following: -
5. Cost Object ControllingIn the section product cost planning we have only seen planning ofthe standard cost estimate to be released in the material master.In this section we will see how configuration is done for costing theproducts on various cost objects such as production orders, processorders, sales orders and product cost collector.Further we configure how the Work in process, variance arecalculated and finally settled to the material.
5.1 Product Cost by Order – Manufacturing Order Check costing variants.Menu PathIMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Manufacturing OrdersCheck Costing Variants for Manufacturing Orders (PP)The costing variants used on manufacturing orders are shownbelow:-Let us see the configuration settings for PPP1Double click
5.2 Check Order TypesMenu PathIMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Manufacturing OrdersCheck Order TypesPurpose of ConfigurationHere an important thing we need to check is the settlement profile.Settlement profile PP01 is attached to the production order typeOrder type 1100 is copied from Standard order type PP01.
ClickClick onRemember to change the settlement profile after youconfigure the settlement profile ZPP1
5.3 Define Goods Received Valuation for Order DeliveryMenu PathIMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Define Goods ReceivedValuation for Order DeliveryPurpose of ConfigurationThis step is only relevant if your have specified price control V inthe material master records of semifinished products or finishedproducts.The value for the credit is determined using a valuation variant. Youmust define this valuation variant separately for each valuationarea. The valuation variant determines which material price is usedfor the credit posting.For materials with price control S, on the other hand, the creditposting is always made at standard price.This Step is not relevant for us; nevertheless we still see theconfiguration. The value gets automatically maintained due toplant which is copied from the standard SAP plant
5.4 Work in Process – Define Results Analysis KeysMenu PathIMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define Results Analysis KeysPurpose of ConfigurationIn this step you create keys that contain control parameters for thecalculation of work in process. You can calculate work in processfor the following orders: Production orders with quantity structure (PP) Production orders without quantity structure (CO) Run schedule headers, if reporting point quantities can be entered Process orders, if the confirmation is made separately for each operation and not at header levelWIP is the total actual costs posted to production order (in make tostock, e.g.). The actual costs can be the good issue, activitiesconfirmation, overhead posting as well as good receipts.At month end when you calculate WIP, as long as the status of theprod order is neither TECO nor DLV, total costs posted will betreated as WIP. When settled, the posting will be made to FI and toprofit center if used.In the following month, when there are further postings to orderand if the order status is still Not DLV or TECO, the change in theWIP will again be posted to FI until the order is DLV or TECO, inwhich case prod variance will be calculated and settled to FI.The result analysis key is entered into the master records of theorders through the default values for each order type and plant.
Each order for which you want to create work in process (WIP) mustreceive a results analysis key. The presence of a results analysis keyin the order means that the order is included in WIP calculationduring period-end closing.Results analysis keys are already defined in the SAP standardsystem.In the product cost by order component we use the RA key000002 – WIP calculation at Actual costsClick onClick on
5.5 Define Cost Elements for WIP CalculationMenu PathIMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define Cost Elements for WIP CalculationPurpose of ConfigurationIn this step we create cost elements under which the work inprocess and (if applicable) the reserves are updated on the order.These secondary cost elements must have cost element type 31(results analysis for orders/projects). Do not define any costelements in the Controlling component for the G/L accounts inthese posting rules, because the order is not credited when thework in process is settled.We will create 3 cost elements for WIP:- 1) WIP - All costs 2) WIP - Material costs 3) WIP - Secondary costs
5.6 Define Results Analysis VersionsMenu PathIMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define Results Analysis VersionsPurpose of ConfigurationHere you create result analysis version per version in controllingarea. In controlling area we have 3 actual version 0, D01, D02.Since currency and valuation profile is active we have 3 versions. Incase that is not active you will have only one plan/actual version 0.Click onYou will get a pop as follows:
Select 1100 controlling area version 0Update the Technical RA cost element 950000
5.7 Define Valuation Method (Actual Costs)Menu PathIMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define Valuation Method (Actual costs)Purpose of ConfigurationHere you create valuation methods for the calculation of work inprocess. There are two possible cases:Case 1:-The work in process is valuated with the actual costs: -In this case, the value of the work in process is the differencebetween the actual costs incurred and the actual cost that weresettled (that is, the difference between the debits for materialwithdrawals, internal cost allocations, external activities, andindirect costs and the credits for goods receipts). Work in process iscalculated by period until the status is set to “delivered” or“technically completed”. With orders that have been delivered, theorder balance is divided up according to variance categories and thework in process is canceled.Case 2: -The work in process is valuated with the standard costsIn this case, WIP calculation valuates the yields confirmed at thereporting points or operations using the standard price calculatedby the standard cost estimate. When the variances are calculated,the work in process is subtracted from the difference between theactual costs and the target costs. This ensures thatOnly true variances are calculated
This creates the link between the controlling area, the resultsanalysis key, the results analysis version, and the system status.When you create new valuation methods, you specify whether thework in process should be valuated at target costs or actual costs.In the Product Cost by Order component the work in process isnormally valuated at actual costs. The value of the work in processis the difference between the debit and the credit of an order as longas the order has the status PREL (partially released) or REL(released).The valuation method for WIP calculation is linked to a systemstatus.The following status codes are relevant for WIP calculation in thiscomponent: • PREL - The order is partially released. • REL - The order is released. • DLV - The order has been completely delivered. • TECO - The order is technically completed.If the status is PREL or REL, the system creates work in process inthe amount of the actual costs with which the order is debited.If the status is DLV or TECO, the system cancels the work inprocess. The difference between the debit through actual costspostings and the actual credit of the order from goods receipts isinterpreted as a variance with this status.Click on
SelectUpdate the following: -ClickClick onOn Saving the Result analysis version for D01 and D02 getsautomatically created.
5.8 Define Line IdsMenu PathIMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define Line IDsPurpose of ConfigurationThe line IDs serve to group the work in process and reserves forunrealized costs according to the requirements of FinancialAccounting.Reserves for unrealized cost means a production order has apartial goods receipt, but the actual issues (material andactivities) to the production order is less than standard and thesystem expect these issues to be made, therefore reserves forunrealized cost can be created if required for these costs whichare debited short.The work in process or reserves for unrealized costs are calculatedas a total for each order and apportioned to the line IDs. You candefine separately for each line ID whether the work in process forthat line ID must be capitalized.To pass the data on to Financial Accounting, you must defineposting rules that link this data to G/L accounts.Note:-To calculate the work in process using actual costs, youmust create an additional line ID for the cost elements underwhich the goods receipts are posted.For each line ID, you must create a cost element (type 31). Ifyou separate the values according to creation and usage, thenyou must create two cost elements for each line ID.
We want analysis for Material costs, Secondary costs.We will create Line Ids for the same.Click onUpdate the following: -Click on Save
5.9 Define AssignmentMenu PathIMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define AssignmentPurpose of ConfigurationYou assign the cost elements under which the order is debited andcredited, or under which the costs are written in the standard costestimate, to line IDs here.There are two different methods: The valuation of work in process with actual costs for the order The valuation of work in process with planned costs for the finished materialValuation Using Actual CostsThe line IDs put the costs incurred for the order into specificgroups, such as: Direct Material Costs Production Costs Indirect CostsThe category indicates whether the cost elements under which thedifferent postings are made are debits or credits for WIP calculation.You have to assign all debits, such as for material withdrawals,internal activities, external activities and overhead, to line IDs ofcategory K (costs).You have to assign all credits, such as for material issues and ordersettlement to line IDs of category A (settled costs). You can use the
debit/credit indicator to separate the costs that are written underthe same cost element.This information is needed for WIP calculation to treat thewithdrawal of a semi-finished product from stock as a debit and thedelivery of a semi-finished product to stock as a credit.Capitalizing Work in Process:In the assignment, you define how the process that has to bedisplayed as a result of these costs is to be capitalized. For example,you can specify that 100% of the work in process calculated from the direct material costs can be capitalized. 80% of the work in process calculated from the indirect costs can be capitalizedYou also define the validity dates for the assignment. You assign thecost elements combined in line IDs to one of the following groups:CapitalizeCosts with an option to capitalizeCapitalizeYou then defineWhich percentage of the costs cannot be capitalized andFor which percentage of the costs you can choose whether the costsmust be capitalized or cannot be capitalizedThis assignment is taken into account in the posting rules. Thereare three categories in the posting rules that are created from thisassignment: WIPR – Work in Process with requirement to capitalize cost WIPO – Work in Process with option to capitalize costs WIPP – Work in Process with prohibition to capitalize costsYou will normally define a posting rule that assigns the work inprocess with requirement to capitalize costs to the G/L accounts forunfinished products (balance sheet) and stock changes (P+L). Workin process is capitalized according to this assignment.
Click onUpdate the following: -Controlling area : 1100RA version :0Cost elements for material start with 4 rest codes we will mask.C (credit/debit) + All debits and creditsV (Vble/fixed ind.) + AllAccount (Accounting indicator) ++Masked(all)ReqToCa(Requirement to capitalize) – Here we will update the Lineid defined earlier.Click on SaveWhen you maintain for version 0 all the data for version D01 andD02 automatically gets copied. (If material ledger & currency andvaluation profile is active)
5.10 Define UpdateMenu PathIMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define UpdatePurpose of ConfigurationFor each line ID, you specify the results analysis cost elementunder which the work in process and possibly the reserves forunrealized costs are updated, and assign each line ID to a category.There are two different methods: The valuation of work in process with the actual costs for the order. The valuation of work in process with the planned costs for the finished material Valuation Using Actual Costs The line IDs put the costs incurred for an order into the following groups: Direct material costs Production costs Indirect costsThe category indicates whether the cost elements under which thedifferent postings are made are debits or credits for WIP calculation.You have to assign all debits, such as for material withdrawals,internal activities, external activities and overhead to line IDs ofcategory K (costs).You have to assign all credits, such as for material issues and ordersettlement to line IDs of category A (settled costs).
In the earlier step define assignment we have assigned the costelements of material beginning with 4 to line id MAT, Overhead tothe line id OVH and Revenue to REV.All material withdrawals, internal activities, external activities, andoverhead are assigned to line IDs of category K (costs).
The system creates work in process for each debit posting that isupdated under one of these cost elements. These values areupdated under the results analysis cost elements (cost elementcategory 31) that you specify here.We must assign all credits, such as for material issues and ordersettlement to line IDs of category E (Revenue). For each creditposting that is updated under one of these cost elements, thesystem reduces the work in process.Click onUpdate the following:-
K – CostsA - RevenueClick on SaveAutomatically the Versions for D01 and D02 get created.
5.11 Define Posting Rules for Settling Work in ProcessMenu PathIMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define Posting Rules for Settling Work in ProcessPurpose of ConfigurationIn this step we specify the G/L accounts in Financial Accounting towhich the work in process is settled. We assign a results analysiscost element or a group of results analysis cost elements to two G/Laccounts.A FI is generated on the basis of the settlement of work in process:-Entry passed:-WIP account Debit (Balance sheet)Change in WIP Credit (Profit & loss account)We can assign the results analysis data to the G/L accounts at thefollowing levels: • Results analysis categories The results analysis categories are created on the basis of the assignment of the costs to line IDs: WIPR - Work in process with requirement to capitalize costs WIPO - Work in process with option to capitalize costs WIPP - Work in process with prohibition to capitalize costs We normally define a posting rule that assigns the work in process with requirement to capitalize costs to the G/L
accounts for unfinished products (balance sheet) and stock changes (P/L). • Results analysis cost elements In this case you assign the individual results analysis cost elements to the G/L accounts. For example, the work in process for the direct material costs is updated under results analysis cost element 950000 and the work in process for the production costs under results analysis cost element 9500001, you can pass this information on to different G/L accounts in Financial Accounting. In our scenario we do not want the results to be updated to different GL codes.Before doing this transaction you need to first switch off theindicator:-Menu PathIMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define Results Analysis VersionsPurpose of ConfigurationDouble ClickUncheck Remove the tickClick onClick onUpdate the following: -
Co area (controlling area) – 1100Com(Company code) – 1100Ra ver (RA version) – 0RA categ (RA category ) – WIPR (Work in process with requirementto capitalize)In case you want to calculate reserves for unrealized costs you needto select RA category RUCR (Reserves for unrealized costs). Thisnormally happens when the goods issue to the production orderbased on the goods receipt is lesser than as per the standardissues.Note: The GL code 462201 (Change in WIP) should not be createdas cost element in the controlling module119460 is a balance sheet account WIPClick on SaveThe posting rules for version D01 and D02 are definedautomatically.
Switch on the transfer to financial accounting tick now.
5.12 Define Number RangesMenu PathIMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define Posting Rules for Settling Work in ProcessPurpose of ConfigurationWhen work in process is calculated, the following businesstransactions are carried out: KABG Automatic results analysis KSWP Calc. primary target costs (WIP) KSWS Calc. secondary target costs (WIP)CO documents are created when these transactions are carried out.The system assigns numbers to these documents.We must maintain number ranges to restrict the areas for thenumbers assigned or to categorize according to certain criteria.The number range is already defined or copied while maintainingthe controlling area.
6. Variance Calculation 6.1 Define Variance KeysMenu PathIMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End ClosingVariance Calculation Define Variance KeysPurpose of ConfigurationOrders can only be selected for variance calculation if a variancekey is entered in the order. In this step you defineWhether scrap is calculated in addition to the variancesWhether a document is written containing the date, the user, andthe changes madeYou can calculate variances either for the entire life of the object(cumulatively) or for a specific posting period (by period).As a rule, variances are calculated cumulatively for productionorders and by period for run schedule headers (RSH) and costobject hierarchies.With cumulative variance calculation, the target costs arecalculated using the quantity that you delivered to stock for theorder. The actual costs refer to the entire life of the order. Variancecalculation requires that the order have the status Finaldelivery (TECO). The variance key is entered in the master data ofthe order in the following way:If you create a material master record, the system proposes avariance key through the plant.
We define variance keys in this step. You assign a variance key tothe plant here. Variances are calculated on the basis of the variancekey in the order master recording cumulative variance calculation,the target costs are calculated on the basis of the quantity you havetransferred to stock for the order. The actual costs are for the entirelife of the order. Variance calculation requires that the order havethe status DLV (delivered) or TECO (technically completed).Normally there is no need to create a variance key; we can usethe standard variance key of SAP 000001.If you create a production order to manufacture this material, thesystem proposes a variance key through the entry in the materialmaster record.
6.2 Define Default Variance Keys for PlantsMenu PathIMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End ClosingVariance Calculation Define Default Variance Keys for PlantsPurpose of ConfigurationWe assign a variance key to the plant in this step.Variances are calculated on the basis of the variance key shown inthe order master record. This entry is defaulted as follows: • When we create a material master record, the system proposes a default variance key for that material master through the plant. • When we create a production order, process order for this material, the system proposes a default variance key through the entry in the material master record.This value gets copied automatically when a plant is copied. Nomaintenance is generally required here. If it is not then you shouldmanually maintain the default variance key for plant 9100Click on
6.3 Check Variance VariantsMenu PathIMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End ClosingVariance Calculation Check Variance VariantsPurpose of ConfigurationThe following variance categories can be calculated:Variances on the input side: • Scrap variances You specify whether scrap variances are calculated in the step Define Variance Keys. This enables you to control the display of scrap or the deduction of the scrap from the actual costs separately for each variance variant; you can also control this separately for each variance variant by assigning the variance variant to a target cost version. • Input price variancesPrice variances are the differences between the planned prices andthe actual prices of the resources used. If this indicator is set, youshould make sure thatThe Material origin indicator in the costing view of the materialmaster record is setThe Record quantity indicator is set in all relevant cost elements • Input quantity variancesQuantity variances are differences between the planned and actualinput quantities of the resources. If this indicator is set, you shouldmake sure that
The Material origin indicator in the costing view of the materialmaster record is setThe Record quantity indicator is set in all relevant cost elements. • Resource-usage variances A resource-usage variance arises when a different resource is used than was planned. • Remaining input variances Remaining input variances are differences on the input side that cannot be assigned to any other variance category on the input side (such as overhead).Variances on the output side: • Lot size variances Lot size variances are differences between the planned fixed costs and the charged fixed actual costs. Lot size variances can only be calculated for target cost version 0. • Output price variances Output price variances are differences between the target credit (at the standard price) and the actual credit (for example at the moving average price). • Mixed-price variances If we valuate your inventories with mixed prices, mixed-price variances may result if the standard price calculated on the basis of the mixed cost estimate is not the same as the target cost of the procurement alternative. Example: Suppose the standard price for a material was calculated in a mixed cost estimate. The material has price control indicator S, which means that the goods receipts are valuated at the
standard price and the order is credited accordingly. When the system calculates the total variance, it compares the control cost (in this case the actual cost) with the procurement alternative for which the order was created. If the target cost for the procurement alternative is not the same as the credits at the standard price, a mixed-price variance will result. • Remaining variances Remaining variances are variances that cannot be assigned to any other variance category (for example, rounding differences). If the system cannot calculate any target costs, only remaining variances will be calculated.Variances are calculated for all variance categories that are selectedin this view. • If a particular variance category is not selected, the variances of that category will be assigned to the remaining variances. Scrap variances are an exception to this: if you dont want to see scrap variances, these variances can enter all other variance categories on the input side. • If no variance categories are selected, only remaining variances will be calculated.The Minor differences field enables us to have small amountscharged and settled as remaining variances, although they are stillassigned to the relevant variance category in the detail screen ofvariance calculation.
6.4 Define Valuation Variant for WIP and Scrap (Target Costs)Menu PathIMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End ClosingVariance Calculation Define Valuation Variant for WIP and Scrap(Target Costs)Purpose of ConfigurationWe are not configuring any valuation variant, since we arevaluing WIP at actual cost. This is more relevant in productcost by period.
6.5 Define Order type dependent parametersMenu PathIMG Production Shop Floor Control Master Data OrderDefine order type-dependent parametersPurpose of ConfigurationHere, you define the parameters relevant to controlling, such as, forexample, costing variants for planned and actual costs and aresults analysis key.Click on and enter the followingChange or update the following
6.6 Define Target Cost VersionsMenu PathIMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End ClosingVariance Calculation Define Target Cost VersionsPurpose of ConfigurationIn this step you define how you want to calculate the target costsand therefore the variances. Variance calculation calculates targetcosts so that the variances between the actual costs and theplanned costs are calculated using the same reference basis.For example, if you compare the costs in the standard cost estimatewith the costs in the production order, the costs in the standardcost estimate are adjusted to the quantity that was delivered tostock for the production order.If you are using full settlement, you have the following options:Target cost version 0 (Cumulative Variances)You compare the actual costs of a production order with the targetcosts calculated in the estimate for the material produced.The base quantity for variance calculation is the actual quantity ofthe production order (the quantity that was delivered to stock). Thetarget costs are calculated by converting the planned costs in theproduction order to the actual quantity.The control costs are calculated by subtracting the value of thescrap and possibly the work in process from the actual costs for theorder.
For this version, select actual costs as the control costs andstandard cost estimate as the target costs.Target cost version 1 (Production Variances)You compare the actual costs of a production order with the targetcosts.The base quantity for variance calculation is the actual quantity ofthe production order (the quantity that was delivered to stock). Thetarget costs are calculated by converting the planned costs in thestandard cost estimate to the actual quantity.The control costs are calculated by subtracting the value of thescrap from the actual costs for the order.For this version, select actual costs as the control costs andplanned costs as the target costs.Target cost version 2 (Planning Variances)You compare the planned costs of the production order with theplanned costs of the standard cost estimate for the materialproduced.The base quantity for variance calculation is the planned quantityof the production order (the quantity that is to be produced in theorder). The target costs are calculated by converting the plannedcosts in the standard cost estimate to the planned quantity in theorder.The planned costs in the order are interpreted as control costs.For this version, select planned costs as the control costs andstandard cost estimate as the target costs.If you are using periodic settlement, you can only calculatecumulative variances. The default rule in the order type determineswhether you work with full settlement or periodic settlement.
Standard cost estimates, modified standard cost estimates andcurrent cost estimates are created for each material in productcosting. Costing is based on bills of material and routings for thematerial to be produced.You can create a standard cost estimate, a modified standard costestimate or a current cost estimate manually through a single-levelproduct cost estimate by listing the internal activities and materialcomponents required for making the product. This data is valuatedin costing.Standard, modified standard and current cost estimates arecontrolled by a costing variant. The results of the standard costestimate are transferred to the material master record as thestandard price.You can allow the costing results to be updated by setting thePlanned indicator for one costing type. This designates the costestimate as a standard cost estimate.In a future release it will be possible to calculate variances on thebasis of the modified standard cost estimate and the current costestimate.The target costs for each material are found as follows: Costs which depend on lot size are divided by the costing lot size and multiplied by the delivered quantity. Costs which do not depend on lot size (such as setup costs) are regarded as target costs without the aforementioned calculation.The planned costs are automatically calculated when you create aproduction order in the PP system. The system valuates thematerial components and the activities carried out in the order andsave the costs as an order plan.