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This presentation provides an overview of product costing in the Product Cost Planning module of CO. It discusses why product costing is important, where costs come from, what costing variants do, the importance of cost components, and how materials are costed for raw materials, manufactured materials, and subcontracted materials. The presentation also covers topics like quantity structures, updating material costs, and creating cost estimates.

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PRESENTED BY: Overview of Product Costing Tom King, Independent Consultant
Introduction One of the primary uses of product costing is to define a standard cost for materials. However, product costing can be used for much more. Knowing how costing variants and the cost component structure are defined and used is an important step in getting the most out of your system. This presentation provides an overview of product costing in the Product Cost Planning module of CO.
Topics: Why cost materials? Where do the costs come from? What the costing variant does The importance of cost components Quantity structures – with or without? Costing with quantity structure How are material costs updated? How are raw materials costed? How are other materials costed? What about other costs? Costing run Alternative costing 1 2 3 4 5 6 7 8 9 10 11 12
Why cost materials? Can’t we just assign them a cost?
Reasons for assigning costs to materials • Define a standard cost for valuing inventory • Measuring procurement performance (purchasing / manufacturing) • Analysis of procurement alternatives • Make or buy • Alternative sourcing or manufacturing strategies • What-if analysis • Helping to measure corporate performance • Transfer pricing scenarios • …
Why product costing in SAP? • Why not just assign the costs? • Standardized and repeatable method for generating the costs • Ability to look at product costs from multiple viewpoints • COGM • COGS • Inventory valuation • … • Ability to create multiple different cost estimates for the same products • Standard costing • Group costing eliminating inter-company profits • Different inventory valuation views • …
Where do costs originate? How do I know what makes up a product cost?
What is the procurement source? • External vendor • Internal vendor (plant to plant transfers, intra-company and inter-company) • Internally produced • Externally produced using company-supplied components
Costing sources – externally purchased materials • Purchase price lists • Purchase orders • Transport costs • Import costs • Administrative costs
Costing sources – internally purchased materials • Transfer price • Transport costs • Import costs • Administrative costs
Costing sources – internally manufactured materials • Component prices • Direct internal manufacturing costs • Indirect internal manufacturing costs • External manufacturing costs (for outside processing, if any) • Administrative and other overhead costs
Costing sources – externally manufactured materials • Component prices • Subcontracting costs • Administrative and other overhead costs
What the costing variant does Why do I need one?
Costing variant • Determines the purpose of the cost estimate • Costing type • Valuation variant • Different types of cost estimates use different costing variants • When creating a cost estimate the costing variant must be specified
Costing variant • Costing type – purpose of cost estimate • Valuation variant – how costs are determined • Date control – default validity dates for cost estimate • Quantity structure control – how BOMs and routings are selected • Transfer control – costing of lower level components • Reference variant – what elements will be recosted OKKN
Costing type • Price update types • No update possible • Standard price (only one available) • Tax-based price (Accounting 2) • Commercial price (Accounting 2) • Other prices (Accounting 2 and Costing 2) • Valuation views • Legal valuation • Group valuation • Profit center valuation OKKI
Valuation variant • Valuation sources • Purchased materials • Activity types • Subcontracting costs • External processing costs • Overhead allocations • Price factors for components and operations OKK4
Costing variant special assignments • Cost component structure • Assignment by company code or plant • Costing version • 99 per costing variant • Variant for transfer pricing • Exchange rate type • Mixed costing setup • Cost component split in controlling area currency • By company code • Cross company costing • By controlling area OKKN
The importance of cost components What do they do for me?
What are cost components? • Groupings of costs • Based on cost element and origin group • Identify categories of cost (material, labor, manufacturing costs, depreciation, etc) • Assigned to cost component structures • Up to 40 (fixed and variable costs combined) or 20 (fixed and variable costs separate) • Cost component structures are assigned to the costing variant • Generates a split of costs by cost component when creating a cost estimate
Why are cost components important? • Define which costs are used for specific purposes • Standard costs • Cost of goods manufactured (COGM) • General and administrative (SG&A) • Commercial and tax-based inventory • Cost of goods sold (COGS) • Group costing • Material master updated using the values associated with specific cost components
Why are cost components important? • Cost component views • Each cost component is assigned to one or more cost component views • Views provide different looks at the cost within the same cost estimate CK11N
Why are cost components important? • Cost component view purposes • Groups of cost components assigned to define a specific cost • Specific areas of material valuation • Special costing views Costs associated with purchasing SG&A Manufacturing cost Standard cost Commercial inventory cost Tax-based inventory cost Transfer price surcharge Group costing profit Profit center costing profit
Cost component definition Purchasing Group profit COGM or SG&A Inventory standard Commercial inventory cost Tax-based inventory cost Profit center profit Transfer price surcharge
The cost component split and cost component views Inventory view COGS view Purchasing view
Cost component split – should it be set to primary? Non-primary • Activity type cost element used for the cost component definition • Activity rates can be either assigned or calculated • Smears cost for each activity type into one cost component Primary • Primary costs from the activity type cost plan are used for the cost component split • Requires calculation of activity rates using KSPI • Resulting cost components derived from the primary cost elements providing richer cost split
Cost component split – should it be set to primary? Non-primary cost component split Primary cost component split
Quantity structures – with or without? Why choose one over the other?
What is a quantity structure? • Master data that associates a cost with a quantity • Bills of materials (quantities of components to make a product) • Routing operations (calculations per operation base quantity) • Purchasing information (price per quantity) • Materials (planned prices per price unit)
Costing without quantity structure • Unit costing • All costing items are entered manually into the cost estimate • Quantity structures are ignored Manual line items
Cost estimate itemization items • A – co-product • B – base planning object (obsolete) • E – internal activity type • F – external manufacturing activity • G – overhead allocation • I – delivery costs (purchasing conditions) • L – subcontracting • M – material • N – external service • O – arithmetic operation • P – business process (manually processed) • T – text only (no cost assignment) • V – manually specified cost (variable item) • X – business process (automatic)
Costing with quantity structure • Information from quantity structures determine quantities of costing items • Automatically generated when executing Create Cost Estimate (CK11N) Recipe BOM Base Qty
When should I use … • Cost estimate without quantity structure? • Product development (quantity structures not fully known) • What-if analysis for product • Quantity structures maintained in separate system • Note: labor intensive – the fewer materials, the better!!! • Cost estimate with quantity structure? • Normal production materials with standardized quantity structures • Note: tools provided to allow for costing of all materials at once
What does the With Qty Structure flag do? • Both types of cost estimates can be created regardless of setting • The same costing variant can be used for both • Controls which cost estimate type is used for updating the material master Material master – Costing 1 tab
Costing with quantity structure What can I see in a cost estimate?
Creating a cost estimate (CK11N) Specify costing variant information Specify dates (if allowed by costing variant) Select specific quantity structures if desired
The cost estimate Costing structure (fully exploded) Detail list – itemization, cost component split, or custom Costing overview – information about cost estimate
Costing overview window Cost basis Costs by cost component view Detail list selections
Costing overview window – additional information Costing Data Dates Quantity Structure Valuation Data Cost Estimate History
Detail list – itemization • Cost estimate view broken down by individual costing items • Activity type costs • Material costs • Overhead costs • Other costs • Not used to update material
Detail list – cost component split • Cost estimate view broken down by cumulative cost components • Cost element / origin group assignments • Used to update material • Based on cost component view
Costing structure • Fully exploded bill of materials with cost contributions at each level • Materials only / all costs
How are material costs updated? And what can be updated?
Fields in material master that can be updated • Costing 2 tab • Standard cost • Planned prices • Accounting 2 tab • Tax-based inventory • Commercial inventory
How does the system know which fields to update? • Costing type assigned to costing variant • Standard • Tax-based • Determination of lowest value • Commercial • Determination of lowest value • Planned price, tax-based, commercial • Always from cost estimate
What costs are updated? • Based on cost component view • Standard • Inventory • Tax-based • Inventory (Tax-Based) • Commercial • Inventory (Commercial) • Planned price • You decide
Updating standard costs • Two-step process • “Mark” the cost for the fiscal period of the cost estimate • The cost is stored in the Future Planned Price field in the Costing 2 tab • Marking must be enabled for the company code and period first • “Release” the marked cost estimate during the period for which it was marked • Releasing can only be done during the “marked” period • Transfers the cost from the Future Planned Price to the Current Planned Price and makes it the standard • Any inventory for this material will be revalued based on the new cost estimate • Transaction CK24 or Fiori app Release Material Cost Estimates • Steps can be run in the background for multiple materials at once
Updating standard costs CK24 - Mark CK24 - Release Material master Costing 2 Price change document
Updating other costs • One-step process • No time constraint – costs can be updated at any time • Select the field or fields to be updated • Multiple fields can be updated from the same cost estimate • Update the costs • Commercial and tax-based inventory costing types • Use determination of lowest value • If the system determines a value lower than the cost estimate, that value is used instead of the cost estimate value • Cannot be used to update raw materials – there is a different method for determining lowest value • Other costs costing types • The value assigned to the cost component view selected is always updated
Updating other costs CK24 – Other Costs Material master Accounting 2 Material master Costing 2
How are raw materials costed? Costing sources and costing strategies
The valuation variant defines the pricing strategies • Where the cost is sourced • Material master fields • Purchase order pricing conditions • Purchasing information record pricing conditions • How delivery costs are handled • Combined with purchasing conditions • Separated out
Material Val. tab of the valuation variant • Cost source strategy sequence • Mainly different fields from material master • If cost not found with first strategy, goes to next one until cost is found or there are no more strategies • Sub-strategy sequence • Only if selecting price from purchasing information • Determines which conditions will be used • Delivery costs • Assigns conditions to origin groups to separate out those costs (quotation or purchase order price from condition table sub-strategies only)
Material master settings • First checks the special procurement for costing to see if a key is found to direct the costing. If this indicates outside purchase (usually 20), a raw material cost estimate is created • Next goes to MRP 2 tab. If procurement type is F and the special procurement is blank, this is a purchased item. Costing 1 tab MRP 2 tab
Example 1 – cost from material master • When a material master field is selected for the costing strategy, that cost will be used in the cost estimate for the cost of the material, if valid • If a dated field is chosen, such as Planned Price 1, then the cost estimate quantity structure date must be on or after the date assigned in the material master • The cost will be assigned to the material’s cost element / origin group assignment
Example 1 – cost from material master (Planned Price 1) Planned Price 1 from Costing 2 tab Item type I for delivery costs
Example 2 – cost from purchasing conditions • No Planned Price 1 value loaded (strategy sequence 1) • Look to strategy sequence 2 – Price from Purchasing Info Record • Sub-strategy sequence 1 indicates Quotation Price Via Condition Table • Only those conditions assigned to origin groups are included in the cost estimate • Each condition has its own separate line in the itemization • Cost component split based on Origin Group assignment • NOTE: • Only sub-strategies Quotation Price Via Condition Table or Purchase Order Price Via Condition Table allow for this • All other purchasing info sub-strategies combine all applicable conditions into one cost item with the cost component assigned to the material being costed
Example 2 – raw material cost estimate using delivery costs Purchasing info record conditions Delivery cost configuration - OKYO Condition RC00 not included in cost
How are other materials costed? Manufactured materials, subcontracting, plant-to-plant transfers
Manufactured materials • Have a bill of materials • List of components used to make the product • Costs derived from the component prices and quantities used to make the product • Have a manufacturing routing (or “task list”) • Routes for discrete manufacturing • Recipes for process manufacturing • Costs are derived from the allocation of activity types associated with each operation • Procurement type in the material master set to E (internal) MRP 2 setting
Bill of materials (BOM) • BOM header contains the base quantity for which the component quantities refer • Component list has the quantity of each item to make the base quantity • Relevancy To Costing indicates whether the cost should be included
Material costs in cost estimate • Materials have item type M • Quantities come from BOM • Value is material price times quantity
How are production costs determined? • Costs come from activity type prices • Each activity type must be associated with a cost center • A quantity of the activity type is planned for a cost center for a fiscal year • The activity price is either assigned or calculated • Work centers / resources are assigned to operations • Each work center has a connection to a cost center and up to 6 activity types • A formula is assigned to each activity type for quantity calculations • When a cost estimate is created, the activity quantities are allocated based on the formulas
• Work center assigned to cost center • Three activity types from the cost center are used • A formula is assigned to each activity type Work center costing definition
• Formulas use parameters available to the routing for the calculation • Parameters are associated with: • Specific fields in the route • “Standard values” • Routing user-defined fields • Work center constants • General constants Work center formulas OP54 OP51
• Product costing uses the definition assigned to the routing operation • This can be manually changed • Be careful when doing this! • If the work center definition is changed, it is not automatically copied to the route! Work center definition copied into routing when created
• Activity types use item type E (internal activity) • Quantities calculated using the formulas copied from the work center definition • Value is activity price times quantity Operation activity costs in cost estimate
Subcontracted materials • Have a bill of materials • List of components used to make the product • Costs derived from the component prices and quantities used to make the product • Have purchasing information associated with subcontracting costs • Purchasing information record or purchase order • Procurement type in the material master set to F (external) with special procurement set to subcontracting (usually 30 – depends on configuration) MRP 2 setting
• The valuation variant defines the search strategy and which purchasing conditions to include • Similar to purchasing strategy, but not all options available • A purchasing information record (or PO) provides the conditions to be used • Must be type 3 for subcontracting How subcontracting cost is determined
• Quantity structure points to BOM used • Special procurement points to subcontracting • Material cost from BOM • Subcontracting uses item type L • value is total of applicable conditions Cost estimate for subcontracting
Plant to plant transfers • Special procurement key defines source plant • Used in production planning and costing • Procurement type in the material master set to F (external) with special procurement set to transfer from another plant • No “set” special procurement type and requires configuration • Specific to source plant MRP 2 setting Procurement key configuration
• Special procurement set up for stock transfer • Cost copied from the source plant – uses item type M Cost estimate for plant to plant transfer
Other types of special procurement • Phantom material • Used to represent several components that are always grouped together • Procurement type E, special procurement 50 • Withdrawal from another plant • Used when the BOM item comes from another plant – no stock transfer • Manufactured in another plant • Material produced in plant other than the planning (costing) plant • Internal manufacturing • Standard manufacturing – used in Costing 1 to force costing as manufactured material • Special procurement 52
What about other costs? Overhead allocation, template allocation, additive cost estimates
Why add costs to a cost estimate? • Accounting for non-manufacturing costs • SG&A costs • Special processes that don’t fit a routing • Shipping costs • … • Methodologies used • Overhead costing sheet allocation • Template allocation • Additive cost estimates
• Overhead costing sheets • Base – grouping of costs by cost element / origin group • Overhead condition – condition type for which percentage- and amount- based values are stored • From/To – rows of the costing sheet to which the condition applies • Credit – source of the costs (cost center / business process) Overhead allocations
Overhead conditions • Assigned to a master data dependency • Plant • Company code • Overhead key • … • Maintained by the dependency • Rates assigned to a specific value of the dependency
• Costing sheet defined on the Overhead tab of the valuation variant • Different costing sheets defined for manufactured and purchased materials • Costing sheet definitions can be plant-dependent Connecting the costing sheet to the cost estimate
Cost estimate with overhead Valuation tab shows costing sheet connection Overhead items added at end of cost estimate with item type “G”
Templates for product costing • Provide a much more controlled and accurate means of allocating costs than overhead cost sheets • Can use a variety of master data for both calculations and activation of specific allocations • Allocation based on posting the calculated quantity of a cost center / activity type or a business process • Not limited to percentage or amount allocations • The template environment defines the purpose of the template • Environment 001 used for cost estimates (and production orders)
Template definition Template environment Editing window Allocation object Quantity formula Row activation Available functions Allocation rows
• Costing sheet must be assigned to the valuation variant • Template assigned to combination of overhead key and costing sheet (transaction KTPF Connecting the template to the cost estimate
• Overhead key assigned in Costing 1 tab of material master • Costing sheet / overhead key combination selects template • Activity type allocation with item type E • Business process allocation with item type X Cost estimate using template allocations
Additive cost estimates • Created like a unit cost estimate – no quantity structure involved • Must use same costing variant and costing version as the main cost estimate • When costing a material, the additive costs are included with the main cost estimate if enabled • Additive costs are enabled in the costing variant and valuation variant (raw materials only
Creating an additive cost estimate (CK74N or Fiori) • Create manually • Save as special cost estimate
Material cost estimate with additive costs included Costs from additive cost estimate
Costing run Costing multiple materials at once
How can multiple cost estimates be created? • Costing materials one by one is labor intensive and time consuming • The costing run creates a material selection list to cost multiple materials • Transaction CK40N or Fiori app Manage Costing Runs (S/4HANA 1809) • Features • Selection of materials to cost • Explosion of component materials associated with the selected materials • Arrangement of list of materials for efficient costing • Ability to cost the materials in the background • Generates a cost estimate report to list all materials • Marking for standard costs • Releasing standard costs with ability to schedule in the future • Updating material master for other cost estimates
• Specification of costing parameters and dates similarly to a single cost estimate • Costing variant • Costing version • Transfer control • Dates • New Repeat function from S/4HANA 1809 Defining the costing run
• Selection and structure explosion (1 step as of S/4HANA 1809 • Selecting and ordering materials to be costed • Costing • Cost materials by level • Analysis • Create a costing run report • Marking • Marking of standard cost estimates (optional) • Release / Update • Update material master with cost (optional) Processing costing run steps
• Overview of costing levels • Status of material costing • Costing analysis • Drilldown capability to get to costing details Reviewing costing results
• Shows all summary of all cost estimates created in costing run • Double-click on an item to get to the detailed cost estimate Example analysis report
Alternative costing Exploring how costing variants can provide additional information about costs
Should I use more than one costing variant? • Each costing variant has a special purpose • What-if costing • Group costing • Inventory costing • Other material costs • Costs from different costing variants can be compared with one another • Costs from different costing variants can be updated in the material master • The reference variant can be used to “fix” specific costs from one costing variant when costing in another costing variant
• Defines a transfer control definition to transfer costs from an alternate cost estimate • The transfer control refers to cost estimates from a specific costing variant What does the reference variant do?
• Specific portions of the costs are selected to be revalued when a cost estimate is created • The reference variant is assigned to the new costing variant, and when a cost estimate is created, only those portions defined in the reference variant will be recosted What does the reference variant do?
Cost estimate using variant ZRMC • ZRMC is defined so that only raw material costs are recalculated Raw material costs are recalculated for ZRMC cost estimate based on its valuation variant parameters Standard cost estimate (ZPC1) What-if cost estimate (ZRMC) Standard activity type costs copied from ZPC1 cost estimate to ZRMC cost estimate
Costing with different valuation views • Valuation views provide different looks at the cost of a material • Legal – costs including intercompany markups (transfer price) • Group – costs excluding the intercompany markups • Profit Center – costs including markups between profit centers • Valuation view is controlled by costing type Costing type 10
• Not relevant for inventory valuation purposes • Defined as delta profit for either company code (group costing) or profit center (profit center costing) Group costing – special delta profit cost component
• Standard cost estimate contains transfer price adjustment from additive cost estimate – legal valuation view • Group costing ignores difference in costs from plant UWU3 to UWU2 – group valuation view Cost itemization using standard cost and group cost Standard cost estimate (ZPC1) Group cost estimate (ZUGP)
Cost component split using standard cost and group cost • Legal valuation shows transfer costs assigned to cost component 175 • Group valuation shows transfer costs assigned to cost component 170 Standard cost estimate (ZPC1) Group cost estimate (ZUGP)
How can I analyze my product costs? • SAP provides reporting tools to compare cost estimates • Costing run comparisons – multiple materials • Multiple materials regardless of costing run • Single material analyses • Itemization and cost component split • Useful transactions • S_P99_41000111 – Analyze/Compare Multiple • Costing run reports • S_ALR_87099930 (variant of S_P99_41000111) • S_ALR_87099931 (variant of S_P99_41000111) • S_ALR_87099932 (variant of S_P99_41000111) • S_ALR_87013047 – Cost Component Compare • S_ALR_87013048 – Cost Element Compare • CK79_99 – Itemization Compare Itemization comparison with two costing variants
Conclusion 5 takeaways and useful resources
Five Takeaways • Product costing is not only used to generate standard costs • Proper cost component configuration is crucial to provide the best information • Material costs are updated from the cost component views • Use cost component views to provide a full picture of material costs • Product costing is closely linked with both PP and MM master data – it pays to have an understanding of those modules and how they are set up
Resources • Tanya Duncan, Practical Guide to SAP® CO-PC (Product Cost Controlling) (Espresso Tutorials, 2014) • ISBN: 978-1-5003-1863-5 • http://5064.espresso-tutorials.com • John Jordan, Product Cost Controlling with SAP 3rd Edition (SAP Press, 2016) • ISBN: 978-1-4932-1270-5 • www.sap-press.com/3920
Resources • Tom King, SAP® S/4HANA Product Cost Planning configuration and master data (Espresso Tutorials, 2019) • ISBN: 978-3-96012-908-0 • http://5376.espresso-tutorials.com • Tom King, SAP® S/4HANA Product Cost Planning costing with quantity structure (Espresso Tutorials, 2019) • ISBN: 978-1-51710082-7 • http://5377.espresso-tutorials.com
Questions & Answers Contact Information: Speaker: Tom King Company: Independent Consultant Email: tomking1919@gmail.com Telephone: +1, 864-529-2682
Thanks for attending this session! Produced by: Disclaimer: SAP®, R/3, mySAP, mySAP.com, xApps, xApp, SAP NetWeaver®, Duet®, PartnerEdge, and other SAP® products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other product and service names mentioned are the trademarks of their respective companies. ERP Corp is neither owned nor controlled by SAP Register by November 30 SAVE $700 For details visit: Controlling.ERPCorp.com

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T_King_Product_Costing2022_Overview.pdf

  • 1.
    PRESENTED BY: Overview ofProduct Costing Tom King, Independent Consultant
  • 2.
    Introduction One of theprimary uses of product costing is to define a standard cost for materials. However, product costing can be used for much more. Knowing how costing variants and the cost component structure are defined and used is an important step in getting the most out of your system. This presentation provides an overview of product costing in the Product Cost Planning module of CO.
  • 3.
    Topics: Why cost materials? Wheredo the costs come from? What the costing variant does The importance of cost components Quantity structures – with or without? Costing with quantity structure How are material costs updated? How are raw materials costed? How are other materials costed? What about other costs? Costing run Alternative costing 1 2 3 4 5 6 7 8 9 10 11 12
  • 4.
    Why cost materials? Can’twe just assign them a cost?
  • 5.
    Reasons for assigningcosts to materials • Define a standard cost for valuing inventory • Measuring procurement performance (purchasing / manufacturing) • Analysis of procurement alternatives • Make or buy • Alternative sourcing or manufacturing strategies • What-if analysis • Helping to measure corporate performance • Transfer pricing scenarios • …
  • 6.
    Why product costingin SAP? • Why not just assign the costs? • Standardized and repeatable method for generating the costs • Ability to look at product costs from multiple viewpoints • COGM • COGS • Inventory valuation • … • Ability to create multiple different cost estimates for the same products • Standard costing • Group costing eliminating inter-company profits • Different inventory valuation views • …
  • 7.
    Where do costsoriginate? How do I know what makes up a product cost?
  • 8.
    What is theprocurement source? • External vendor • Internal vendor (plant to plant transfers, intra-company and inter-company) • Internally produced • Externally produced using company-supplied components
  • 9.
    Costing sources –externally purchased materials • Purchase price lists • Purchase orders • Transport costs • Import costs • Administrative costs
  • 10.
    Costing sources –internally purchased materials • Transfer price • Transport costs • Import costs • Administrative costs
  • 11.
    Costing sources –internally manufactured materials • Component prices • Direct internal manufacturing costs • Indirect internal manufacturing costs • External manufacturing costs (for outside processing, if any) • Administrative and other overhead costs
  • 12.
    Costing sources –externally manufactured materials • Component prices • Subcontracting costs • Administrative and other overhead costs
  • 13.
    What the costingvariant does Why do I need one?
  • 14.
    Costing variant • Determinesthe purpose of the cost estimate • Costing type • Valuation variant • Different types of cost estimates use different costing variants • When creating a cost estimate the costing variant must be specified
  • 15.
    Costing variant • Costingtype – purpose of cost estimate • Valuation variant – how costs are determined • Date control – default validity dates for cost estimate • Quantity structure control – how BOMs and routings are selected • Transfer control – costing of lower level components • Reference variant – what elements will be recosted OKKN
  • 16.
    Costing type • Priceupdate types • No update possible • Standard price (only one available) • Tax-based price (Accounting 2) • Commercial price (Accounting 2) • Other prices (Accounting 2 and Costing 2) • Valuation views • Legal valuation • Group valuation • Profit center valuation OKKI
  • 17.
    Valuation variant • Valuationsources • Purchased materials • Activity types • Subcontracting costs • External processing costs • Overhead allocations • Price factors for components and operations OKK4
  • 18.
    Costing variant specialassignments • Cost component structure • Assignment by company code or plant • Costing version • 99 per costing variant • Variant for transfer pricing • Exchange rate type • Mixed costing setup • Cost component split in controlling area currency • By company code • Cross company costing • By controlling area OKKN
  • 19.
    The importance ofcost components What do they do for me?
  • 20.
    What are costcomponents? • Groupings of costs • Based on cost element and origin group • Identify categories of cost (material, labor, manufacturing costs, depreciation, etc) • Assigned to cost component structures • Up to 40 (fixed and variable costs combined) or 20 (fixed and variable costs separate) • Cost component structures are assigned to the costing variant • Generates a split of costs by cost component when creating a cost estimate
  • 21.
    Why are costcomponents important? • Define which costs are used for specific purposes • Standard costs • Cost of goods manufactured (COGM) • General and administrative (SG&A) • Commercial and tax-based inventory • Cost of goods sold (COGS) • Group costing • Material master updated using the values associated with specific cost components
  • 22.
    Why are costcomponents important? • Cost component views • Each cost component is assigned to one or more cost component views • Views provide different looks at the cost within the same cost estimate CK11N
  • 23.
    Why are costcomponents important? • Cost component view purposes • Groups of cost components assigned to define a specific cost • Specific areas of material valuation • Special costing views Costs associated with purchasing SG&A Manufacturing cost Standard cost Commercial inventory cost Tax-based inventory cost Transfer price surcharge Group costing profit Profit center costing profit
  • 24.
    Cost component definition Purchasing Groupprofit COGM or SG&A Inventory standard Commercial inventory cost Tax-based inventory cost Profit center profit Transfer price surcharge
  • 25.
    The cost componentsplit and cost component views Inventory view COGS view Purchasing view
  • 26.
    Cost component split– should it be set to primary? Non-primary • Activity type cost element used for the cost component definition • Activity rates can be either assigned or calculated • Smears cost for each activity type into one cost component Primary • Primary costs from the activity type cost plan are used for the cost component split • Requires calculation of activity rates using KSPI • Resulting cost components derived from the primary cost elements providing richer cost split
  • 27.
    Cost component split– should it be set to primary? Non-primary cost component split Primary cost component split
  • 28.
    Quantity structures –with or without? Why choose one over the other?
  • 29.
    What is aquantity structure? • Master data that associates a cost with a quantity • Bills of materials (quantities of components to make a product) • Routing operations (calculations per operation base quantity) • Purchasing information (price per quantity) • Materials (planned prices per price unit)
  • 30.
    Costing without quantitystructure • Unit costing • All costing items are entered manually into the cost estimate • Quantity structures are ignored Manual line items
  • 31.
    Cost estimate itemizationitems • A – co-product • B – base planning object (obsolete) • E – internal activity type • F – external manufacturing activity • G – overhead allocation • I – delivery costs (purchasing conditions) • L – subcontracting • M – material • N – external service • O – arithmetic operation • P – business process (manually processed) • T – text only (no cost assignment) • V – manually specified cost (variable item) • X – business process (automatic)
  • 32.
    Costing with quantitystructure • Information from quantity structures determine quantities of costing items • Automatically generated when executing Create Cost Estimate (CK11N) Recipe BOM Base Qty
  • 33.
    When should Iuse … • Cost estimate without quantity structure? • Product development (quantity structures not fully known) • What-if analysis for product • Quantity structures maintained in separate system • Note: labor intensive – the fewer materials, the better!!! • Cost estimate with quantity structure? • Normal production materials with standardized quantity structures • Note: tools provided to allow for costing of all materials at once
  • 34.
    What does theWith Qty Structure flag do? • Both types of cost estimates can be created regardless of setting • The same costing variant can be used for both • Controls which cost estimate type is used for updating the material master Material master – Costing 1 tab
  • 35.
    Costing with quantitystructure What can I see in a cost estimate?
  • 36.
    Creating a costestimate (CK11N) Specify costing variant information Specify dates (if allowed by costing variant) Select specific quantity structures if desired
  • 37.
    The cost estimate Costingstructure (fully exploded) Detail list – itemization, cost component split, or custom Costing overview – information about cost estimate
  • 38.
    Costing overview window Costbasis Costs by cost component view Detail list selections
  • 39.
    Costing overview window– additional information Costing Data Dates Quantity Structure Valuation Data Cost Estimate History
  • 40.
    Detail list –itemization • Cost estimate view broken down by individual costing items • Activity type costs • Material costs • Overhead costs • Other costs • Not used to update material
  • 41.
    Detail list –cost component split • Cost estimate view broken down by cumulative cost components • Cost element / origin group assignments • Used to update material • Based on cost component view
  • 42.
    Costing structure • Fullyexploded bill of materials with cost contributions at each level • Materials only / all costs
  • 43.
    How are materialcosts updated? And what can be updated?
  • 44.
    Fields in materialmaster that can be updated • Costing 2 tab • Standard cost • Planned prices • Accounting 2 tab • Tax-based inventory • Commercial inventory
  • 45.
    How does thesystem know which fields to update? • Costing type assigned to costing variant • Standard • Tax-based • Determination of lowest value • Commercial • Determination of lowest value • Planned price, tax-based, commercial • Always from cost estimate
  • 46.
    What costs areupdated? • Based on cost component view • Standard • Inventory • Tax-based • Inventory (Tax-Based) • Commercial • Inventory (Commercial) • Planned price • You decide
  • 47.
    Updating standard costs •Two-step process • “Mark” the cost for the fiscal period of the cost estimate • The cost is stored in the Future Planned Price field in the Costing 2 tab • Marking must be enabled for the company code and period first • “Release” the marked cost estimate during the period for which it was marked • Releasing can only be done during the “marked” period • Transfers the cost from the Future Planned Price to the Current Planned Price and makes it the standard • Any inventory for this material will be revalued based on the new cost estimate • Transaction CK24 or Fiori app Release Material Cost Estimates • Steps can be run in the background for multiple materials at once
  • 48.
    Updating standard costs CK24- Mark CK24 - Release Material master Costing 2 Price change document
  • 49.
    Updating other costs •One-step process • No time constraint – costs can be updated at any time • Select the field or fields to be updated • Multiple fields can be updated from the same cost estimate • Update the costs • Commercial and tax-based inventory costing types • Use determination of lowest value • If the system determines a value lower than the cost estimate, that value is used instead of the cost estimate value • Cannot be used to update raw materials – there is a different method for determining lowest value • Other costs costing types • The value assigned to the cost component view selected is always updated
  • 50.
    Updating other costs CK24– Other Costs Material master Accounting 2 Material master Costing 2
  • 51.
    How are rawmaterials costed? Costing sources and costing strategies
  • 52.
    The valuation variantdefines the pricing strategies • Where the cost is sourced • Material master fields • Purchase order pricing conditions • Purchasing information record pricing conditions • How delivery costs are handled • Combined with purchasing conditions • Separated out
  • 53.
    Material Val. tabof the valuation variant • Cost source strategy sequence • Mainly different fields from material master • If cost not found with first strategy, goes to next one until cost is found or there are no more strategies • Sub-strategy sequence • Only if selecting price from purchasing information • Determines which conditions will be used • Delivery costs • Assigns conditions to origin groups to separate out those costs (quotation or purchase order price from condition table sub-strategies only)
  • 54.
    Material master settings •First checks the special procurement for costing to see if a key is found to direct the costing. If this indicates outside purchase (usually 20), a raw material cost estimate is created • Next goes to MRP 2 tab. If procurement type is F and the special procurement is blank, this is a purchased item. Costing 1 tab MRP 2 tab
  • 55.
    Example 1 –cost from material master • When a material master field is selected for the costing strategy, that cost will be used in the cost estimate for the cost of the material, if valid • If a dated field is chosen, such as Planned Price 1, then the cost estimate quantity structure date must be on or after the date assigned in the material master • The cost will be assigned to the material’s cost element / origin group assignment
  • 56.
    Example 1 –cost from material master (Planned Price 1) Planned Price 1 from Costing 2 tab Item type I for delivery costs
  • 57.
    Example 2 –cost from purchasing conditions • No Planned Price 1 value loaded (strategy sequence 1) • Look to strategy sequence 2 – Price from Purchasing Info Record • Sub-strategy sequence 1 indicates Quotation Price Via Condition Table • Only those conditions assigned to origin groups are included in the cost estimate • Each condition has its own separate line in the itemization • Cost component split based on Origin Group assignment • NOTE: • Only sub-strategies Quotation Price Via Condition Table or Purchase Order Price Via Condition Table allow for this • All other purchasing info sub-strategies combine all applicable conditions into one cost item with the cost component assigned to the material being costed
  • 58.
    Example 2 –raw material cost estimate using delivery costs Purchasing info record conditions Delivery cost configuration - OKYO Condition RC00 not included in cost
  • 59.
    How are othermaterials costed? Manufactured materials, subcontracting, plant-to-plant transfers
  • 60.
    Manufactured materials • Havea bill of materials • List of components used to make the product • Costs derived from the component prices and quantities used to make the product • Have a manufacturing routing (or “task list”) • Routes for discrete manufacturing • Recipes for process manufacturing • Costs are derived from the allocation of activity types associated with each operation • Procurement type in the material master set to E (internal) MRP 2 setting
  • 61.
    Bill of materials(BOM) • BOM header contains the base quantity for which the component quantities refer • Component list has the quantity of each item to make the base quantity • Relevancy To Costing indicates whether the cost should be included
  • 62.
    Material costs incost estimate • Materials have item type M • Quantities come from BOM • Value is material price times quantity
  • 63.
    How are productioncosts determined? • Costs come from activity type prices • Each activity type must be associated with a cost center • A quantity of the activity type is planned for a cost center for a fiscal year • The activity price is either assigned or calculated • Work centers / resources are assigned to operations • Each work center has a connection to a cost center and up to 6 activity types • A formula is assigned to each activity type for quantity calculations • When a cost estimate is created, the activity quantities are allocated based on the formulas
  • 64.
    • Work centerassigned to cost center • Three activity types from the cost center are used • A formula is assigned to each activity type Work center costing definition
  • 65.
    • Formulas useparameters available to the routing for the calculation • Parameters are associated with: • Specific fields in the route • “Standard values” • Routing user-defined fields • Work center constants • General constants Work center formulas OP54 OP51
  • 66.
    • Product costinguses the definition assigned to the routing operation • This can be manually changed • Be careful when doing this! • If the work center definition is changed, it is not automatically copied to the route! Work center definition copied into routing when created
  • 67.
    • Activity typesuse item type E (internal activity) • Quantities calculated using the formulas copied from the work center definition • Value is activity price times quantity Operation activity costs in cost estimate
  • 68.
    Subcontracted materials • Havea bill of materials • List of components used to make the product • Costs derived from the component prices and quantities used to make the product • Have purchasing information associated with subcontracting costs • Purchasing information record or purchase order • Procurement type in the material master set to F (external) with special procurement set to subcontracting (usually 30 – depends on configuration) MRP 2 setting
  • 69.
    • The valuationvariant defines the search strategy and which purchasing conditions to include • Similar to purchasing strategy, but not all options available • A purchasing information record (or PO) provides the conditions to be used • Must be type 3 for subcontracting How subcontracting cost is determined
  • 70.
    • Quantity structurepoints to BOM used • Special procurement points to subcontracting • Material cost from BOM • Subcontracting uses item type L • value is total of applicable conditions Cost estimate for subcontracting
  • 71.
    Plant to planttransfers • Special procurement key defines source plant • Used in production planning and costing • Procurement type in the material master set to F (external) with special procurement set to transfer from another plant • No “set” special procurement type and requires configuration • Specific to source plant MRP 2 setting Procurement key configuration
  • 72.
    • Special procurementset up for stock transfer • Cost copied from the source plant – uses item type M Cost estimate for plant to plant transfer
  • 73.
    Other types ofspecial procurement • Phantom material • Used to represent several components that are always grouped together • Procurement type E, special procurement 50 • Withdrawal from another plant • Used when the BOM item comes from another plant – no stock transfer • Manufactured in another plant • Material produced in plant other than the planning (costing) plant • Internal manufacturing • Standard manufacturing – used in Costing 1 to force costing as manufactured material • Special procurement 52
  • 74.
    What about othercosts? Overhead allocation, template allocation, additive cost estimates
  • 75.
    Why add coststo a cost estimate? • Accounting for non-manufacturing costs • SG&A costs • Special processes that don’t fit a routing • Shipping costs • … • Methodologies used • Overhead costing sheet allocation • Template allocation • Additive cost estimates
  • 76.
    • Overhead costingsheets • Base – grouping of costs by cost element / origin group • Overhead condition – condition type for which percentage- and amount- based values are stored • From/To – rows of the costing sheet to which the condition applies • Credit – source of the costs (cost center / business process) Overhead allocations
  • 77.
    Overhead conditions • Assignedto a master data dependency • Plant • Company code • Overhead key • … • Maintained by the dependency • Rates assigned to a specific value of the dependency
  • 78.
    • Costing sheetdefined on the Overhead tab of the valuation variant • Different costing sheets defined for manufactured and purchased materials • Costing sheet definitions can be plant-dependent Connecting the costing sheet to the cost estimate
  • 79.
    Cost estimate withoverhead Valuation tab shows costing sheet connection Overhead items added at end of cost estimate with item type “G”
  • 80.
    Templates for productcosting • Provide a much more controlled and accurate means of allocating costs than overhead cost sheets • Can use a variety of master data for both calculations and activation of specific allocations • Allocation based on posting the calculated quantity of a cost center / activity type or a business process • Not limited to percentage or amount allocations • The template environment defines the purpose of the template • Environment 001 used for cost estimates (and production orders)
  • 81.
  • 82.
    • Costing sheetmust be assigned to the valuation variant • Template assigned to combination of overhead key and costing sheet (transaction KTPF Connecting the template to the cost estimate
  • 83.
    • Overhead keyassigned in Costing 1 tab of material master • Costing sheet / overhead key combination selects template • Activity type allocation with item type E • Business process allocation with item type X Cost estimate using template allocations
  • 84.
    Additive cost estimates •Created like a unit cost estimate – no quantity structure involved • Must use same costing variant and costing version as the main cost estimate • When costing a material, the additive costs are included with the main cost estimate if enabled • Additive costs are enabled in the costing variant and valuation variant (raw materials only
  • 85.
    Creating an additivecost estimate (CK74N or Fiori) • Create manually • Save as special cost estimate
  • 86.
    Material cost estimatewith additive costs included Costs from additive cost estimate
  • 87.
  • 88.
    How can multiplecost estimates be created? • Costing materials one by one is labor intensive and time consuming • The costing run creates a material selection list to cost multiple materials • Transaction CK40N or Fiori app Manage Costing Runs (S/4HANA 1809) • Features • Selection of materials to cost • Explosion of component materials associated with the selected materials • Arrangement of list of materials for efficient costing • Ability to cost the materials in the background • Generates a cost estimate report to list all materials • Marking for standard costs • Releasing standard costs with ability to schedule in the future • Updating material master for other cost estimates
  • 89.
    • Specification ofcosting parameters and dates similarly to a single cost estimate • Costing variant • Costing version • Transfer control • Dates • New Repeat function from S/4HANA 1809 Defining the costing run
  • 90.
    • Selection andstructure explosion (1 step as of S/4HANA 1809 • Selecting and ordering materials to be costed • Costing • Cost materials by level • Analysis • Create a costing run report • Marking • Marking of standard cost estimates (optional) • Release / Update • Update material master with cost (optional) Processing costing run steps
  • 91.
    • Overview ofcosting levels • Status of material costing • Costing analysis • Drilldown capability to get to costing details Reviewing costing results
  • 92.
    • Shows allsummary of all cost estimates created in costing run • Double-click on an item to get to the detailed cost estimate Example analysis report
  • 93.
    Alternative costing Exploring howcosting variants can provide additional information about costs
  • 94.
    Should I usemore than one costing variant? • Each costing variant has a special purpose • What-if costing • Group costing • Inventory costing • Other material costs • Costs from different costing variants can be compared with one another • Costs from different costing variants can be updated in the material master • The reference variant can be used to “fix” specific costs from one costing variant when costing in another costing variant
  • 95.
    • Defines atransfer control definition to transfer costs from an alternate cost estimate • The transfer control refers to cost estimates from a specific costing variant What does the reference variant do?
  • 96.
    • Specific portionsof the costs are selected to be revalued when a cost estimate is created • The reference variant is assigned to the new costing variant, and when a cost estimate is created, only those portions defined in the reference variant will be recosted What does the reference variant do?
  • 97.
    Cost estimate usingvariant ZRMC • ZRMC is defined so that only raw material costs are recalculated Raw material costs are recalculated for ZRMC cost estimate based on its valuation variant parameters Standard cost estimate (ZPC1) What-if cost estimate (ZRMC) Standard activity type costs copied from ZPC1 cost estimate to ZRMC cost estimate
  • 98.
    Costing with differentvaluation views • Valuation views provide different looks at the cost of a material • Legal – costs including intercompany markups (transfer price) • Group – costs excluding the intercompany markups • Profit Center – costs including markups between profit centers • Valuation view is controlled by costing type Costing type 10
  • 99.
    • Not relevantfor inventory valuation purposes • Defined as delta profit for either company code (group costing) or profit center (profit center costing) Group costing – special delta profit cost component
  • 100.
    • Standard costestimate contains transfer price adjustment from additive cost estimate – legal valuation view • Group costing ignores difference in costs from plant UWU3 to UWU2 – group valuation view Cost itemization using standard cost and group cost Standard cost estimate (ZPC1) Group cost estimate (ZUGP)
  • 101.
    Cost component splitusing standard cost and group cost • Legal valuation shows transfer costs assigned to cost component 175 • Group valuation shows transfer costs assigned to cost component 170 Standard cost estimate (ZPC1) Group cost estimate (ZUGP)
  • 102.
    How can Ianalyze my product costs? • SAP provides reporting tools to compare cost estimates • Costing run comparisons – multiple materials • Multiple materials regardless of costing run • Single material analyses • Itemization and cost component split • Useful transactions • S_P99_41000111 – Analyze/Compare Multiple • Costing run reports • S_ALR_87099930 (variant of S_P99_41000111) • S_ALR_87099931 (variant of S_P99_41000111) • S_ALR_87099932 (variant of S_P99_41000111) • S_ALR_87013047 – Cost Component Compare • S_ALR_87013048 – Cost Element Compare • CK79_99 – Itemization Compare Itemization comparison with two costing variants
  • 103.
  • 104.
    Five Takeaways • Productcosting is not only used to generate standard costs • Proper cost component configuration is crucial to provide the best information • Material costs are updated from the cost component views • Use cost component views to provide a full picture of material costs • Product costing is closely linked with both PP and MM master data – it pays to have an understanding of those modules and how they are set up
  • 105.
    Resources • Tanya Duncan,Practical Guide to SAP® CO-PC (Product Cost Controlling) (Espresso Tutorials, 2014) • ISBN: 978-1-5003-1863-5 • http://5064.espresso-tutorials.com • John Jordan, Product Cost Controlling with SAP 3rd Edition (SAP Press, 2016) • ISBN: 978-1-4932-1270-5 • www.sap-press.com/3920
  • 106.
    Resources • Tom King,SAP® S/4HANA Product Cost Planning configuration and master data (Espresso Tutorials, 2019) • ISBN: 978-3-96012-908-0 • http://5376.espresso-tutorials.com • Tom King, SAP® S/4HANA Product Cost Planning costing with quantity structure (Espresso Tutorials, 2019) • ISBN: 978-1-51710082-7 • http://5377.espresso-tutorials.com
  • 107.
    Questions & Answers ContactInformation: Speaker: Tom King Company: Independent Consultant Email: tomking1919@gmail.com Telephone: +1, 864-529-2682
  • 108.
    Thanks for attending this session! Producedby: Disclaimer: SAP®, R/3, mySAP, mySAP.com, xApps, xApp, SAP NetWeaver®, Duet®, PartnerEdge, and other SAP® products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other product and service names mentioned are the trademarks of their respective companies. ERP Corp is neither owned nor controlled by SAP Register by November 30 SAVE $700 For details visit: Controlling.ERPCorp.com