product cost & profitability sap · 2020. 10. 13. · overview of sap •design of sap...
Post on 01-Nov-2020
13 Views
Preview:
TRANSCRIPT
CMA Jayesh P Desaiwww.jayeshdesai.com
Webinar Oct 11, 2020
SAPfor
F inanceTransformation
Product Cost & Profitability Analysis
ICAI-WIRC
www.jayeshdesai.com 1
Disclaimer
“SAP” is a trademark of SAP AG, Neurottstrasse 16, 69190 Walldorf, Germany.
SAP AG is not the publisher of this material and is not responsible for any inaccuracy.
This presentation is made in my personal capacity and I do not represent SAP or any of its subsidiaries.
www.jayeshdesai.com 211-10-2020
3
Jayesh P Desai & Co.Cost Accountants
www.jayeshdesai.com
Profile
www.jayeshdesai.com11-10-2020
• Practicing Professional (Since 2017)• Business Valuation• Data Analytics – Product Costing, Pricing & Profitability
Analysis• SAP Consulting & Training
• Key Accomplishments• Developed Financial Model for Start-up in areas such as
Blockchain, AI, Data Analytics, Gaming, Online Education, E-commerce, Electric Vehicle
• Valuation of early and funded start-up, matured companies, CIRP under Companies Act, FEMA, IBBI and other needs
• Data Analytics for manufacturing companies in power, Consumer Durables, Injection Molding, Textiles
• SAP trainer for Institute of Cost Accountants of India. Conducted 2 sessions of 60 hours each with 150 participants
• Conducted several Webinars on SAP for Finance Professionals for over 200 participants
Jayesh P Desai & Co.www.jayeshdesai.comJayesh@jayeshdesai.com
4
FCMA, CFA, CISA
CIA, PMP, UCLA (PGPX)
Registered Valuer (IBBI)
CMA Jayesh P Desai
Practicing Cost Accountant
DesaijayeshP
www.jayeshdesai.com11-10-2020
• Corporate Professional (1991-2016)• Financial Accounting, Product Costing, Profitability Analysis,
Internal/ System Audit, Corporate Restructuring• SAP Implementation, Data Analytics, Project & Delivery
Management• Building Global Teams & Leadership, Leading Innovation
• Key Accomplishments• Worked with General Mills, IBM, Colgate, Bayer, Shaw
Wallace, General Motors• Over 20 years SAP experience as delivery manager,
consultant and power user • Implemented 4 SAP FICO projects with integration• Domain experience in Finance & Controlling in SAP
environment• Specialised in SAP Controlling (CCA, PC, COPA, PCA)• Lead & Delivered global SAP & Data Analytics projects.
Managed Global Teams in India, US, UK• Lead Innovation and Data Analytics initiatives across various
functions and countries
5
FCMA, CFA, CISA
CIA, PMP, UCLA (PGPX)
Registered Valuer (IBBI)
Jayesh P Desai & Co.www.jayeshdesai.comJayesh@jayeshdesai.com
CMA Jayesh P Desai
DesaijayeshP
www.jayeshdesai.com11-10-2020
Content in the Series
Overview of SAP
• Design of SAP
• Enterprise Structure
• Modules & Business Processes
• SAP Live, Q & A
PC & CO-PA
• Product Costing
• Material Ledger
• Profitability Analysis
• SAP Live Q & A
9th
Oct
ob
er
10
thO
cto
ber
SAP Controlling Overview
• CO Enterprise Structure
• Controlling Master Data
• Cost Control
• SAP Live, Q & A
www.jayeshdesai.com 6
11
thO
cto
ber
11-10-2020
SAP Product Costing
www.jayeshdesai.com 711-10-2020
Content
www.jayeshdesai.com 8
MAP versus SP
Value Flow in Production
FS in Mfg. Companies
Standard Costing Design
Components of Standard Costing
SAP Live- Purchasing- Consumption- COGM- COGS- Variances
11-10-2020
MAP versus SP
www.jayeshdesai.com 9
• Moving Average PricePrice that changes in consequence of usage and entry of invoices. Calculated by dividing the value of material by the quantity in stock. Automatically recalculated based on activity.
• Standard PriceConstant price without considering usage or invoices. Price variances are posted to price difference accounts; not affecting the standard price. Usually calculated at the beginning of each year.
In SAP, MAP is indicated by Price Control indicator as ‘V’ and Standard Price is indicated by ‘S’ in the material master
The decision on method of valuating material is taken at the time of creating/ extending the material master. Finished goods are valuated with standard price while RM/ PM may be MAP or standard price.
11-10-2020
Step 1: Goods Receipt (movement type 101), PO value Rs 3,600
Dr. RM Stock A/c Rs 3,600Cr. GR/ IR Clearing A/c Rs 3,600
40 Kg @90
Step 2: Goods Issue to Production Order (movement type 261)Production Order No. 100251
Dr. Consumption A/c Rs 1,800Cr. RM Stock A/c Rs 1,800
20kg @90
Issue of material to shop floor is recorded as consumption and not WIP
GR/ IR Clearing account gets nullified during invoice processing MIGO
Value Flow in Production – GR/GIUsing a simple scenario
www.jayeshdesai.com 1011-10-2020
Step 3: Production Order “Confirmed”No FI entry, only CO transfer from cost center to production orderActivity Rate INR 40 per kg
Dr CrFinished Goods
Production Order No. 100251
Goods issue of RM (step 2) 1,800
Machine Activity 800
Value Flow in Production - Activity
www.jayeshdesai.com 1111-10-2020
Step 4: Good Receipt of Finished Goods from shop floor (movement 101)
Dr. Finished Goods Stock A/c Rs 2,400Cr. COGM A/c Rs 2,400
Dr CrFinished Goods
Production Order No. 100251
Goods issue of RM 20 kg 1,800
Machine Activity 800
Goods receipt of Finished Goods
20 kg
2400
Value Flow in Production – GR of FG
Standard Cost per Kg
Raw Material 80
Activity 40
Total 120
www.jayeshdesai.com 1211-10-2020
Step 5: Good issue during PGI – 10 Kgs
Dr. Cost of Sales A/c Rs 1,200Cr. Finished Goods Stock A/c Rs 1,200
Dr CrP& L Account
Consumption A/c 20 kgs 1,800
COGS 10 kgs 1,200
COGM 20Kgs 2,400
Value Flow in Production - PGI
www.jayeshdesai.com 1311-10-2020
The variance, like WIP is calculated and maintained Production Order-wise and the formula for valuation also is the same, namely, the balance in the account, which is nothing but the difference between the total debits and the total credits in each Production Order.
Given that variance and WIP are calculated based on the same formula, it is understood that a Production Order can either be in WIP or have Variance. The entry that is passed for variance is
(20*80-20*90)
Dr Production Variance a/c Rs 200
Cr Cost of Goods manufactured a/c Rs 200
Value Flow in Production - Variance
www.jayeshdesai.com 1411-10-2020
Financial Statement
Manufacturing Account
Particulars Qty Rate Amount Particulars Qty Rate Amount
Consumption 20 90 1800 COGM 20 120 2400
Conversion Cost 1200 COGM- Variance 20 10 200
Under-absorbed Cost 400
3000 3000
Profit & Loss Account
Variance 200 Sales 10 250 2500
Under-absorbed Cost 400
COGS 10 120 1200
Other Cost 500
Profit 200
2500 2500
Balance Sheet
Inventory – FG 10 120 1200
Inventory - RM 20 90 1800
Standard Cost per Kg
Raw Material 80
Activity 40
Total 120
www.jayeshdesai.com 1511-10-2020
Standard Costing Design
Material Master – FG
Work Centre
Routings –FG
BOM – FG
Cost Centre/ Activity Rate
Activity Quantity
RM/ PM Quantity
Costing Sheet
Base
OH Rate
RM
PM
Activity
OH
Cost Components are assigned
to Value Fields in PA
and provides
Cost of Sales
Controlled by:Costing Variant
Cost Elements
Cost ComponentMfg. Plant (IN15)
RM/ PM Price
Material Master – RM/ PM
X
X
X Cost Elements
www.jayeshdesai.com 1611-10-2020
Components of Standard Costing
www.jayeshdesai.com
• Material Master for FG, RM and PM• Price Control, Costing indicator, Plan price
for RM/ PM, Costing Lot
• BOM• Assembly
• Item with quantity
• Base qty
• Routings• Operations
• Work Centre, Cost Centre
• Activities
• Resources
• Cost Centers/ Cost Elements
• Activity Price Calculations
• Costing Variant
– Costing type
– Valuation Variant
– Date Control
– Qty structure control
– Transfer Control
– Reference Control
• Costing Sheet
• Plant, production version, etc
Master Data Configuration
• Material Cost Estimate/ Costing Run
(CK13N/ CK40N)
• Cost Centre Planning & activity rates
(KP06, KP26 and KSPI)
T-Codes
1711-10-2020
• Cost accounting using actual prices
• Storing values of stock in three different valuations – Legal, group, PCA
The Material Ledger(ML) is a tool within the CO Module that collects all transactional data for materials whose master data is stored in the material master. It acts as a subledger for selected materials that captures all goods movements, invoice values, transfers and price changes. On the basis of this data, the material ledger calculates and maintains the actual cost for these materials. This actual cost can then be utilized to valuate the material stock accounts. The material ledger makes stock valuation in up to three currencies and/or valuations possible.
Material Ledger
www.jayeshdesai.com 1811-10-2020
1. Actual Costing.
During the period, valuation of all goods movements is done with the preliminary valuation price which is normally the standard price. All variances from the preliminary valuation are maintained in the ML. At period end, revaluation of ending inventory can be performed with the determined actual price. This is not mandatory. Actual prices can be calculated for statistical purposes only.
2. Parallel currencies and/or valuations of material stocks.
All goods movements in the ledger can be maintained in 3 currencies. The values are translated into other currencies using the historical exchange rates. Prerequisite for usage of transfer pricing functionality.
Objectives
www.jayeshdesai.com 1911-10-2020
Components of Standard Costing
www.jayeshdesai.com 2011-10-2020
SAP Live
www.jayeshdesai.com 2111-10-2020
www.jayeshdesai.com 2211-10-2020
Content
www.jayeshdesai.com 23
• Income Statement Design
• Operating Concern
• OC & CA relationship
• PA Methods
• Characteristics, Value Field & Profitability Segment
11-10-2020
0 Fixed Assets
1 Current Assets
2 Net worth
3 Other Liabilities
4 Revenue
5 Material Cons.
6 Primary Cost
7 Other Expenses
8 Secondary Cost
9 Reporting
PP
MM
SD
Production Order
Production Cost Centre
Service Cost Centre
Marketing Cost Centre
General Ledger
SAP Modules
Income Statement Design
www.jayeshdesai.com 2411-10-2020
CC 1CC 2CC 3 CC 5CC 4
CA1 CA2 CA3
Operating Concern
FY Var
COA
FY Var
COA
FY Var
COA
Operating Concern
These are few possibilities
Operating Concern
www.jayeshdesai.com 2511-10-2020
Controlling Area & OC
www.jayeshdesai.com 2611-10-2020
Period accounting method Cost of Sales method
•Revenues
•Sales deductions
•Changes in stock
•Capitalized internal services
• Work in process
•Revenues
•Sales deductions
•Cost of sales
(incl. variances for period)
Total activities Gross result
•Total costs:
Material costs
Personnel costs
Other costs
•Sales and distribution costs
•Administrative costs
•Research & Development
Result Result
The period accounting approach - The total
costs for the period are compared with the total
operating output for the period. Adjustments
made for stock increase/ decrease. It shows by
Cost Element what was incurred.
In the cost-of-sales accounting approach
there is no differentiation according to cost
elements. Here the sales revenues are
compared with the manufacturing costs for the
products sold (cost of sale). The cost-of-sales
procedure therefore indicates where the costs
were incurred.
PA Methods
www.jayeshdesai.com 2711-10-2020
Characteristics
www.jayeshdesai.com 2811-10-2020
Value Field
www.jayeshdesai.com 2911-10-2020
A profitability segment corresponds to a market
segment. It is defined by a combination of
characteristic values
You can calculate the profitability of a profitability
segment by setting off its sales revenues against
its costs.
Profitability Segment
www.jayeshdesai.com 3011-10-2020
SAP Live
www.jayeshdesai.com 3111-10-2020
www.jayeshdesai.com 3211-10-2020
Content
What is Standard Costing?
Costing Methodology
Plant & Kitchen
Components
Standard Costing Design
Price Calculations
Important Settings
Valuation
SAP Live
www.jayeshdesai.com 3311-10-2020
What is Standard Costing?
www.jayeshdesai.com 34
Standard Costing is used for determining cost of manufacturing product/ rendering services beforethe goods are sold or services rendered
It helps management in -• Determining Cost of Goods Sold
Sale – COGS = Gross Profit
• Valuation of Inventories (Legal Valuation)• Cost controlling• Profitability forecasting & analysis• Pricing
In this session, we will deal with manufactured products
11-10-2020
Costing Methodology
www.jayeshdesai.com 35
• Moving Average PricePrice that changes in consequence of usage and entry of invoices. Calculated by dividing the value of material by the quantity in stock. Automatically recalculated based on activity.
• Standard PriceConstant price without considering usage or invoices. Price variances are posted to price difference accounts; not affecting the standard price. Usually calculated at the beginning of each year.
In SAP, MAP is indicated by Price Control indicator as ‘V’ and Standard Price is indicated by ‘S’ in the material master
The decision on method of valuating material is taken at the time of creating/ extending the material master. Finished goods are valuated with standard price while RM/ PM may be MAP or standard price.
11-10-2020
Costing Methodology
www.jayeshdesai.com 36
• Make to Order
The planning and manufacturing process is initiated after receiving the sales orders from the customer.
The whole process is customer focused and throughout the manufacturing process the connection to the customer can be maintained.
The primary benefit of this process is that manufacturer can meet specific customer requirements and track the profitability of each sales order.
• Make to Stock
Characteristics of a Make-to-Stock (MTS) process are commodity-based end products
Production prior to sales order based on forecast
End products sold from inventory, controlling of inventory is critical and distribution and warehousing of end product is the norm.
We will consider Make to Stock scenario in this presentation
11-10-2020
Costing in SAP
www.jayeshdesai.com 37
• Standard Costing
• Target Costing
• Life Cycle Costing
• Joint Product
• Bi-product
• Mixed Costing
• Batch Costing
• Activity Based Costing
• Split Valuation
• With Quantity Structure
• Without Quantity Structure
• Simulation Costing
11-10-2020
Plant & Kitchen Similarity
www.jayeshdesai.com 3811-10-2020
Kitchen is a “plant” with several “Work Centre”www.jayeshdesai.com 3911-10-2020
www.jayeshdesai.com 40
MilkSugarMisc. Item
10 Ltrs5 Kgs1 Kg
252050
25010050 400
HeatingRefrig.WashingStorage
2 Hrs1 Hrs1 Hr5%
253015
50301520 115
515Estimated Cost
Per Unit Cost 5.15
Rosgulla 100 Psc.
Ingredients Qty Rate Tot
Tempting Rosgulla!
11-10-2020
www.jayeshdesai.com 41
MilkSugarMisc. Item
10 Ltrs5 Kgs1 Kg
252050
25010050 400
HeatingRefrig.WashingStorage
2 Hrs1 Hrs1 Hr5%
253015
50301520 115
515Standard Cost
Per Unit Cost 5.15
Rosgulla 100 Psc.
Ingredients Qty Rate Tot
Costing Lot
Finished Goods (FERT)
Raw Material (ROH)
Activities
Overhead
BOM
Routing
CS
Cost Component
Tempting Rosgulla in SAP!
11-10-2020
Components for Standard Costing
www.jayeshdesai.com 42
• Material Master for FG, RM and PM• Price Control, Costing indicator, Plan price
for RM/ PM, Costing Lot
• BOM• Assembly
• Item with quantity
• Base qty
• Routings• Operations
• Work Centre, Cost Centre
• Activities
• Resources
• Cost Centers/ Cost Elements
• Activity Price Calculations
• Costing Variant
– Costing type
– Valuation Variant
– Date Control
– Qty structure control
– Transfer Control
– Reference Control
• Costing Sheet
• Plant, production version, etc
Master Data Configuration
• Material Cost Estimate/ Costing Run
(CK13N/ CK40N)
• Cost Centre Planning & activity rates
(KP06, KP26 and KSPI)
T-Codes
11-10-2020
Standard Costing Design
Material Master – FG
Work Centre
Routings –FG
BOM – FG
Cost Centre/ Activity Rate
Activity Quantity
RM/ PM Quantity
Costing Sheet
Base
OH Rate
RM
PM
Activity
OH
Cost Components are assigned
to Value Fields in PA
and provides
Cost of Sales
Controlled by:Costing Variant
Cost Elements
Cost ComponentMfg. Plant (IN15)
RM/ PM Price
Material Master – RM/ PM
X
X
X Cost Elements
www.jayeshdesai.com 4311-10-2020
• RM/ PM prices are based on market forecast or historical averages.
• These are entered in Planned Price field of Material Master
• Price Control is mostly ‘V’ but can also be ‘S’
• Activity prices involves cost centers and activity-dependent planning (KP06 and KP26)
Price Calculations
www.jayeshdesai.com 4411-10-2020
Head -Manufacturing
Baroda Plant Pune Plant Mumbai PlantMachine Activity Rate
Labor Activity Rate
Fixed Machine Cost
Capacity Machine Hour
+
Variable Machine Cost
Plan Machine Hour
=Machine Activity Price
Cost Centre
Product Product Product
Activity Price Calculations
www.jayeshdesai.com 4511-10-2020
• Plant
• Material Type
• Lot Size
• Proc Type
• Special Procurement
• With Qty Structure
• Planned Price
• Valuation Class
• Price Control
• Base UOM
• Material Origin
• Overhead Group
• Do Not Cost
• Production Version (MRP4)
Material Master Key Settings
www.jayeshdesai.com 4611-10-2020
• Base Quantity
• Production Relevant
• CostingRelevncy
• Assembly
• Material
• Component
• Quantity
• Plant
BOM Key Settings
www.jayeshdesai.com 4711-10-2020
• Resource
• Operations
• Plant
• Status
• Usage
• Activity Type
• Duration
• Costing Relevancy
Routing Key Settings
www.jayeshdesai.com 4811-10-2020
Configurations
www.jayeshdesai.com 4911-10-2020
• Once standard cost is released, all finished goods currently in stock, are re-valuated.
• Difference between old value and the new value gets posted to FI using MM procedures in OBYC.
• FG stock is reflected at current standard price
Valuation
www.jayeshdesai.com 5011-10-2020
Thanks!
www.jayeshdesai.com
Jayesh@jayeshdesai.com
SAP4Me
DesaijayeshP
www.jayeshdesai.com 51
Link to Recorded SAP
Webinar
11-10-2020
top related