sap co costing

8/21/2019 SAP CO Costing

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SAP Product CostingConfiguration

SAP R/3 ENTERPRISE ECC6

Published by Team of SAP Consultants atSAPTOPJOBS

Visit us at www.sap-topjobs.com

Copyright 2009-11@SAPTOPJOBS

All 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.


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TABLE OF CONTENTS

1. INTRODUCTION 7

2. PRODUCT COST PLANNING 8

2.1 Basic Settings for Material Costing 10

2.2 Maintain Overhead Cost Elements 11

2.3 Define Calculation Bases 16

2.4 Define Percentage Overhead Rates 20

2.5 Define Quantity-Based Overhead Rates 23

2.6 Define Credits 24

2.7 Define Origin Groups (Optional) 28

2.8 Define Costing Sheets 30

2.9 Define Overhead Keys 33

2.10 Define Overhead Groups 35

2.11 Define Cost Component Structure 372.11.1 Create a cost component structure 402.11.2

Define the cost components. 42

2.11.3 Assign the cost elements to these cost components. 512.11.4 Cost elements for Additive costs / without quantity structure 522.11.5 Transfer structure 532.11.6 Cost component views 532.11.7 Assign org units to cost component structure 562.11.8 Cost component split 572.11.9 Cost component structure 58

3. MATERIAL COST ESTIMATE WITH QUANTITY STRUCTURE 60

3.1 Define Costing Types 61

3.2 Define Valuation Variants 73

3.3 Define Date Control 81

3.4 Define Quantity Structure Control 84

3.5 Define Transfer Strategy 89

3.6 Define Reference Variants (Optional) 93


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3.7 Define Costing Variants 97

4. SELECTED FUNCTIONS IN MATERIAL COSTING 109

4.1 Activate Cross-Company Costing (optional) 109

4.2 Activate Cost Component Split in Controlling Area Currency (Optional) 111

4.3 Define Quantity Structure Types for Mixed Costing (optional) 113

4.4 Define Costing Versions (optional) 116

4.5 Define Source Structure in Joint Production (optional) 118

5. COST OBJECT CONTROLLING 123

5.1 Product Cost by Order Manufacturing Order Check costing variants. 124

5.2 Check Order Types 140

5.3 Define Goods Received Valuation for Order Delivery 142

5.4 Work in Process Define Results Analysis Keys 144

5.5 Define Cost Elements for WIP Calculation 146

5.6 Define Results Analysis Versions 152

5.7 Define Valuation Method (Actual Costs) 156

5.8 Define Line Ids 160

5.9 Define Assignment 162

5.10 Define Update 165

5.11 Define Posting Rules for Settling Work in Process 169

5.12 Define Number Ranges 173

6. VARIANCE CALCULATION 174

6.1 Define Variance Keys 174

6.2 Define Default Variance Keys for Plants 176

6.3 Check Variance Variants 177

6.4 Define Valuation Variant for WIP and Scrap (Target Costs) 181

6.5 Define Order type dependent parameters 182

6.6 Define Target Cost Versions 184


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6.7 Define Number Ranges for Variance Documents 191

7. SETTLEMENT 192

7.1 Create Settlement Profile 192

7.2 Create PA Transfer Structure 195

7.3 Maintain Number Ranges for Settlement Documents 198

8. PRODUCT COST BY PERIOD 201

8.1 Check costing variants for Product cost collectors 201

8.2 Check Order Types 229

8.3 Define Cost-Accounting-Relevant Default Values for Order Types and Plants 238

8.4 Check Control Data for Repetitive Manufacturing Profiles 241

8.5 Activate Generation of Cost Log in Repetitive Manufacturing 245

8.6 Define Goods Received Valuation for Order Delivery 246

9. WORK IN PROCESS 247

9.1 Define Results Analysis Keys 247

9.2 Define Cost Elements for WIP Calculation 248

9.3 Define Results Analysis Versions 248

9.4 Define Valuation Method (Target Costs) 249

9.5 Define Valuation Variant for WIP and Scrap (Target Costs) (Optional) 252

9.6 Assignment of Valuation Variant for WIP (Optional) 253

9.7 Define Line Ids 254

9.8 Define Assignment 254

9.9 Define Update 254

9.10 Define Posting Rules for Settling Work in Process 254

9.11 Define Number ranges 254

10. VARIANCE CALCULATION 255

10.1 Define Variance Keys 255


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10.2 Define Default Variance Keys for Plants 255

10.3 Define Variance Variants 255

10.4 Define Target Cost Versions 255

10.5 Define Number Ranges for Variance Documents 255

11. SETTLEMENT 256

11.1 Create Settlement Profile 256

11.2 Create PA Transfer Structure 256

11.3 Maintain Number Ranges for Settlement Documents 256

12. PRODUCT COST BY SALES ORDER 257

12.1 Control of Sales-Order-Related Production/ Product Cost by Sales Order 25712.1.1 Check Account Assignment Categories 25712.1.2 Check Requirements Classes 25912.1.3 Check Requirements Types 26212.1.4 Check Control of Requirements Type Determination 26412.1.5 Check Planning Strategies (selection of reqt. type through MRP group) 26512.1.6 Check Strategy Groups (selection of reqt. type through MRP group) (optional) 268

12.2 Preliminary Costing and Order BOM Costing 26912.2.1 Check Costing Type 26912.2.2 Check Costing Variants for Product Costing 272

12.3 Results Analysis 28012.3.1 Create Results Analysis Keys 28012.3.2 Define Cost Elements for Results Analysis 28012.3.3 Define Results Analysis Versions 28012.3.4 Define Valuation Methods for Results Analysis 28012.3.5 Define Line IDs 28012.3.6 Define Assignment for Results Analysis 28012.3.7 Define Update for Results Analysis 28012.3.8 Define Posting Rules for Settlement to Financial Accounting 28012.3.9 Maintain Number Ranges for Results Analysis Documents 280

12.4 Settlement 28112.4.1 Create PA Transfer Structure 28112.4.2 Create Settlement Profile 284

13. INFORMATION SYSTEM 286

13.1 Maintain Summarization Hierarchies 286

14. APPENDIX 292

14.1 Customizing settings in OBYC 292


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14.2 Attach primary cost component structure (Optional) 295


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1.INTRODUCTION

A 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 and

Overhead cost

To 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. This

quantity is multiplied by the activity prices maintained in the cost centeraccounting module. W e will cover all this and more in this document

W 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 in

controlling area 1100.


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2. Product Cost Planning

For doing the configuration we will use the following path on theSAP application screen:-

Menu Path

SAP Menu Tools AcceleratedSAP Customizing SPRO -

Edit Project

Product 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 goodsin the Materials Management application component

Set prices for finished and semi finished goods in the Salesand Distribution application component

Calculate the cost of goods manufactured or the cost of goodssold for the Profitability Analysis function in Controlling

Set a standard to measure production efficiency in Cost ObjectControlling

Product Cost Planning shows you: The cost composition of each product The value added in each manufacturing step The value added in each overhead process


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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, which

allow you to simulate the cost impact of changing one productionfactor or modifying the amount of overhead allocated to a product.


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2.1Basic Settings for Material Costing

The company A Ltd for its plant 1100 requires the followingoverheads:-

1) Material overhead

2) Production overhead

It 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.


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2.2 Maintain Overhead Cost Elements

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing Overhead Maintain Overhead Cost Elements

Purpose of Configuration

To 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:-


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Click on Save

Create another overhead cost element for production overheads


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Click on Save


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2.3 Define Calculation Bases

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing Overhead Costing Sheet: Components Define Calculation Bases


The calculation base determines to which cost elements overhead isapplied together.

We will define 2 bases on which overheads will be calculated:-

1)Materials2)Wages

Proceed as follows:-

Click on and update the following:-


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Click on Save

Select

Double click

Update

Click 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.


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We update this as base for our calculation of overhead.

Click on Save

Select

Wages 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


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Click on Save


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2.4 Define Percentage Overhead Rates

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing Overhead Costing Sheet: Components Define Percentage Overhead Rates


We 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.



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Click on Save

Select

Double click

Click on


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Overhead type 1 is actual overhead rate

Overhead type 2 is planned overhead rate

Click on Save

Click

Select

Double click

Click on and update the following

Click on

To maintain a new dependency the path is as follows:-

Menu Path


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IMG Controlling Cost Center Accounting Actual PostingsPeriod-End Closing Overhead Costing Sheet: Components Extras: Dependencies / Condition Tables Define ConditionTables/ Define Dependencies.

Create a new Condition table with table name as 999

You 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 will

assign the condition table.

2.5 Define Quantity-Based Overhead Rates

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing Overhead

Costing Sheet: Components Define Quantity-Based OverheadRates


In 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.


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2.6 Define Credits

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing Overhead Costing Sheet: Components Define Credits


By 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.


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Click on

Select

Double click



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Click on

We update the cost center which is to be credited using theoverhead cost element.

Click on

Select

Double click

Click on


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Click on


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2.7 Define Origin Groups (Optional)

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing Define OriginGroups


Origin 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 materialmaster record, the combination of origin group and costelement is updated in the Controlling module.

If the Material originindicator in the costing view of thematerial master record is specified in addition to the origingroup, the costs are updated under the combination ofmaterial number and cost element in the Controllingcomponent.

Therefore you can do the following for each cost element and origingroup:

Calculate Overhead

If 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.


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Make assignments to cost components

If 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.


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2.8 Define Costing Sheets

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing Overhead Define Costing Sheets


The 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.



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Click on Save

Select

Double click on



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Click on Save

Click

Click to check the costing sheet.


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2.9 Define Overhead Keys

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing Overhead Define Overhead Keys


Overhead 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 sheetto your production order, Enter in theassigned costing sheet, overheads that use the overhead keyfield.

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:-


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2.10 Define Overhead Groups

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing Overhead Define Overhead Groups


Here 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.

Example

Suppose you want to apply an overhead rate of 10% to one group of

materials 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 Percentage

SAP10 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


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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 still

see the standard SAP configuration.


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2.11 Define Cost Component Structure

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Basic Settings for Material Costing Define CostComponent Structure


In 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 product

In 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.


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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 forvariable 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 asemifinished product are displayed in the cost estimates of thehigher-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 relevantfor inventory valuation or not, or only relevant for variablecosts or relevant for both fixed and variable costs.

Cost Component Views

You 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 Groups

You 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.


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For each cost component, you can assign two cost componentgroups.


Let us create a cost component structure for the following:-

Cost ComponentsSource

Raw Material andSFG

BOM(Materials)

Packing Material

BOM

(Materials)

Material Overheads Cost Sheet

Salaries andWages

Routing/Cost Center

ProductionOverhead

Cost Sheet

Depreciation Cost Sheet

Other Costs Cost Sheet


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2.11.1 Create a cost component structure

Enter an alphanumerical key and a name for the cost component

structure, and specify whether the cost component structure is aprimary cost component split.


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Click on Save


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2.11.2 Define the cost components.

Enter the cost component structure, a key and a name for the cost

component. 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 evaluation

Double click

Click on



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Roll up cost component Selecting this makes the cost of Raw

material to roll up to the next level of finished good.

Click on to create another cost component


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Click on save

Click on


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Click on Save

Click

These are the cost components created.


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Now we need to attach the cost component structure to the costelements


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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.

Select

Double click

Click on


Click on Save


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2.11.4 Cost elements for Additive costs / without quantitystructure

Here you can define which cost elements or cost elements andorigin groups are proposed in cost estimates without quantity

structure 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.


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2.11.5 Transfer structure

The 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 structure

2.11.6 Cost component views


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We want only a single cost component view i.e. Costs of goodsmanufactured

Double click

Double click


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2.11.7 Assign org units to cost component structure

Assign 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 the

main cost component split.

Double click

Click on

We 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.


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2.11.8 Cost component split

You 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 cost

component structure. A possible cost component group could beBOM, Routing, BOM & Routings.

We are not configuring anything over here. In case you need toconfigure

Double click and maintain the entries.


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2.11.9 Cost component structure

When 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 Active

Double click

Click


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Click on Save


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3.Material Cost Estimate with Quantity Structure

In 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).


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3.1 Define Costing Types

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Material Cost Estimate with Quantity StructureCosting Variant: Components Define Costing Types


This key is used for internal control of costing application. This key

determines 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)


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Double click

We will use the standard costing type 01 the configuration of whichis as follows:-


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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 ensuresthat the results of the standard cost estimate can be used asthe standard price for that period.


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For the other costing types, you can update the costing resultswith the With date indicator, for example. In this case thecurrent 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 component

view but on other bases. Therefore nothing is configured here.


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Since we are using Material Ledgerwe 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


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Click

Change the description of the costing type from

to

Click on Save

Let us now the see configuration for profit center cost estimate

Double click


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Click

Change the description from

to

Click on Save


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3.2 Define Valuation Variants

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Material Cost Estimate with Quantity StructureCosting Variant: Components Define Valuation Variants


Through 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.


In the tab Material valuation

We 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 the

material 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 3rdstrategy will be used i.e. system will look for


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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 forprices in activity type planning in Cost Center AccountingCosting to valuate the utilized activity types.You also specify which plan/actual version is used.


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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 forprices in the purchasing info record.


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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 processing

Here we define the sequence in which the system searches forprices in the purchasing info record or routing operation forvaluation of the external activities.


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In our configuration we have defined that the system willsearch for price from operation (which is manually maintainedin the routing), in case no price is maintained the system willsearch for info records maintained in the system (netquotation price)

In the tab Overhead costs

Here 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 for

subcontracted materials in material costing. We do not require thisso we will not configure this.


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Important note

If you want to use different valuation strategies or different

overhead 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 don't do this, the valuation variants apply to all your plants.

In the tab Misc.


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Click

This is Indicator for relevancy to costing; it controls the extent towhich a BOM item, operation, or sub operation in the routing is

included 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 relevancyto costing is Xis fully relevant to costing.

A BOM item or operation without an indicator for relevancy tocosting is not relevant to costing at all.


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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.

Click

Click on

Click


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3.3 Define Date Control

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Material Cost Estimate with Quantity StructureCosting Variant: Components Define Date Control

Date 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 quantitystructure, sales order costing)

The validity period of the cost estimate

The date on which the quantity structure is determined(quantity structuredate)

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


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We will change it to the following:-


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Click on


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3.4Define Quantity Structure Control

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Material Cost Estimate with Quantity StructureCosting Variant: Components Define Quantity StructureControl


Quantity 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 whichthe BOM is used.

Selection ID for selecting alternative routings

This key determines the priority given to routings duringrouting selection.

Let us use the standard setting PC01

We will display the settings of PC01


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We will change it to the following:-


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Selection ids for routing

How 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)


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Click on


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3.5 Define Transfer Strategy

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Material Cost Estimate with Quantity StructureCosting Variant: Components Define Transfer Control


The 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 theindividual levels of the BOM, they are not recosted. Rather, theexisting costing data is transferred into the cost estimate in

accordance with the transfer control.

If you always want to recost, choose the transfer control Notransfer.

Cross-Plant Transfer

The following special procurement types are taken intoaccount for transfer into material cost estimates:

Transfer from other plant Production in other plant

If you have entered one of these special procurement types inthe costing view of the material master record, the systemproceeds as follows:


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o In the plant from which the material component iswithdrawn according to the special procurement type, thesystem looks for existing costing data and transfers thatdata into the cost estimate.

Strategy Sequences for Single-Plant and Cross-Plant Transfer

The 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 shouldsearch for costing data in. If the indicator within current fiscal

year is set, the number of periods that you enter here islimited to the fiscal year.

If you turn on the indicator Transfer only with collectiverequirements material. the transfer depends on therequirements indicator of the material component.

For materials in the individual requirements the systemcreates 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


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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 goods

In cross plant we will keep the following strategy sequence:-

Future standard cost estimateCurrent standard cost estimatePrevious standard cost estimate

Further the indicator within fiscal year is selected, so that systemsearches the above costs only in the current fiscal year.


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3.6 Define Reference Variants (Optional)

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Material Cost Estimate with Quantity StructureCosting Variant: Components Define Reference variants


Reference variants allow you to create material cost estimates or

costing 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 quantitystructure of the existing standard cost estimate when itcalculates the inventory cost estimate without having to

predetermine the quantity structure. In the reference costestimate, you specify that the overhead for the inventory costestimate should still be calculated differently.

We are not using reference variant.

The SAP standard reference variant is shown below:-


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3.7 Define Costing Variants

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Material Cost Estimate with Quantity Structure Define Costing Variants


Costing 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 thecontrol parameters for Product Costing.


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Controls Control

Parameters

Description

Costing Type PriceUpdate in

MaterialMaster

Indicator that determineswhether the Costing

results are written to thematerial .Costing resultscan be written to :-

Standard Price Field- usedin Standard Costing

No update Whenperforming SimulationCosting

MaterialValuationStrategy

Strategy sequence thatdetermines the valuationof the materials used inthe Cost estimate.

For example ,materialvaluation has thefollowing strategysequence :-

1 Planned Price 1

2 Standard Price

If the system finds a valuein the planned Price 1field, this value is taken asthe value for valuating thematerial. If the systemdoes not find a value, thevalue in the standard

price field is used.

ValuationVariant

ActivityTypeStrategy

Strategy sequence thatdetermines how activitytypes is valuated inCosting.


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For example, Activity Typehas the following strategysequence :-

1 Plan Price average forthe whole year

2 Plan price for the period

If the system finds a planaverage price for theactivity type, this price isused for valuating theactivity type.

If the system cannot find aplan average price, it looks

for a plan price for theperiod.

BOM Strategy Sequence thatdetermines which BOMusage is selected inCosting :-

e.g.Production BOM willbe used for Costing

QuantityStructure

Determination

Routing Strategy Sequence thatdetermines which Routingusage is selected inCosting :-

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 variant

Click and update the following.


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Use the costing type, valuation variant configured earlier and thestandard date control PC01, quantity structure control PC01,transfer control PC01

In tab Qty. Struct

If the Pass on lot size indicator is selected, the system determinesthe costing lot size using the lot size of the highest material in the

BOM 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


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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 finished

material to calculate the material costs for the finished product.

2) Pass on lot size only with individual requirement

In 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 size

Here, 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.


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In tabAdditive Costs

Following configuration is decided:-

Whether we can transfer the cost components that wereentered in the form of an additive cost estimate

Whether the additive costs for materials with the specialprocurement types stock transfer or production are includedin another plant

We want to include additive cost (costs manually created suchas freight) and also to include them in stock transfers


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In the tab Update



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In the tab Assignments

We determine the following:

Which cost component structure is used for the costestimate

Which costing versionis used

Whether the cost component split can be saved in thecontrolling area currency in addition to the company codecurrency

Whether you can cost across company codes with thiscosting variant


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In the tab Misc

You update the following:-


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You will get message

Press enter to continue.

Click on Save to save costing variant

Click on to check the costing variant

Similarly you need to configure Z1P2 and Z1P3 for Group and Profit

center valuation.

In Z1P2 you will select the costing type created for group valuation


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Rest of the configuration will be same as Z1P1.

For Z1P3 selecting costing type created for profit center valuation.


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Rest of the configuration will be the same as Z1P1


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4. Selected Functions in Material Costing

4.1Activate Cross-Company Costing (optional)

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Selected Functions in Material Costing ActivateCross-Company Costing


Here we specify that costing across company codes is allowed.Costing across company codes means that:

Material costing can access information in more than onecompany code

Additive costs for costs such as transportation charges can betaken into account with planned stock transfers

The costing results can be released for all company codes inthe controlling area

This 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 will

be used instead of the individual cost components.

Click on

Update the following: -


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Click on Save


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4.2Activate Cost Component Split in Controlling AreaCurrency (Optional)

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Selected Functions in Material Costing Activate CostComponent Split in Controlling Area Currency


Here 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 alwaysupdated:

Cost component splits in company code currency Itemizations in both currencies (provided that the costingvariant allows itemizations to be saved)

This step is only relevant if the following applies:

The controlling area currency is not the same as the companycode 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.


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2. Enter a company code for which a currency has beenmaintained that is not the same as the controlling areacurrency.

3. If necessary, enter a costing type and a valuation variant.

We will not activate cost component split in controlling areacurrency.


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4.3 Define Quantity Structure Types for Mixed Costing(optional)

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Selected Functions in Material Costing Mixed CostingDefine Quantity Structure Types


This 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 kg

The 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


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Mixed cost estimate = 10800/100 = 108 /kg

The quantity structure category controls how mixed costing isapplied and how it is executed. It determines which procurement

alternatives are to be costed with which mixing ratios for thematerials in the cost estimate.

Double Click

Click on


You can have time dependency as follows:-


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Click on Save


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4.4 Define Costing Versions (optional)

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Selected Functions in Material Costing DefineCosting Versions


This 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 don't use costing versions, the exchange rate type isdetermined through the valuation variant specified in thecosting variant.If you use costing versions, you can specify that a differentexchange rate type should have priority.

Quantity structure type for mixed costing

Mixed cost estimates are created with reference to a costingversion. You can create more than one mixed cost estimate forthe same material; such cost estimates are differentiated bytheir costing versions.

Here we attach the quantity structure mix to the costingversion, since we will work with costing mixed costing


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Click on new entries and update the following:-

.


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4.5 Define Source Structure in Joint Production (optional)

Menu Path

IMG Controlling Product Cost Controlling Product CostPlanning Selected Functions in Material Costing Costing in

Joint Production Define Source Structure


Applicable 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 don't 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 not

have 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 on



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Click on Save

Select

Double Click

Click on



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Click on Save

Select

Double Click

Click on



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Click on Save

Click

Select

Double Click

Click on


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Click on Save


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5. Cost Object Controlling

In the section product cost planningwe have only seen planning of

the 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.


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5.1 Product Cost by Order Manufacturing Order Checkcosting variants.

Menu Path

IMG 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 PPP1

Double click


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Double click

Than,


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Double click


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In Overheads you need to update the costing sheet create by usearlier.


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Click on

Click twice

Double click


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Double click


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Double click


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In overhead you update the costing sheet created by us.


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Click on


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5.2Check Order Types

Menu Path

IMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Manufacturing OrdersCheck Order Types


Here an important thing we need to check is the settlement profile.Settlement profile PP01 is attached to the production order type

Order type 1100 is copied from Standard order type PP01.


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Click

Click on

Remember to change the settlement profile after youconfigure the settlement profile ZPP1


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5.3Define Goods Received Valuation for Order Delivery

Menu Path

IMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Define Goods ReceivedValuation for Order Delivery


This step is only relevant if your have specified price control V in

the 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 credit

posting 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


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I


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5.4Work in Process Define Results Analysis Keys

Menu Path

IMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define Results Analysis Keys


In 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 level

WIP 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.


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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 costs

Click on

Click on


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5.5 Define Cost Elements for WIP Calculation

Menu Path

IMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define Cost Elements for WIP Calculation


In 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 costs2)WIP - Material costs3)WIP - Secondary costs


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Double click


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Click on

Create another Result analysis cost element for Material costs


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Click on Save

Create another result analysis cost element for Secondary costs


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Click on Save


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5.6Define Results Analysis Versions

Menu Path

IMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define Results Analysis Versions


Here 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 on

You will get a pop as follows:


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Select 1100 controlling area version 0

Update the Technical RA cost element950000


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And click


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Click on Save

Click


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5.7 Define Valuation Method (Actual Costs)

Menu Path

IMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define Valuation Method (Actual costs)


Here 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 ortechnically 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 costs

In 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


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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 costsor 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 creditof the order from goods receipts isinterpreted as a variance with this status.

Click on


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Select


Click

Click on

On Saving the Result analysis version for D01 and D02 getsautomatically created.


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5.8 Define Line Ids

Menu Path

IMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define Line IDs


The 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.


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We want analysis for Material costs, Secondary costs.

We will create Line Ids for the same.

Click on


Click on Save


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5.9 Define Assignment

Menu Path

IMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define Assignment


You 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 theorder

The valuation of work in process with planned costs for thefinished material

Valuation Using Actual CostsThe line IDs put the costs incurred for the order into specificgroups, such as:

Direct Material Costs Production Costs Indirect Costs

The 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


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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 the

delivery 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 costscan be capitalized

You 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 capitalized

This 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 costs

You 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.


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Click on


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 Save

When you maintain for version 0 all the data for version D01 andD02 automatically gets copied. (If material ledger & currency and

valuation profile is active)


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5.10 Define Update

Menu Path

IMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define Update


For 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 theorder.

The valuation of work in process with the planned costs for thefinished material

Valuation Using Actual CostsThe line IDs put the costs incurred for an order into the followinggroups:Direct material costsProduction costsIndirect costs

The 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).


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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).


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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 on



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K Costs

A - Revenue

Click on Save

Automatically the Versions for D01 and D02 get created.


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5.11 Define Posting Rules for Settling Work in Process

Menu Path

IMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define Posting Rules for Settling Work in Process


In 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 theassignment 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 inprocess with requirement to capitalize costs to the G/L


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accounts for unfinished products (balance sheet) and stockchanges (P/L).

Results analysis cost elements

In this case you assign the individual results analysis costelements to the G/L accounts.For example, the work in process for the direct material costsis updated under results analysis cost element 950000 andthe work in process for the production costs under resultsanalysis cost element 9500001, you can pass this informationon to different G/L accounts in Financial Accounting.

In our scenario we do not want the results to be updated todifferent GL codes.

Before doing this transaction you need to first switch off theindicator:-

Menu Path

IMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define Results Analysis Versions


Double Click

Uncheck Remove the tick

Click on

Click on



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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). This

normally 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 module

119460 is a balance sheet account WIP

Click on Save

The posting rules for version D01 and D02 are definedautomatically.


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Switch on the transfer to financial accounting tick now.


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5.12 Define Number Ranges

Menu Path

IMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End Closing Workin Process Define Posting Rules for Settling Work in Process


When 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.


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6.Variance Calculation

6.1Define Variance Keys

Menu Path

IMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End ClosingVariance Calculation Define Variance Keys


Orders 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 made

You 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 Final

delivery (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.


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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 entire

life 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.


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6.2 Define Default Variance Keys for Plants

Menu Path

IMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End ClosingVariance Calculation Define Default Variance Keys for Plants


We assign a variance key to the plant in this step.

Variances are calculated on the basis of the variance key shown in

the order master record. This entry is defaulted as follows:

When we create a material master record, the system proposesa default variance key for that material master through theplant.

When we create a production order, process order for thismaterial, the system proposes a default variance key throughthe 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 9100

Click on


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6.3 Check Variance Variants

Menu Path

IMG Controlling Product Cost Controlling Cost ObjectControlling Product Cost by Order Period-End ClosingVariance Calculation Check Variance Variants


The following variance categories can be calculated:

Variances on the input side:

Scrap variances

You specify whether scrap variances are calculated in the stepDefine Variance Keys. This enables you to control the displayof scrap or the deduction of the scrap from the actual costsseparately for each variance variant; you can also control thisseparately for each variance variant by assigning the variancevariant to a target cost version.

Input price variances

Price 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 originindicator in the costing view of the materialmaster record is setThe Record quantity indicatoris set in all relevant cost elements

Input quantity variances

Quantity variances are differences between the planned and actualinput quantities of the resources. If this indicator is set, you shouldmake sure that


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The Material originindicator in the costing view of the materialmaster record is setThe Record quantity indicatoris set in all relevant cost elements.

Resource-usage variances

A resource-usage variance arises when a different resource isused than was planned.

Remaining input variances

Remaining input variances are differences on the input sidethat cannot be assigned to any other variance category on theinput side (such as overhead).

Variances on the output side:

Lot size variances

Lot size variances are differences between the planned fixedcosts and the charged fixed actual costs. Lot size variancescan only be calculated for target cost version 0.

Output price variances

Output price variances are differences between the targetcredit (at the standard price) and the actual credit (for exampleat 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 thebasis of the mixed cost estimate is not the same as the targetcost of the procurement alternative.Example:Suppose the standard price for a material was calculated in amixed cost estimate. The material has price control indicatorS, which means that the goods receipts are valuated at the


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standard price and the order is credited accordingly. When thesystem calculates the total variance, it compares the controlcost (in this case the actual cost) with the procurementalternative for which the order was created. If the target costfor 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 toany other variance category (for exa