Cost of Goods Sold :

Calculation of the Cost of Goods Sold

Use
The cost of goods sold includes all the costs arising from the company activities involved in making a product. The cost of goods sold comprises the cost of goods manufactured, and sales and administration overhead costs. Costing enables you to calculate the cost of goods sold for each product unit, and to transfer the costing results to Profitability Analysis.

Integration
You can transfer the cost of goods sold to Profitability Analysis when you do the following: Assign the cost components containing the cost of goods manufactured and the sales and administration costs to the value fields of an operating concern and link these values to the Sales volume quantity field Define a selection strategy which points to the appropriate costing variant and costing date Link the selection strategy with the materials or material types to be valuated

You make the necessary settings to transfer data from the cost estimate into Profitability Analysis in Customizing for Profitability Analysis. For more information, see Transferring Data to Profitability Analysis. You can find additional information about Profitability Analysis in the R/3 Library under Analysis (CO-PA). Profitability

Features
In the R/3 System, you can assign the sales and administration costs to a product by creating an appropriate costing sheet in Customizing for Product Cost Planning. The costing sheet specifies the following: The production and material overhead applied to products The sales and administration overhead applied to products

The costing sheet is also used to determine a process template to calculate process costs. The costing sheet thus specifies the cost elements under which the sales and administration costs are updated in costing. The cost component structure determines the cost components under which these costs are shown. It flags these cost components as sales and administration costs.

In make-to-order production, the sales and administration costs are generally assigned to the product as overhead surcharges. The cost of goods sold for the product is passed on to Profitability Analysis. ( See also: Product Cost by Sales Order) In order-related production, repetitive manufacturing and process manufacturing, the sales and administration costs are generally passed on from Cost Center Accounting directly to Profitability Analysis. The cost of goods manufactured for the product is passed on to Profitability Analysis. ( See also: Product Cost by Order or Product Cost by Period)

Discrete Manufacturing - The Made To Order Cycle and Make TO Stock Cycle View Comments (2) Info Additional Features

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Added by R Brahmankar , last edited by R Brahmankar on Jan 23, 2009 (view change) Labels: (None)
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Enter labels to add to this page: Tip: Looking for a label? Just start typing. In sap there is specific transaction flow for a particular Manufacturing Process. It all depends upon the requirement of client and process. Here is the basic flow of transactions which is req. for creating master data, planning and order processing... The Made TO Order Cycle: The sale department passes on the Made to order-Sales Order to the Material department so that material requirement is analyzed. This is done in SAP by carrying on an MRP Run for all the levels of the product BOM. This MRP Run would create Planned Orders for the shortages. Here the planned orders for fert sub assemblies, Components etc, are created. This planned orders for materials produced in house are converted in to Production order and planned orders for materials procured from outside are converted in to Purchase order. The creation of Production order through

the planned orders will convert all the dependant requirements in to dependant reservations. The dates of production or purchase are decided through the total replenishment time mentioned in the material master, If it is, in-house production, then the Route times precede over the total replenishment time entered in the material master. And the availability of all the components is ruled by the availability checking rules and by availability checking scopes. Thus whenever the system declares a product to be ready or available by a date it implies that the system has checked the availability of the material with respect to the Ware house stock, in coming stock (Receipts) and all other planned orders already existing for the product or material. In the Made to order production, sales order produced for Fert and Sub assemblies are converted in to production order during MRP run. The production orders created have a specific quantity, specific Basic start date and a specific Basic Finish Date, a set of operations and a set of component attached from the BOM. In course of production the quantities produced in the operation for an order should be confirmed so that the current status of work is available in real time situation. The components required for production are issued to the production order through goods issue by a movement type 261 and the issue is always made to the reservations or to the order, thereby clearing the reservations. Issues of unplanned components are made as new items issue and not as order issue. The quantities, for an order which are produced completely are the put in to stock i.e. a Goods Receipt is done. Thus the made to order cycle starts with the sales orders and converting them to Production Orders through MRP Run and there off confirming produced quantities for an order and finally putting the order in to stock. The Cycle of Made to order: Steps: MTO Scenario 1. Material Creation (Made To order Material with major changes of: Item Category: 0004-make to order/assem.,or 0001-make to order) 2. Routing Creation 3. Creation of BOM 4. Sales order 5. Production order Scheduling, Costing, Release and Save 6. Production order Quantity confirmations for operations, Parallel task of material issue to order or to reservations (261) 7. Fully Produced Production Quantities will be put into stock (GR) 8. Delivery against sales order 9. Invoicing. The Made To Stock Cycle The Made to stock scenario will start from Demand Management here we can create Planed independent requirements manually or by using data from SOP. After MRP run system will create planned orders which we can convert to Production order As the Stocks produced there off are not customer stock or the stock is not attached to any specific customer. Further confirmations are

done and issues of material are carried out to the production order. Finally the production is put in to stock (GR). Here at any point of time a sales order might come in and delivery to the customer is done from the existing stock. Production Master Data The Production Master Data consists of Material Master, Bill of Material, Work Center, Route, and Production Line Design. The Material Master is created first for all components involved in making the Final product. Then these components are put in a product relationship i.e. a list of materials required to make the final product are put in a hierarchy, this is called a Bill of Material. The next task is to identify the work centers required to produce the product; if the work centers are already created then they can be readily put in a sequence, which would be a sequence of work centers required to produce the product. This sequence of work centers one after the other (in the sequence of work to be done) is called a Route The Cycle of Made to stock: Steps: MTS Scenario 1. Material Creation (Made To Stock Material with major changes of: Item Category: NORM ) 2. Creation of BOM 3. Route Creation 4. Demand requirements 5. MRP Run 6. Creation/conversion of Production order (Made To stock), Scheduling, Costing, Release and Save 7. Production order Quantity confirmations for operations, Parallel task of material Issue to order or to reservations (261) 8. Fully Produced Production Quantities will be put into stock (GR) 9. Sales order Creation 10. Delivery against sales order 11. Invoicing. Example:MTO: Make to Order. The production and Procurement will only happen with reference to Sales Orders. Until unless there is no Sales Order there will not be any Procurement/production.

Planning strateguy used is 20. with littlevariation in the Business requirement Planning Strategy 50 can also termed as MTO. In material master in MRP3 view mainatin the MTO Strategy group like 20,50 etc MTO: Make to Stock.. With this Business Process, the main aim is to supply to the customer immediately there is a demand and this can be done by supplying from the Stock. You will keep the products as stock.. Planning Strategy : 10 & 11. Both these strategies will not consider Sales Orders. But strategy 40 can also be termed as MTS, here with this Sales Orders will also be taken into account to smoothen the production. For details also refr this useful link, http://help.sap.com/saphelp_47x200/helpdata/en/cb/7f9b7043b711d189410000e829fbbd/frameset. htm.\\

ERP Production Planning

Master Data Material Master Material Master Records contain information about a material that defaults to an SAP system task when you enter the material number. The Material Code, for each unique material, is generated by the SAP system. Work Centers or Resources Operations are carried out at a work center. Work Center and Resource can be anything you use in the process of manufacturing. It can be Machine, Person, Production line, machines group etc. A workcenter or Resource is assigned to a Cost Center. Bill of Material A Complete formally structured list of components that make up a product. The list contains the material number of each component, with the quantity, unit of measure and item category. BOMs are used in their different forms in various situations where a finished product is assembled from several component parts or materials. You can create the following BOMs in the SAP system: Material BOMs Equipment BOMs Functional location BOMs Document structures

Order BOM Work breakdown structure (WBS) BOM Routings or Master Recipes Routings enable you to plan the production of materials (products). Therefore, routings are used as a template for production orders and run schedules as well as as a basis for product costing. Master recipes are mainly used for planning the manufacture of products. Master recipes are used as a reference for process orders as well as the basis for product costing. Overall Flow in SAP PP The Flow in Production Planning and Control and consists of Planning and Execution.
Planning -

Production planning is usually done from budget sales plan. The Production plan is then divided into Quarterly plan, monthly plan.... etc. Everything is based on the Sales plan to meet the sales requirements as per the production time cycles. Demand for the Product is produced through demand mangement, this data from demand management is transferred to MRP or it becomes input to MRP. MRP checks for the availability of various raw materials used for prodcution at different stages using the master data Bill of material and available stocks. Purchase requistions are created for materials which are externally procured and with deficit stock, planned orders are created for inhouse produced materials. These purchase requisitions initiate the Procurement Cycle and the Planned orders the Execution Cycle of Production.
Execution -

These Planned orders are converted to Production/ Process orders, Using the master data Routings/ Master recipes. These orders are scheculed as per the production timings and released by the Production Supervisor. For all the materials used in production order a reservation is raised to stores department and as per the request the materials are issued to production personnel. Production is carried outbasing on the steps maintained in the Routing/ Recipes where the master data Resource/ Work Center is mentioned against each operation in the Recipe/ Routing. Once the production is completed the Confirmations and material consumptions are posted against the Order and the Goods Receipt is taken. The above is the very crisp overview of SAP PP.
Planning Process - Overview

Sales & Operations Planning (SOP) is a flexible forecasting and planning tool with which sales, production, and other supply chain targets can be set on the basis of historical, existing, and estimated future data. Rough-cut planning can also be carried out to determine the amounts of the capacities and other resources required to meet these targets. Use SOP to streamline and consolidate your company's sales and production operations. SOP is particularly suitable for longand medium-term planning.

http://help.sap.com/saphelp_46c/helpdata/en/a5/632f3b43a211d189410000e829fbbd/frameset.htm Demand Management determines the requirement dates and requirement quantities for important assemblies and specifies the strategies for planning and producing/procuring finished products. The result of Demand Management is the demand program. The demand program differentiates planned independent requirements and customer independent requirements. It gives the information needed in MPS and MRP for planning at SKU level. The placing of sales orders eventually consumes planned requirements and triggers updating to the Sales Information System. http://help.sap.com/saphelp_46c/helpdata/en/a5/632f3b43a211d189410000e829fbbd/frameset.htm You can transfer data both to and from Profitability Analysis (CO-PA). For example, you might use the sales and profitability plans you receive from Sales & Profit Planning (CO-PA-SPP) as the basis for creating sales and production plans in Flexible Planning. Having finalized these plans, you might pass the results back to CO-PA-SPP, which works out the cost of producing the planned number of units. You trigger the transfer of data from Flexible Planning to CO-PA in Flexible Planning. This is done with mass processing. You trigger the transfer of data from CO-PA to Flexible Planning in CO-PA. This is done either online or in the background. http://help.sap.com/saphelp_46c/helpdata/en/a5/632f3b43a211d189410000e829fbbd/frameset.htm The main function of material requirements planning is to guarantee material availability, that is, it is used to procure or produce the requirement quantities on time both for internal purposes and for sales and distribution. This process involves the monitoring of stocks and, in particular, the automatic creation of procurement proposals for purchasing and production. In doing so, MRP tries to strike the best balance possible between "optimizing the service level and minimizing costs and capital lockup." The MRP component (PP-MRP) assists and relieves MRP controllers in their area of responsibility. The MRP controller is responsible for all activities related to specifying the type, quantity, and time of the requirements, in addition to calculating when and for what quantity an order proposal has to be created to cover these requirements. The MRP controller needs all the information on stocks, stock reservations, and stocks on order to calculate quantities, and also needs information on lead times and procurement times to calculate dates. The MRP controller defines a suitable MRP and lot-sizing procedure for each material to determine procurement proposals. http://help.sap.com/saphelp_46c/helpdata/en/f4/7d3f9344af11d182b40000e829fbfe/frameset.htm

Following process flow diagrams gives a crisp idea on planning process -

Useful OSS Notes (SMP Login Required) 632752 667876 1122048 1082779 728749 641995 612004 Using the MLCCS_KO88_TREATMENT program Transactions COOIS and COHV Stock determination for confirmation without quantity System does not return to variant transaction Backflushing not executed Account assignment check in the confirmation Limit and price determination in confirmation