Product Cost by Sales Order: Scenario

Prerequisites

You must make the following decisions with settings in Customizing for Product Cost by Sales
Order:

 That the materials are assigned to a sales order stock

 Whether the sales order stock is valuated

You normally use a valuated sales order stock.

 That the sales order item carries costs and revenues

 How inventories should be valuated

You specify whether the dependent requirements are controlled by individual requirements or
collective requirements in the material master record in the MRP view with the
indicator Individual/collective.

Purpose

You use Product Cost by Sales Order in the following situations:

 When you are manufacturing with reference to a sales order in a complex make-to-order
environment
 When you are purchasing customer-specific trading goods with reference to a sales
order and reselling them to your customers
 When you are providing services whose costs are assigned to a sales order
 When you want to assign special direct cost of sales to the sales document item
 When you want to allocate process costs (such as development costs) to the sales
document item
 When you want to allocate the sales and administration overhead or other overhead
costs using the sales document item as the cost object

Process Flow

1. You create a sales order.

 Product Cost by Sales Order is normally used with orders of the order type standard
order (TA). The material ordered or the combination of material and order type
determines whether the Product Cost by Sales Order functionality is active for the order
item or not.

2. You create a sales order cost estimate.

You can calculate the planned costs for the sales order item in a sales order cost
estimate. You can create a sales order cost estimate with product costing or unit costing.
You can use unit costing to postprocess (modify) the results of product costing. You can
use the sales order cost estimate to:

 Calculate the standard price (see also: Valuated Sales Order Stock: Valuation)
 Create reserves for unrealized costs or reserves for imminent loss or complaints in results
analysis.
 Pass the cost component split for the planned costs to Profitability Analysis (CO-PA) To
do this, you must create a sales order cost estimate with product costing. If you want to
transfer the cost component split, you cannot postprocess the sales order cost estimate
using unit costing.

3. For trading goods: external procurement

Purchase requisitions can be generated on the basis of the sales order items directly, or
on the basis of planned orders. These purchase requisitions are assigned to the sales
order item. The purchasing department converts the purchase requisitions into purchase
orders. The purchase order is assigned to the sales order item.

If the sales order stock is valuated, the externally procured materials are assigned to the
sales order stock at the time of the goods receipt. The standard price is the net order
value. If the sales order item carries costs and revenues, price differences between the
net order value and the invoiced price are assigned to the sales order item.

4. In manufacturing enterprises: production

If the material being manufactured has a multilevel BOM, other materials may have to be
manufactured with reference to the sales order if the material is controlled by individual
requirements and consequently cannot be withdrawn from the make-to-stock inventory.
Manufacturing orders are created for these dependent requirements. If the sales order
stock is valuated, the manufacturing orders for the semifinished products deliver the
semifinished products to the valuated sales order stock where they are withdrawn by
 manufacturing orders for higher-level materials. The manufacturing orders are credited
when they deliver materials to inventory and charged when they withdrawal materials
from inventory.

5. Actual costs on the sales order item

You can view the funds commitment in the valuated sales order stock on the sales order
item as statistical actual data in the Product Cost Controlling Information System. A
requirement is that you represent the material stock accounts as a cost element of cost
element category 90.

When you deliver to the customer, the goods issue posting results in the sales order
item being debited with the standard price. You can post costs for internal activities
directly to the sales order item.

6. Actual revenues on the sales order item

The customer is billed for the deliveries made and activities performed for the sales
order. The revenues are assigned to the sales order item.

7. Period-end closing

You can perform the following steps for the dependent manufacturing orders in the period-end
closing activities in Product Cost by Order:

 Dynamic template allocation

 Revaluation of activities at actual prices
 Overhead allocation (such as calculation of material overhead and production overhead
to determine the cost of goods manufactured)
 Calculation of work in process (WIP)
 Variance calculation
 Settlement

You can transfer the total variance of the manufacturing orders or product cost collector
assigned to a sales order item to the sales order item that carries costs and revenues.
You proceed as follows:

Create the price difference account to which you settle the variances as a cost
element (the price difference account is not normally a cost element). Use a price
difference account that you select by means of automatic account determination
 using transaction GBB and account grouping code AUA. When you settle the
total variance to Financial Accounting (FI), the total variance is assigned to the
sales order item.

Make sure that you don’t settle the total variance to Profitability Analysis (CO-PA)
twice. The total variance can be transferred to CO-PA both when the
manufacturing orders or product cost collectors are settled and when the sales
order item is settled. Therefore, turn off the Variances indicator in the settlement
profile specified in the order type.

In the period-end closing activities for the Product Cost by Sales Order component you perform
the following activities for the sales order item:

 Dynamic process cost allocation

 Revaluation of activities at actual prices
 Allocation of overhead (such as calculation of the sales overhead and the administrative
overhead to calculate the cost of goods sold)
 Settlement of the sales order item to a profitability segment in CO-PA

If you have performed results analysis, you settle the results analysis data.

If you have not performed results analysis, you settle the costs and revenues
carried on the sales order item.

You can transfer a cost component split for the planned costs to CO-PA if you:

 Have created a sales order cost estimate or an order BOM cost estimate using product costing
and have not modified it with unit costing
 Transfer the cost component split of a standard cost estimate to CO-PA

 Settlement of the reserves calculated in results analysis to FI and EC-PCA (if applicable)

8. Analysis
9. In the Product Cost Controlling Information System you analyze the costs and revenues
that were incurred for the sales order and the dependent production orders.

See also:

For detailed information on the required Customizing settings for the Product Cost by Sales
Order component, see the following section:
Checklist for Product Cost by Sales Order