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Acquire an overall perspective of Product Cost Planning within R/3. Observe a product life cycle from the perspective of Product Cost Planning. Acquire an overall perspective of product cost object controlling within R/3. Understand the period oriented product cost controlling. Obtain an understanding of the functions in the material ledger. Analysis of product costs.
an understanding of the actual costing function in the material ledger. Know how to revaluate inventories of semi finished products, and finished products with calculated actual costs or accrue variances. Analysis of actual product costs.
MM
CO
Product Planning
PP
AM
Quality Mgmt.
QM
SAP R/3
PM OC
Human Resources
Project System
PS
Plant Maint.
HR
Industry Solutions
IS
CO C omponents
CO PA
Operating concern (9100 A Ltd) Profitability Analysis Profitability Analysis Overhead Cost Controlling
Internal orders
Profitability segment
EC PCA
CO OM
Cost centers
Internal Orders
Activity types
CO CEL
FI
HR
Asset
Expense
Revenues
Human Resources
MM
SD
Product Costing is the backbone of a strong standard cost system. This is the process by which production activities are recorded at standard values and variances from actual costs are isolated. For planning purposes, the corporation wants a preliminary target of what they think it will cost to produce X units of a product. To set attainable standards by which efficiencies within the production operations can be measured. To provide feedback to management on the actual performance of the production process in relation to those targets. Identified variances may indicate inefficiencies that have to be investigated. Corrective action may have to be taken.
Product Costing
Costing Methodology
Costing Methodology
Price that changes in consequence of usage and entry of invoices. Calculated by dividing the value of material by the quantity in stock. Automatically recalculated based on activity. Constant price without considering usage or invoices. Material stock valued at the same price over an extended period. Price variances are posted to price difference accounts; not affecting the standard price.
The method of valuing inventory of a material is determined when extending/creating the material master.
Begin. inventory: 100 PC at 2.00 Goods receipt: 100 PC at 3.00 3 Invoice receipt: 100 PC at 4.00 4 Goods issue: 150 PC at 3.00 Stock Stock
1 2 3
Stock Coverage
3
200,300,100,-
450,- 4 If the invoice receipt is for 100 units, the stock coverage is 200 units: all differences stock
300,-
300,-
Consumption
4
Vendor 400,- 3
450,-
ok
Stock 200.200 50 50
V Price
100 3 Goods receipt: 100 PC at 3.00 4 Goods issue: 150 PC at 2.50 Invoice receipt: 100 PC at 4.00 Stock
1 2 4
Stock Shortage
375.With a delayed invoice receipt Of 100 units: a shortage of 50 units price differences despite MAP Consumption
3
200.300.50.-
300.-
300.-
Price difference
4
Vendor
50.-
375.-
400.-
80.in stock
60.in stock
Stock Coverage
With multiple delayed invoice receipts: Danger of Incorrect Valuation!
Even though all receipts between 2.- and 3.- were valuated!
+ + +
The stock value is adjusted each time goods are received Real-time price fluctations are posted to stock Price difference postings only take place in exceptional cases
Price fluctuations cannot be adjusted to the finished products of higher levels (S price) Only recommended for raw materials or goods procured externally (real-time price for goods receipt known) False entries with severe consequences (compounded errors) Danger of incorrect valuations with delayed invoice receipt
Stock
1 2
GR/IR account
3
200.200.-
240.-
240.-
Price difference
2
Vendor
3
40.-
20.-
220.-
+ All stock postings take place at the standard price + Prices remain constant throughout at least one period + Price fluctuations do not debit/credit the cost objects (e.g. orders)
consistant controlling with the standard price as a bench mark
+ Calculation of the standard prices with cost component splits + Recommended for all material types Price differences cannot be subsequently adjusted to the ending inventories or the consumed products (sales, production withdrawals)
Valuation Period
Actual Prices?
Raw Materials II
Costing Methodology
Valuation Method by Material: Finished Goods Intermediates Raw Material Packaging Standard w/ ML Standard w/ ML Moving Average Actual Moving Average Actual
Valuation Area
Organizational unit dividing up a company for the purpose of valuating stocks in a standardized and consistent manner. Level at which material value is managed. The valuation area may is defined: - by plant
Manufacturing Cost
Cost Center 1 Cost Center2
MM: RM
COPC
Routing
Act2
Production orders
COPA
VAR.. . VAR...
Cost Object
F. Goods Inventory
Process Order
BOM Raw Matl 1 Raw Matl 2 Pkg Matl
PA
(Profitability Analysis) (SAP Value Fields) Cost of Goods Sold Raw Matl 1 & 2 Costs Pkg. Matl Costs
Routing
(Activity Types) Mach. Hrs. or lbs. Produced Lab tests Setup Hrs.
Costs to Produce Product testing costs Change Over costs (setup costs) Fixed & Variable Cost
Determination of the cost of goods manufactured Product Cost Planning supplies information for other modules:
Update of prices in a material master Update of the cost of good sold with the detailed structure of cost component (grouped cost elements) Standard (material) cost estimate as the base for calculation of production variances
Standard Cost Estimate (once a year) Prepare Product Cost Collector Production Costs Receive Finished Stocks Month End Closing
Mark cost estimate with quantity structure Release cost estimate with quantity structure Create Cost Object Preliminary Costing Post Materials Costs Debit Secondary cost Credit Production Output WIP Calculation Variance Calculation Settlement
Additive
You use additive costing to enable you to manually add costs that cannot be calculated by the system to a material cost estimate.
Report
Material costs Production costs Overhead
Valuation
Price update
Start of Year 1
Start of Year 2
Time
New product Technical change Ad hoc
Valuation
Purchase price Activity Type Price Overhead
Costing
Items M Material E Activity E Activity G Overhead Cost Elements 400000 Raw materials 943201 Production hours 943901 UT: Cooling Var. Values 600 000 610 000 612 000 SAR SAR SAR SAR
Used for:
Costing Results
W Z1 S1 S2 Z2 S3
-
Product Z
Product S
Costing Varia nt
Costing Variant
Valuation Variant
Quantities
Prices
Costing Varia nt
Costing Sheet Strategy for transfer of the existing cost estimates Determination of : - Bills of Material - Routing
COSTING VARIANT
Valuation control for: - materials - internal activities - external activities - subcontracting - overheads via costing sheet
Master Recipe
Recipe header Operations Materials list
Production Version
Validity Period Production line
Quantity * material price = cost of goods manufactured due to the consumption of raw materials.
Quantity * activity price = cost of goods manufactured due to the internal activities during the production process.
Cost of goods manufactured due to the manually entered cost elements or mathematical operation.
Production Version
ID, Production line, Validity period.
Master Data
+ + + + +
Materials Cost Centers Activity Types Cost Elements Cost Component Structure
Cost Elements
Validity period Category
Cost Centers
Validity period Category Functional area
Activity Types
Validity period Activity unit Allocation cost element
Items in a chart of accounts that are relevant to cost, are referred to as cost elements. They are used for entering all costs within the entire cost accounting system.
Cost Elements
Secondary costs elements are used exclusively in CO to identify internal cost flows such as assessments or settlements. They do not have corresponding general ledger accounts in FI and are defined in CO only.
Executive Management
Admin. C. Center
Maintena nce
Projects
COGS
Profitability Segment
Activity types define the type of activity that can be provided by a cost center (work activity, production hours, and so on).
Activity Type
Activity Pr ic e Calculatio n
Cost center: R&TCost center
Planned costs: 430000 (salaries) 440000 (miscl.) 473120 (telephone) 44,000 10,000 30,000
1PDH01 100 h
: Activity Price Calculation Apportionment of cost center costs to activity types according to particular criteria
3 Cost Splitting
1. Assign CC 1203004 to Splitting Structure U4 Steam service 2. Perform cost splitting
..
..
..
Quantity
Costing
ID 101 110 111 Cost Component Raw Materials Catalyst Chemicals Values Fixed & Variable 600 000 0 0 SAR SAR SAR SAR
Used for:
Costing Results
Cost Centers
Utilities
Personnel Exp. Internal Activity Allocation
Pric e u pdate
Standard price
Only one validated standard price per product per period, The price represents most desired (or most likely) costs Only one price per product over the year (recommended) Determined during costing runs - standard cost estimate is populated in appropriate valuation views Includes variable and fix cost elements Base for variances calculation; which is then posted to FI and COPA Used for stock valuation of finished goods and semi-finished products Stored in material master data (accounting view) in Legal, Group and Profit Center valuation views after releasing the cost estimate
Pric e u pdate
Future price
Future standard price Stored in material master data (accounting & costing view) in Legal, Group and Profit Center valuation views after marking the cost estimate.
Previous price
Replaced standard price by current one due to releasing the cost estimate Stored in material master data (accounting & costing view).
Pr ic e u pdate
Analysis of Costing Results
10
Future
Current Previous
15
10
15
10
Stock Revaluation
Product Costing
- SPC1 SPC3 cost estimates, verification, save - Organizational measures: marking and releasing - Cost estimate marking - Cost estimate release
MM & CO postings
- Various analysis available
- Work-in-process postings - Inventory deviations postings - Variances processing and analysis - Settlement processing
Costing run
Costing run
You can use the costing run to process mass data. It enables you to cost, mark, and release more than one material at the same time. Every processing step involved in costing with quantity structure is performed by the costing run, from the same screen.
Costing run
Costing Run Creation Company Code Costing variant Dates Costing Run
BOM explosion
$ $ $ $ $ $ $ $ $
Execute costing run Marking and releasing costing run results (price update)
Materials
Prepare Cost Object Production Costs Receive Finished Stocks Month End Closing
Create cost object Preliminary costing Post Materials Costs Debit Secondary cost Credit Production Output WIP Calculation Variance Calculation Settlement
Supporting make-or-buy decisions Determining price floors Performing complex cost analysis Determining inventory values
Time
Time
Variances
Goods Receipts
Should be periodically
Must be periodically
Impossible
Possible
Create product cost collectors. Create a preliminary cost estimate for product cost collectors. Calculate and analyze target costs and actual costs for product cost collectors. Calculate or update the work-in-process inventory and the finished goods inventory. Calculate and analyze variances for each period. Transfer data to: Financial Accounting, Profitability Analysis, Profit Center Accounting and Material Ledger.
Executive Management
R&T C. Center
Projects
Profitability Segment
Preliminary costing
Production Version
ID, Production line, Validity period.
Master Recipe
Materials List/BOM
Production Version
Material X Material Y
Operation 20
Resource Requirements
Preliminary costing
Product Costing - SPC1 SPC3 costing run, verification, save - Organizational measures: marking and releasing - Cost estimate marking - Cost estimate release Master & control data definition - Material Master Data, BOMs and Routings - Product Cost Collectors with Preliminary costing (PREM) Production postings (backflush) - Various analysis available Period-end closing tasks - Inventory deviations postings - Variances processing and analysis - Settlement processing
Preliminary costing
Preliminary costing
Product Cost Collector
Item Caustic Soda Ethylene EDC Materials Internal activities Overheads Total Plan 1.500 2.000 0.500 4.000 2.500 1.500 8.000 Actual
Operations
Components Components
Individual order confirmation Individual confirmation Collective confirmation Collective confirmation Milestone confirmation Milestone confirmation Progress confirmation Order confirmation Confirmation with reference
Costs
100
20 50
Confirmation functions
Confirmation status
Output goods goods movement Confirm with receipt Defaults for remaining time Backflush components Check operation sequence Check delivery tolerances Backflush collection interface Plant data utilities Backflushing Reduce capacity requirements Reduce capacity requirements Determine actual costs Determine actual costs
Operation 30 Component XY
Required qty = 20 PC
Warehouse
Goods issue
Component XY = 10 PC
Fi nal Conf irmat ion & Techni cal Com plet ion
Final confirmation
Order header
Operations Operations
Technical completion
Order header
Operations Operations
Components Components
Components Components
Incorrect or missing data for components and activities prevents processing of the back flush transaction These errors must be corrected before postings can be made for materials and activities When the errors have been eliminated, the theoretical yield and consumption may be adjusted and the results recorded
Su mm ary
Non-feedstock raw materials are staged daily to the production area for planned manufacture As each production quantity is confirmed, a back flush of the proportional quantities of raw materials and utilities consumed is recorded The results from the output receipts, plus material & resource consumptions, update the stock records and provide valuation of production according to standard cost approach.
List o f Transactio ns
Simultaneous
costing transactions:
MF60 Stage Materials MFBF Back Flushes MF41 Month-End Corrections COR6 Confirm Orders & Back Flush COR2 Reverse Confirmations
Actual costs
CO Production Order
Step 6 Goods Receipt from Order into Warehouse - Actual Postings
Status PARTIALLY DELIVERED
Order Material 430004 + 5.000,943201 + 7.500,400000 + 1.100,462001 - 5.000,-
CO
FI
The results from the output receipts, plus material & resource consumptions, update the stock records and provide valuation of production according to standard cost approach.
Period-end closing:
Product Cost Collectors are only included in the period-end closing process if the status of the order is not one of the following: LKD (Locked), CLSD (Closed), DLFL (Deletion flag), DLT (Deleted). If you dont enter a production process in the individual processing mode of the period-end closing transaction, but only enter the data for the material and plant, this period-end closing transaction will be performed for all production processes for that material. Functions available in period-end closing: overhead calculation, WIP calculation, variance calculation, settlement.
Variances
Goods Receipts
Should be periodically
Must be periodically
Impossible
Possible
CO Production Order
Step 7 Work-in-Process Calculation - Period-end closing
Status RESULTS ANALYSIS CARRIED OUT
Order Material 430004 + 5.000,943201 + 7.500,400000 + 1.100,WIP Report: Work-in-Process 13.600 - 5.000 = 8.600 462001 - 5.000,-
CO Production Order
Step 8 Settlement of - Period-end closing
Status RESULTS ANALYSIS CARRIED OUT
Work In Progress (WIP) 462201 8.600,Work In Progress (WIP) 119460 8.600,Order Material 430004 + 5.000,943201 + 7.500,400000 + 1.100,462001 - 5.000,-
CO
FI
WIP is being updated on the order as statistical value for information purposes.
As a result of the actual postings in the new period there is a new balance on the order.
CO
FI
CO
FI
As a result of a posting the balance of the order was posted to production difference account and cumulated WIP was reversed.
Variance: Integration
Product Cost Collector
Material CATALYST Quantity prod.: 10 pcs
COPC
Actual Costs
Materials Labour Depreciation 800 1.200 400 2.400 - 2.000 400
Material Master
Accounting View Standard Price 200
10pcs * 200
FI
Accounting Price difference Stock 2.000 400 Settlement Profitability Analysis Variance 400 COPA
MM
Stock
COPC
Material: Quantity:
COPC
MEG 10 pieces
Cost of goods sold Revenue Sales deductions Manufacturing costs by standard price (Contribution margin I) Variances
Revenue Sales deductions Overheads plus Variances +/- Change in Stock = Result of a period
Actual costs
= Result of a period
PrCtr 1
FI
Company Code
Company Code
Settlement
FI
Profitability Segment
COPA
Process costs
Revaluation
Overheads Total
% %
Overheads
Postings FI/CO
COPC
Material: Quantity:
COPC
MEG 10 pieces
Cost of goods sold Revenue Sales deductions Manufacturing costs by standard price (Contribution margin I) Variances
Revenue Sales deductions Overheads plus Variances +/- Change in Stock = Result of a period
Actual costs
= Result of a period
PrCtr 1
FI
Company Code
Company Code
Settlement
FI
Profitability Segment
COPA
Production
Production
Material Valuation with Multi-Level Actual Costing Preliminary Valuation During the Period Revaluation at Period End with Actual Price
Production
External Procurement
External Procurement
Material Ledger
MATERIAL STOCK
Financial Accounting
(Company Code) 10 Local currency
30 Group currency
Controlling
(Controlling Area) 10 Local currency
30 Group currency
Pr ic e c ontrol
Material Master
Price Control
Standard Price
(S Price) Stable for long period
Recommended for finished and semi-finished products.
Pr ic e c ontrol
Moving average price
The stock value is adjusted each time are received Real-time price fluctuations are posted to stock Price difference postings only takes place in exceptional cases Price fluctuations can not be adjusted to the finished products of higher levels (in case S price) Only recommended for raw materials or goods procured externally (realtime price for goods receipt known) False entries with severe consequences (compounded errors) Danger of incorrect valuations with delayed invoice receipt
Pr ic e c ontrol
Standard Price
All stock postings takes place with the standard price Price remains constant by at least one period Price fluctuations do not debit / credit the cost object Consistent controlling with the standard price as a bench mark Estimations of the standard prices with cost component split Recommended for all materials types
Price differences can not be subsequently adjusted to the ending inventories or the consumed products (very important in the Cost of Goods Sold accounting)
S
Price determination 2 Transaction based Standard price
V V
ML can record up to 3 different currencies / valuations. This is a requirement for transfer price
Moving price
S Level 3
Cost centers
Orders
Activity types
Internal orders
S Level 2
V Level 1
External Procurement
Level 2
S
Cost centers Orders
Activity types Internal orders
Level 1
External Procurement
Actual Costs
Preliminary valuation
Actual Cost in g
Price differences
Stock transfers (standard price in another plant) External procurement (purchase order or invoice value) Internal production (order settlement)
se ri gh a .. ou . r th
S
Cost centers Orders
Activity types Internal orders
V V
External Procurement
Actual Costs
Preliminary valuation
S
Cost centers Orders
Activity types Internal orders
External Procurement
Actual Costs
Preliminary valuation
S
Cost centers Orders
Activity types Internal orders
External Procurement
Actual Costs
Preliminary valuation
Pe rio d En d Overvie w
Determining prices
Single-level, later multilevel V price is calculated
With revaluation
Price differences are proportionally posted to the remaining stock -> Price indicator V
Without revaluation
Price differences are proportionally posted to the accruals account -> Price indicator S
Material: ACT-LCD##
Status: Closing entry performed Price control: V (only old periods) V price: 26.50 SAR / 100 units
Beginning inventory (BI): 1000 PC / 250 SAR Goods receipt/purchase order : 1000 PC / 260 SAR Invoice receipt : 1000 PC / 280 SAR Consumption: 1300 PC / 325 SAR Ending inventory: 700 PC Material stock (119400)
250 250 10.5 325
GR/IR allocation
260 260
CL
ML accrual (119610)
Material: ACT-LCD##
Status: Closing entry performed Price control: S S price: 25.00 SAR / 100 units
Beginning inventory (BI): Goods receipt/purchase order : Invoice receipt: Consumption: Ending inventory: 1000 PC / 250 SAR 1000 PC / 260 SAR 1000 PC / 280 SAR 1300 PC / 325 SAR 700 PC
GR/IR allocation
260 260
Variances
Cumulative inventory (prelim. valuation) + Cumulative variances Cumulative inventory
= Periodic
unit
price
Summarized Analysis
Object List
Object Comparisons
Detailed Reports
The Report Tree can be used to select Reports in the Information System. The Report Tree is the central collection point and hierarchical outline of all Reports in an application component. The standard Report Tree supplied by SAP should not be changed. A personalized Report tree can be created to which standard Reports as well as one's own creations can be assigned.
Report
Report
Report
Report
Summarized Analysis
Object List
Object Comparisons
Detailed Reports
Object List
Detailed Reports
Displaying Documents
Summarized Analysis
Object List
Object Comparisons
Detailed Reports
The Report Tree can be used to select Reports in the Information System. The Report Tree is the central collection point and hierarchical outline of all Reports in an application component. The standard Report Tree supplied by SAP should not be changed. A personalized Report tree can be created to which standard Reports as well as one's own creations can be assigned.
Object List
Detailed Reports
Displaying Documents
:Customer report Distribution Channels Customer report: Buildings Customer report: Insurance
:SAP report
Org. Units
:SAP report
Events
:SAP report
Birthday List
Ad Hoc Queries
Custom-built Reports