Product CostingPr oduct Costing Ove rv ie w 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. Ma terial L edger Ov erview Obtain 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. HR Industry Solutions IS Office & Comm.SAP Modules . QM SAP R/3 PM OC Human Resources Project System PS Plant Maint. .Overview SD FI Sales & Distribution Materials Mgmt. MM CO Product Planning PP AM Quality Mgmt. Financial Accounting Controlling Fixed Asset Mgmt. 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 Product Cost Controlling CO Production Controlling area (9100 – A Ltd) Order Standard Cost Estimate Cost Element Accounting Profit Center Accounting Internal Orders Activity types CO CEL Cost Element Accounting FI HR Financial Accounting Financial Accounting Asset Expense Company Code (9100 A Ltd) Revenues Human Resources MM Materials Materials Management Management SD Sales and S&D Distribution . •To provide feedback to management on the actual performance of the production process in relation to those targets. This is the process by which production activities are recorded at standard values and variances from actual costs are isolated. . the corporation wants a preliminary target of what they think it will cost to produce X units of a product. Identified variances may indicate inefficiencies that have to be investigated. •To set attainable standards by which efficiencies within the production operations can be measured.Why utilize Product Costing? •Product Costing is the backbone of a strong standard cost system. Corrective action may have to be taken. •For planning purposes. Product Costing Optimized Production Operations Improve and Control Operations OPTIMIZED & FIRM SCHEDULE Plan & Commit Resources Prepare Production Make Product Process ends with initial containment (packout) Disposition & Contain Product Manage Process and Product Documentation . Adjusted with every receipt .Costing Methodology Material Master Price Control Moving average price (V.Price) .Recommended for all material types .Constant .If at all. only to be used for raw materials and materials procured externally Standard Price (S-Price) . Automatically recalculated based on activity. The method of valuing inventory of a material is determined when extending/creating the material master. Price variances are posted to price difference accounts.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. Constant price without considering usage or invoices. . not affecting the standard price. Material stock valued at the same price over an extended period. 00 4 Goods issue: 150 PC at 3.00 Goods receipt: 100 PC at 3.- 450.300.3 450.50 3.00 GR/IR Account Begin. the stock coverage is 200 units: all differences § stock 300.4 If the invoice receipt is for 100 units.00 3 Invoice receipt: 100 PC at 4. inventory: 100 PC at 2.- V price 2.00 3.00 2.- 2 Consumption 4 Vendor 400.Posting Example: Moving average price 1 Procedure 1 2 Stock 100 200 200 50 Stock value 200..500.100.150.- 300.600.00 Stock Stock 1 2 3 Stock Coverage 3 200..- ok . 50 GR/IR account 4 Stock Shortage 375.- 4 .50 3.50 2.300.- 375.- 3 300.00 Stock 1 2 4 2.- V Price 100 3 Goods receipt: 100 PC at 3.200 50 50 Stock Value 2.- 2 Price difference 4 Vendor 50.50 Invoice receipt: 100 PC at 4.00 500.125.- 400.175.- 300.With a delayed invoice receipt Of 100 units: a shortage of 50 units § price differences despite MAP Consumption 3 200.00 4 Goods issue: 150 PC at 2.50.Posting Example: Moving average price 2 Procedure 1 2 Begin. inventory: Stock 200. 20 Invoice receipt: 100 PC at 3.in stock Δ 60.were valuated! .220..10 2.and 3.20 2.660.60 Δ 80.00 Invoice receipt: 100 PC at 3.00 2.00 Stock 100 200 300 100 100 100 Stock Value 200.in stock Stock Coverage With multiple delayed invoice receipts: Danger of Incorrect Valuation! Even though all receipts between 2.420.V Price 2..00 3. inventory: Goods receipt: 100 PC at 2.20 Goods receipt: 100 PC at 2.360.300.Posting Example: Moving average price 3 Procedure Begin.20 3.40 Goods issue: 200 PC at 2. Characteristics of Price Control V Moving average price + + + 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 . - 2 Price difference 2 Vendor 3 40.200.- 220.Posting Example: Standard Price Procedure 1 Initial situation: 2 Goods receipt: 100 at 2.- 20.- Stock Value 200.00 Stock 1 2 GR/IR account 3 200.40 3 Invoice receipt: 100 at 2.400.00 Standard Price 2.- 240.2.- 3 .00 2.20200 Stock 100 200 400.- 240. 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) .g.Characteristics of Price Control S Standard Price + 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. Period-End Closing: Valuation Problems Raw Materials I Finished Products Distribution of Price Differences? Valuation Period ∆ Actual Prices? Raw Materials II Ending Inventory: Raw Materials . 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.by plant . • The valuation area may is defined: . Act2 Production orders COPA VAR. VAR. Goods Inventory .Product Cost Flow MAT COCCA Cost Center X Manufacturing Cost Cost Center 1 Cost Center2 MM: RM BOM Cost Center Y Cost Center 3 Act1 COPC Routing Production Cost Center VAR. Cost Object F.... . Cost Element 3. Mat’l Costs Routing (Activity Types) Mach. Hrs. or lbs.Product Cost Flow Plant Cost View Mfg. Raw Mat’l 1 Costs Raw Mat’l 2 Costs Pkg. Setup Costs Fixed & Variable Cost Three Views Available: 1. Costs to Produce Product testing costs Change Over costs (setup costs) Fixed & Variable Cost . Costs Lab Tests Costs Mach. Hr. Mat’l Costs Routing Mach. Cost Itemization PA (Profitability Analysis) (SAP Value Fields) Cost of Goods Sold Raw Mat’l 1 & 2 Costs Pkg. View Process Order BOM Raw Mat’l 1 Raw Mat’l 2 Pkg Mat’l Product Unit Cost (Cost Component View) Cost of Goods Mfg. Produced Lab tests Setup Hrs. & Taxes Laboratory/QC Waste Treatment Shops & Stores General Services Indirect Conversion Total Product Cost Sales & Mktg. Cost Component 2. Cost Center Utilities Salaries Supplies Maintenance Depreciation Training Direct Conversion Insur. .Pr oduct Costing A L td. Pr oduct Costing A L td. . .Pr oduct Costing A L td. Pr oduct Costing A L td. . Pr oduct Cost Plannin g: Overv ie w Functions of Product Cost Planning: Product Cost Planning with reference to cost object Product cost planning with quantity structure – with structures provided by PP (Production Planning) module 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 . Pr oduct Costing: Ov erview Create Cost estimate with quantity structure 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 . What is a Product Cost Estimate? A tool for planning costs and establishing prices for materials. Master Recipe for costing purposes. It is used to calculate the cost of goods sold for each product unit. Integrated with Production Planning (PP). Cost Estimate With Quantity Structure Utilizes a Bill of Material (BOM) and routing. I. Cost Estimate WITHOUT Quantity Structure Utilizes a material master data and activity types entered manually into cost estimate. . Additive You use additive costing to enable you to manually add costs that cannot be calculated by the system to a material cost estimate.e. Pr oduct Cost Plannin g: Overv ie w Cost estimate with quantity structure Quantity structure Costing variant Cost estimate without qty structure Report Material costs Production costs Overhead Valuation Price update . Pr oduct Cost Plannin g: Overv ie w Simulation Costing Modified Std Cost Est. Current Cost Est. Start of Year 1 Start of Year 2 Time New product Technical change Ad hoc Standard Cost Estimate Inventory Cost Estimate Standard Cost Estimate Inventory Cost Estimate Pr oduct Costing: Ov erview Standard Cost Estimate (once a year) Create Cost estimate with quantity structure Mark cost estimate with quantity structure Release cost estimate with quantity structure Ma terial c ost e stimates with q . s . Quantity Structure BOM Routing 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 Standard Cost Estimate Stock Valuation Profit & Loss Statement Total Material - . Product W Costing structure . s .Total Material Internal Activity External Activity Overheads W Z1 S1 S2 Z2 S3 - Costing structure – Upper level Internal Activity External Activity Overheads Costing structure – Lower level Material Internal Activity External Activity Overheads Product Z Costing structure .Total Material Internal Activity External Activity Overheads Product S Costing structure .Ma terial c ost e stimates with q . Costing Varia nt Costing Variant Quantity Structure Determination Valuation Variant Quantities Prices Cost of Goods Manufactured . Routing Determination of: .external activities .Costing Varia nt Costing Sheet Strategy for transfer of the existing cost estimates Determination of : .overheads via costing sheet .prices update in material master COSTING VARIANT Defaulted dates for costing Valuation control for: .subcontracting .materials .internal activities .Bills of Material . Qu antity Stru cture fo r P ro duct Cost Planning . Bill of Material BOM type & identification BOM header Material data Work Centers / Resources Basic data Costing … Routing .tasks list Routing type & identification Routing header Operation data Production Version Validity Period Production line .Qu antity S tr ucture for Pr oduct Cost Pla nning Material master data Accounting views Costing views MRP views Master Recipe Recipe header Operations Materials list BOM . semifinished and finished products divided into views. Views: -Valuation class Purchasing Storage Sales Accounting Costing MRP … -Price control -Price determination -Price -Stock -Value of the stock -… -Plan price -Cost estimate results -Periodic unit price -… .Qu antity S tr ucture: Ma te ria l Ma ster Data Material Master Data: Material Master Data is an object in SAP R/3 that consists all relevant data for raw materials. quantity str uc. Cost of goods manufactured due to the manually entered cost elements or mathematical operation.for the products (materials) in the system without PP module .to update standard price 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. Product cost planning with quantity structure: Materials Cost Centers / Activity Types Primary Costs USE: . .in case of external MRP system .Ma terial c ost e stimates . • Validity period. • Production line. .Qu antity Stru cture: Pro duction Vers io n Quantity structure determination for cost estimate Validity period definition Product <FERT or HALB > Routing • Group • Group counter Bill of Material • Usage • Alternative Product Cost Estimate Production Version • ID. Qu antity S tr ucture RAW MATERIALS BILLS OF MATERIAL PRODUCT COST ESTIMATE ROUTING Electricity Consumables Maintenance Labor Depreciation SERVICE COST CENTER WORK CENTER / RESOURCE Utilities Overhead ACTIVITY TYPES PRODUCTION COST CENTER .Costing vs. Costing Str ucture Costing Structure for Product Cost Planning - Master Data + + + + + Materials Cost Centers Activity Types Cost Elements Cost Component Structure . Costing Str ucture fo r P ro duct C ost Pla nning Material master data Accounting views Costing views Cost Elements Validity period Category Cost Centers Validity period Category Functional area Activity Types Validity period Activity unit Allocation cost element . . They are used for entering all costs within the entire cost accounting system. Cost Center They represent a defined location of cost incurrence. They do not have corresponding general ledger accounts in FI and are defined in CO only. are referred to as cost elements. Cost Elements Secondary costs elements are used exclusively in CO to identify internal cost flows such as assessments or settlements.Costing Str ucture A cost centers is an organizational unit within a controlling area that represents a clearly delimited area of responsibility where costs are monitored against a plan. Items in a chart of accounts that are relevant to cost. Center Executive Management Admin. Center Maintena nce Prod. Support Production C. Center Projects COGS Product Cost Estimate Profitability Segment .Pla nning Ove rv ie w Company General Service C . C. Costing Str ucture Activity types define the type of activity that can be provided by a cost center (work activity. production hours. and so on). Activity Type . ) 473120 (telephone) 44.000 10.000 30.Activity Pr ic e Calculatio n Cost center: R&TCost center Planned costs: 430000 (salaries) 440000 (miscl.000 1PDH01 100 h Plan activity qty: 100 h 2 Calculated Price: 840 1 : Activity Price Calculation Apportionment of cost center costs to activity types according to particular criteria .000 Planned costs: 84. LLDPE Activity Types Used: 1UTSTF Steam . 943954 UT: Steam fix …. 5 Product 22000058 . Steam service 1203004 1UTSTF Steam .fixed 1UTSTV Steam – var. Primary costs planning on all Cost Centers.Costing Str ucture Planning 1203000 Utilities (Common) 1203000 2 Di n io E ut lC rib st ina rig O 3 Cost Splitting 1. ....TEG A Al cti lo vi 94 ca ty 39 tio Ro via 54 n ut in g …. Assign CC 1203004 to Splitting Structure U4 Steam service 2.fixed …. 1 4 Planned Price Calculation Prices for 1UTSTF are calculated. Perform cost splitting Product Cost Estimate Product 22000057 . Cost Comp onent Stru cture Valuation Purchase price Activity Type Price Overhead x 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 Standard Cost Estimate Stock Valuation Profit & Loss Statement . Internal Activity Allocation Utilities Variable Production Fix Production Structure of manufacturing costs Personnel Exp. Depreciation Structure of primary costs Depreciation Structure of primary costs .Cost Comp onent Stru cture COOM COPC Product Cost Planning Z9 -Primary Raw Materials Primary cost elements Raw Materials ZZ Process view Raw Materials Cost Centers Utilities Personnel Exp. Pr oduct Costing: Ov erview Create Cost estimate with quantity structure Standard Cost Estimate (once a year) Mark cost estimate with quantity structure Release cost estimate with quantity structure . 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 Standard price Only one validated standard price per product per period.standard cost estimate is populated in appropriate valuation views Includes variable and fix cost elements Base for variances calculation. The price represents most desired (or most likely) costs Only one price per product over the year (recommended) Determined during costing runs . . 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).Pric e u pdate Future price Future standard price Stored in material master data (accounting & costing view) in Legal. Pr ic e u pdate Analysis of Costing Results Material Master Data Standard Price Future Current Previous 10 Marking Standard Cost Estimate Future Current Previous 15 10 Releasing Standard Cost Estimate Future Current Previous 15 10 Stock Revaluation . Pric e u pdate procedures Master & control data definition - Material Master Data - CO Production Order incl. Unit Costing 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 Period-end closing tasks - 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 consists of: General data (organizational units, selection criteria) Selected materials Exploded BOMs Costing run results Price update results Costing run Costing Run Creation Company Code Costing variant Dates Costing Run Partial selection of materials Selection of all materials BOM explosion $ $ $ $ $ $ $ $ $ Execute costing run Marking and releasing costing run results (price update) Materials Pr oduct Costing: Ov erview 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 . Cost Ob ject C ontrollin g: Ov erv iew Functions of Cost Object Controlling: Supporting make-or-buy decisions Determining price floors Performing complex cost analysis Determining inventory values . Product Cost by Order Product Cost by Order is mainly used to control the costs of individual production lots. .Cost Ob ject C ontrollin g: Ov erv iew Cost Object Controlling Scenarios: Product Cost by Period Product Cost by Period is used for recurring periodic cost control of products that are manufactured in the same way over a longer period of time. Cost Ob ject C ontrollin g: Ov erv iew Product Cost by Order or by Period Full settlement (by Order) Actual costs = Work in process Releasing an order Time Actual costs Goods receipts = Work in process Partial delivery Actual costs Goods receipts = Variances Delivered / Technically completed Periodic settlement ( by Period) Actual costs Goods receipts = Work in process + Variances Period 1 Time Actual costs Goods receipts = Work in process + Variances Period 2 Actual costs Goods receipts = Work in process + Variances Period 3 . Cost Ob ject C ontrollin g: Ov erv iew Functions Funkcje Type of settlement rule Work-in-Process Product Cost by Order Product Cost by Period FULL WIP calculated on base of actual costs Variance = Actual Costs - PERIODIC WIP calculated on base of target costs Variance = Actual Costs - Variances Goods Receipts Goods Receipts .WIP Settlement Hierarchy of Cost Objects Should be periodically Must be periodically Impossible Possible . Profit Center Accounting and Material Ledger. Transfer data to: Financial Accounting. Calculate or update the work-in-process inventory and the finished goods inventory. Calculate and analyze target costs and actual costs for product cost collectors. . Calculate and analyze variances for each period. Create a preliminary cost estimate for product cost collectors. Profitability Analysis.Cost Ob ject C ontrollin g: Ov erv iew Functions of Product Costs by Period: Create product cost collectors. Inventory deviations postings . PREM costing Production postings (backflush) .Variances processing and analysis .Various analysis available Period-end closing tasks .Product Cost Collectors incl.Cost Object C ontr oll in g: Overv ie w Product Costing . BOMs and Routings .Material Master Data.Cost estimate marking .Organizational measures: marking and releasing .SPC1 – SPC3 costing run. verification.Settlement processing . save .Cost estimate release Master & control data definition . Actual Ove rvie w Company General Common Services Executive Management SBU / Sales C. Center Projects Overhead Variances Variances Product Cost Collector Profitability Segment . Center Maintena nce Production C. Center R&T C. Pr oduct Costing: Ov erview Prepare Cost Object Create Product Cost Collector Preliminary costing . when you are using process orders) when you want to analyze the costs by period rather than by lot In repetitive manufacturing you always use product cost collectors as the cost objects.Ob jects i n C ost Object Controllin g Product cost collectors in the following production environments: In order-related production (that is. when you are using production orders) when you want to analyze the costs by period rather than by lot In process manufacturing (that is. . • Validity period.Ob jects i n C ost Object Controllin g Product Cost Collector Product <FERT or HALB > Routing • Group • Group counter Bill of Material • Usage • Alternative Product Cost Collector Production Version • ID. . • Production line. Ob jects i n C ost Object Controllin g Product <FERT or HALB> PROCESS ORDER 1 PROCESS ORDER 2 Product Cost Collector Master Recipe Operation List/Routing Operation 10 Phase A Materials List/BOM Production Version Material X Material Y Operation 20 Resource Requirements . save .Various analysis available Period-end closing tasks . verification.Variances processing and analysis .Material Master Data.Settlement processing . BOMs and Routings .Inventory deviations postings .Cost estimate release Master & control data definition .Preliminary costing Product Costing .Product Cost Collectors with Preliminary costing (PREM) Production postings (backflush) .Cost estimate marking .Organizational measures: marking and releasing .SPC1 – SPC3 costing run. Preliminary costing Costing variant PREM .e.e. different quantity structures allowed over the period Changes in BOMs take effect immediately. quantities and prices that are planned to occur during production of a product Variable costs coming from BOM and routing Result used mainly for actual activities postings May be used for further analysis up to cost management requirements May be changed all the time in the way of changing (updating) Product Cost Collector.preliminary costing: Created during product cost collector creation Created per each production version Provides split and balanced information of cost items. cost estimate update not required Changes in routings take effect after cost estimate update . i. i. 000 0.500 2.Preliminary costing Product Cost Collector Item Caustic Soda Ethylene EDC Materials Internal activities Overheads Total Plan 1.500 4.000 2.000 Actual .500 1.500 8. Product Cost Collectors with Preliminary costing (PREM) Production postings (backflush) . save .Cost estimate release Master & control data definition .Inventory deviations postings .Organizational measures: marking and releasing . BOMs and Routings .Variances processing and analysis . verification.Material Master Data.Simultaneous costing – actual costs Product Costing .SPC1 – SPC3 costing run.Cost estimate marking .Various analysis available Period-end closing tasks .Settlement processing . 000 2.500 2.500 8.600 4.000 0.400 Actual 1.500 1.600 2.500 4.000 7.200 0.Simultaneous costing – actual costs Confirm order operation Production output & Back Flush Record consumption & output Record process data & batch characteristics Final Confirmation & Back Flush Deal with Back Flush & transaction errors Adjust theoretical yield & consumption to actual Product Cost Collector Item Caustic Soda Ethylene EDC Materials Internal activities Overheads Total Plan 1.800 .800 2. 100 20 50 Confirmation functions Confirmation status Partial confirmation Partial confirmation Final confirmation Final confirmation 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 ...Conf ir mati on Types & Orders Order header Functi ons .P rocess Confirmation types Operations Components Components Individual order confirmation Individual confirmation Collective confirmation Collective confirmation Milestone confirmation Milestone confirmation Progress confirmation Order confirmation Confirmation with reference Costs Material Machine Labor Utility . Back Flu shin g (R epetitiv e Ord ers ) Order quantity = 10 PC Operation 30 Component XY Required qty = 20 PC Warehouse Back Flushing Operation 30 Yield = 5 PC Goods issue Component XY = 10 PC 10 PC of Component XY to be back flushed . 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 PRTs PRTs Costs Costs 100 20 50 Costs Costs PRTs PRTs 100 20 50 Order status: Production order status:Delivered Delivered Production Order status:order status: Technically Technically completed completed Settlement can be carried out . the theoretical yield and consumption may be adjusted and the results recorded .Faile d Tr ansactio ns and C orr ections x x x 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. plus material & resource consumptions. update the stock records and provide valuation of production according to standard cost approach. .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. 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 . - 100 * 50 = 5.943201 + 7.000.400000 + 1.000.462001 .100.500.Actual costs CO Production Order Step 6 – Goods Receipt from Order into Warehouse .000.Finished Products 119430 5.quantity * price = value of the goods receipts from order .- CO FI Production Output 462001 5.5.Actual Postings Status – PARTIALLY DELIVERED Order Material 430004 + 5.000.000. update the stock records and provide valuation of production according to standard cost approach.Su mm ary The results from the output receipts.Actual costs . plus material & resource consumptions. . Pr oduct Costing: Ov erview Month End Closing WIP Calculation Variance Calculation Settlement . . this period-end closing transaction will be performed for all production processes for that material. Functions available in period-end closing: overhead calculation. but only enter the data for the material and plant. DLT (Deleted). If you don’t enter a production process in the individual processing mode of the period-end closing transaction. DLFL (Deletion flag). CLSD (Closed). settlement.Period and year-end closing 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). WIP calculation. variance calculation. Period and year-end closing Functions Funkcje Type of settlement rule Work-in-Process Product Cost by Order Product Cost by Period FULL WIP calculated on base of actual costs Variance = Actual Costs - PERIODIC WIP calculated on base of target costs Variance = Actual Costs - Variances Goods Receipts Goods Receipts .WIP Settlement Hierarchy of Cost Objects Should be periodically Must be periodically Impossible Possible . Period-end closing Status – RESULTS ANALYSIS CARRIED OUT Order Material 430004 + 5.Period and year-end closing CO Production Order Step 7 – Work-in-Process Calculation .000.5.600 .WIP Report: Work-in-Process 13.600 462001 .000 = 8.5.400000 + 1.500.000.100.- .943201 + 7. 600.400000 + 1.Period-end closing Status – RESULTS ANALYSIS CARRIED OUT Work In Progress (WIP) 462201 8.000.Work In Progress (WIP) 119460 8.Period and year-end closing CO Production Order Step 8 – Settlement of .000. .600.462001 .- CO FI WIP is being updated on the order as statistical value for information purposes.100.Order Material 430004 + 5.943201 + 7.500.5. - As a result of the actual postings in the new period there is a new balance on the order.500.100.+ 5.+ 7.+ 1.Period and year-end closing CO Production Order – new period Step 9 – Repetition of the steps from 3 to 7 .5.000.7.000. .Actual Postings Status – PARTIALLY DELIVERED or DELIVERED Order Material 430004 943201 400000 400000 + 5.462001 .000.000.462001 . 462001 .200 + 5.000.5.600 Cumulative: 15.000.7.100.12.462001 .600 .+ 7.Period and year-end closing CO Production Order – period 2 Step 10 – Work-in-Process Calculation (variant 1) .000 = 6.600 Work-in-Process in previous period 13.+ 1.000.+ 5.600 .5.000.Period-end closing Status – PARTIALLY DELIVERED Order Material 430004 943201 400000 400000 WIP Report (cumulated): Work-in-Process 18.500.- .000 = 8. Order Material 430004 943201 400000 400000 + 5.462001 .+ 7.Work In Progress (WIP) 462201 6.600.- CO FI .100.000.000.462001 .+ 1.500.+ 5.600.000.000.5.As WIP is reported as cumulative value.Period and year-end closing CO Production Order – Period 2 Step 11 – Settlement (variant 1) .7.Period-end closing Status – RESULTS ANALYSIS CARRIED Work In Progress (WIP) 119460 6. 000.600 As a result of a posting the balance of the order was posted to production difference account and cumulated WIP was reversed.000.100. 6.+ 1.600.+ 7.600.Period and year-end closing CO Production Order – period 2 Step 12 – Calculation of Variances and Settlement (variant 2) .600 + 5.7.- WIP 119460 8.000.Period-end closing Price Difference Production Difference 464018 6.- CO FI Production Output 462001 Negative variance: Actuals > Plan.5.500.000.462001 . .- Status – TECHNICALLY COMPLETED Order Material 430004 943201 400000 400000 WIP 462201 8.+ 5.462001 . 000 400 Settlement Profitability Analysis Variance 400 COPA MM Stock .Period and year-end closing Variance: Integration Product Cost Collector Material CATALYST Quantity prod.400 . 0 10pcs * 200 Goods Receipt Variance Price 150 Quantity 50 Structure 200 FI Accounting Price difference Stock 2.000 400 Material Master Accounting View Standard Price 200 Target Cost Ver.200 400 2.2.: 10 pcs COPC Standard Cost Estimate Materials 600 Labour Depreciation 1.100 300 Actual Costs Materials Labour Depreciation 800 1. Period and year-end closing Variance Category Cost Element Group PA Assignment lines Value Field + + + . - Actual costs Goods receipt -2.- = Result of a period PrCtr 1 FI Company Code Profit Center ECPCA Company Code Settlement FI Profitability Segment COPA .400.Period and year-end closing Product cost collector Period accounting 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 +/.Variances/WIP 400.Change in Stock = Result of a period Actual costs 2.000. Period and year-end closing . 000 Actual 1.600 4.600 2.500 2.000 0.500 1.Period and year-end closing Periodic Costs Product Cost Collector Item Caustic Soda Ethylene Plan 1.600 9.000 2.800 2.800 1.200 0.500 4.500 8.000 Process costs EDC Materials Internal activities Revaluation Overheads Total % % Overheads . Period and year-end closing Period-end closing Periodic costs Process costs Revaluation Overheads Calculations and analysis Work-in-Process Scrap Variances Settlement Postings FI/CO . 000.Period and year-end closing Product cost collector Period accounting 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 +/.400.Variances/WIP 400.- = Result of a period PrCtr 1 FI Company Code Profit Center ECPCA Company Code Settlement FI Profitability Segment COPA .Change in Stock = Result of a period Actual costs 2.- Actual costs Goods receipt -2. Period and year-end closing . Period and year-end closing Variance Category Cost Element Group PA Assignment lines Value Field + + + . valuation for reporting purposes. .Ma terial L edger: Ov ervie w Functions of Material Ledger: Cost accounting using actual prices Storing values of stock in three different valuations (legal valuation. and profit center valuation) in multiple currencies. Ma terial L edger: Ov ervie w Functions of Material Ledger: Cost accounting using actual prices Storing values of stock in three different valuations (legal valuation. group valuation for reporting purposes. and profit center valuation) in multiple currencies. . invoice values. On the basis of this data. It acts as a subledger for selected materials that captures all goods movements. This actual cost can then be utilized to valuate the material stock accounts. transfers and price changes. .What is the Material Ledger/Actual Cost Concept? The Material Ledger(ML) is a tool within the CO Module that collects all transactional data for materials whose master data is stored in the material master. the material ledger calculates and maintains the actual cost for these materials. Objectives of the Material Ledger 1. This is not mandatory. The values are translated into other currencies using the historical exchange rates. 2. All variances from the preliminary valuation are maintained in the ML. Prerequisite for usage of transfer pricing functionality. valuation of all goods movements is done with the preliminary valuation price which is normally the standard price. Parallel currencies and/or valuations of material stocks. During the period. revaluation of ending inventory can be performed with the determined actual price. Actual Costing. . Actual prices can be calculated for statistical purposes only. All goods movements in the ledger can be maintained in 3 currencies. At period end. Benefits of the Material Ledger ►Variances of Finished Goods Variances from external procurement (purchase orders) as well as from production activities are rolled up from raw and semifinished materials to the finished goods level. ►To provide support for procurement related decisions. Detailed reporting for procurement processes and sources possible. Make vs.. Buy, Vendor A vs.. Vendor B. Price History. ►Combines the benefits of Moving Average and Standard Price Stable prices used for controlling purposes (standard) and actual prices used for valuation purposes (average). ►Easy to use display and error finding by consolidating the views. Allows quick access to detailed views of material master, standard costs and documents Benefits of the Material Ledger ►Relatively simple configuration and set up ►True Cost of Sales Accounting Purchasing and production variances for unsold stocks are inventoried. ►Contribution Margin with Actual Costs of Sales By utilizing multi-level settlement, actual values for your cost component split can be attained. This can be transferred to PA as of release 4.6C Single Level Settlement Production ∆ ∆ Level Level Level Level Production External Procurement External Procurement ∆ Multi .Level Settlement Production ∆ ∆ Level Level Level Level Multi -Level Production External Procurement External Procurement ∆ . Multi .Level Settlement 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 ∆ ∆ . The ML updates the Material Master . The Integrated Material Ledger Display . Material Ledger MATERIAL STOCK Parallel Valuations Parallel Currencies Translation at historic rates (up to three) (Transfer Prices) Group Legal Profit Center .Ma terial L edger Ov erview Actual Costing Revaluation of stock at actual prices or accrual of variances. ML Ov erview – Pa ra lle l C urre ncie s Material Ledger (Valuation Area / Plant) • 10 Local currency • 30 Group currency 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 Moving average price (V Price) • Changed after every receipt • Recommended for raw and externally procured materials. 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) . This is a requirement for transfer price Moving price Single-/ multilevel price determination 3 Standard Standard price Unit periodic price Cannot be activated manually Actual Costing Revaluation of stock at actual price .Pr ic e d etermin ation contro l Multiple currencies/valuations Price control S Price determination 2 Transaction based Standard price V V ML can record up to 3 different currencies / valuations. Pr ic e d etermin ation contro l ‘3’ Cost centers Orders Activity types Internal orders ‘S’ Level 3 Cost centers Orders Activity types Internal orders ‘3’ ‘S’ Level 2 ‘2’ ‘V’ Level 1 External Procurement . Actual Values Ov erview Actual data -> Actual Costing Overview Preliminary valuation price Actual Costing Price differences Updating single-level variances Single-level price determination Multilevel price determination . Actual Values Ov erview Actual data -> Actual Costing Overview Preliminary valuation price Actual Costing Price differences Updating single-level variances Single-level price determination Multilevel price determination . Pr elimin ary v alu ation pric e ‘S’ Cost centers Orders Activity types Internal orders Level 2 ‘S’ Cost centers Orders Activity types Internal orders Level 1 ‘V’ External Procurement Actual Costs Preliminary valuation . Actual Values Ov erview Actual data -> Actual Costing Overview Preliminary valuation price Actual Costing Price differences Updating single-level variances Single-level price determination Multilevel price determination . . ou .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 . r th . Actual Values Ov erview Actual data -> Actual Costing Overview Preliminary valuation price Actual Costing Price differences Updating single-level variances Single-level price determination Multilevel price determination . . Pr. Inven.Up dating S ingle-Leve l V ariances ‘S’ Cost centers Orders Activity types Internal orders 462001 464018 . ‘V’ ‘V’ External Procurement Actual Costs Preliminary valuation . . . Inven. Price diff. . Pr. ‘S’ Cost centers Orders Activity types Internal orders 462001 464018 . Price diff. Actual Values Ov erview Actual data -> Actual Costing Overview Preliminary valuation price Actual Costing Price differences Updating single-level variances Single-level price determination Multilevel price determination . ‘S’ Cost centers Orders Activity types Internal orders 119430 464017 . Inven. End.Sin gle-L evel Pr ice Determinatio n ‘S’ Cost centers Orders Activity types Internal orders 119490 464017 . Price diff. End Inven. . ‘V’ External Procurement Price differences are not applicable Actual Costs Preliminary valuation . . . Price diff. Actual Values Ov erview Actual data -> Actual Costing Overview Preliminary valuation price Actual Costing Price differences Updating single-level variances Single-level price determination Multilevel price determination . . . .Mu lt ile vel Pric e D etermin ation ‘S’ Cost centers Orders Activity types Internal orders 119490 464017 . Price diff. End. ‘V’ External Procurement Price differences are not applicable Actual Costs Preliminary valuation . Price diff. End Inven. Inven. ‘S’ Cost centers Orders Activity types Internal orders 119490 464017 . later multilevel V price is calculated Making closing entry Must be made for each period Posting to prior period is no longer possible Reversal if required 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’ Marking future price .Pe rio d En d Overvie w Actual Costing – Period End Closing Procedure Collecting price differences On price difference accounts or in material ledger within categories Period closing program Open new period in MM (transaction MMPV) Determining prices Single-level. 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 Stock value : 185.5 VB Material consumption (400002) 325 ML accrual (119610) .50/100) Vendor 280 GR/IR allocation 260 260 CL Price difference (464017) 10 20 CL 10.5 SAR (700 PC * 26.Pe rio d En d Overvie w – Clo sing En try (1 ) With Revaluation locked Material: ACT-LCD## Status: Closing entry performed Price control: V (only old periods) V price: 26. Pe rio d En d Overvie w – Clo sing En try (2 ) Without Revaluation locked 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 Stock value: 175 SAR Vendor 280 Material stock (119400) 250 325 250 GR/IR allocation 260 260 Price difference (464017) 10 20 CL 10.5 Material consumption (400002) 325 CL ML accrual (119610) 10.5 . Pe rio d En d Overvie w – Periodic Un it Pr ic e Period opened ( beginning inventory Receipts Single. valuation) + Cumulative variances Cumulative inventory Periodic unit price = Periodic unit price .level price determination + Variances Cumulative inventory (prelim. In fo rma tio n S ys tem Ove rv ie w Materials to be costed Product Cost Planning Reports Summarized Analysis Object List Object Comparisons Detailed Reports . A personalized Report tree can be created to which standard Reports as well as one's own creations can be assigned. The standard Report Tree supplied by SAP should not be changed. .Report Sele ction 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. Report The Report can be used to . Report The Report can be used to . Report The Report can be used to . Report The Report can be used to . In fo rma tio n S ys tem Ove rv ie w Materials to be costed Product Cost Planning Reports Summarized Analysis Object List Object Comparisons Detailed Reports . In fo rma tio n S ys tem Ove rv ie w . In fo rma tio n S ys tem Ove rv ie w Material Ledger Reports Object List Detailed Reports Displaying Documents . In fo rma tio n S ys tem Ove rv ie w Materials to be costed Product Cost Planning Reports Summarized Analysis Object List Object Comparisons Detailed Reports . A personalized Report tree can be created to which standard Reports as well as one's own creations can be assigned. The standard Report Tree supplied by SAP should not be changed. .Report Sele ction 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. In fo rma tio n S ys tem Ove rv ie w . In fo rma tio n S ys tem Ove rv ie w Material Ledger Reports Object List Detailed Reports Displaying Documents . Report Outp ut Types Graphical report-output Variable output areas HTML-header Navigation by drag and drop and context menu Object List (ALV) Various leads columns Standard ALV Functions Pr oduct Costing In form ation Syste m Overview of Reporting Tools SAP REPORTING TOOLS For executing existing reports and queries (Human Resource Information System (HIS (Manager's Desktop (MDT Info systems in the SAP Easy Access Menu For creating new queries Ad Hoc Query SAP Query BUSINESS INFORMATION WAREHOUSE For executing existing queries Business Explorer Browser For creating new queries Business Explorer Analyzer Pr oduct Cost Plannin g R eporting SAP Standard Reports Customer report: Vehicles :SAP Employee :SAP report report Telephone List List :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 Cost Ob ject R eporting SAP Standard Reports Organizational management standard reports menu path Organizational management standard reports . Ma te rial L edger R eport ing Some Standard Organizational Management Reports identified for Sabic are: Structure Display/Maintenance Existing Organizational units Existing Positions Existing Unoccupied Positions .