Product CostingProduct Costing Overview 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. Material Ledger Overview 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. Overview Sales & Distribution Materials Mgmt.SAP Modules . Plant Maint. SD Financial Accounting FI MM CO Controlling Fixed Asset Mgmt. PS OC Project System IS Industry Solutions . QM SAP R/3 PM HR Human Resources Office & Comm. Product Planning PP AM Quality Mgmt. CO Components CO PA Operating concern (9100 – A Ltd) Profitability Analysis Profitability Analysis Overhead Cost Controlling Internal orders Profitability segment EC PCA CO OM Product Cost Controlling CO Production Controlling area (9100 – A Ltd) Order Standard Cost Estimate Cost Element Accounting Profit Center Accounting Cost centers Internal Orders Activity types CO CEL Cost Element Accounting FI Financial Accounting Financial Accounting Asset Expense Company Code (9100 A Ltd) Revenues HR Human Resources MM Materials Materials Management Management SD Sales and S&D Distribution . Corrective action may have to be taken.Why utilize Product Costing? •Product Costing is the backbone of a strong standard cost system. . •To set attainable standards by which efficiencies within the production operations can be measured. •For planning purposes. This is the process by which production activities are recorded at standard values and variances from actual costs are isolated. •To provide feedback to management on the actual performance of the production process in relation to those targets. 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. Product Costing Optimized Production Operations Improve and Control Operations OPTIMIZED & FIRM SCHEDULE Plan & Commit Resources Prepare Production Make Product Disposition & Contain Product Process ends with initial containment (packout) Manage Process and Product Documentation . Price) .Constant .If at all. only to be used for raw materials and materials procured externally Standard Price (S-Price) .Recommended for all material types .Costing Methodology Material Master Price Control Moving average price (V.Adjusted with every receipt . 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. . Material stock valued at the same price over an extended period. Automatically recalculated based on activity. Calculated by dividing the value of material by the quantity in stock. Constant price without considering usage or invoices. not affecting the standard price. 3 . the stock coverage is 200 units: all differences stock Consumption 4 Vendor 450.2 200.100.- 3.00 Stock Coverage 3 GR/IR Account 300.00 2.150.Posting Example: Moving average price 1 Procedure 1 2 3 4 Stock 100 200 Stock value 200.- 450.50 Begin.300..00 Stock Stock 1 2 3 200 50 600.500.00 Goods receipt: 100 PC at 3.00 Goods issue: 150 PC at 3.4 If the invoice receipt is for 100 units..300.00 3.- ok 400.- V price 2. inventory: 100 PC at 2.00 Invoice receipt: 100 PC at 4. - 4 .00 2.175.- 3 300.00 Stock 1 2 4 Stock Shortage 375.50 3.125.- 375.50 Stock Stock Value V Price 100 200 50 50 200.50 GR/IR account 4 Invoice receipt: 100 PC at 4.- 300.- 400.300.Posting Example: Moving average price 2 Procedure 1 2 Begin.- 2 Price difference 4 Vendor 50.50 2.00 4 Goods issue: 150 PC at 2.50.500.- 2.With a delayed invoice receipt Of 100 units: a shortage of 50 units price differences despite MAP Consumption 3 200. inventory: 3 Goods receipt: 100 PC at 3. - 3.20 Invoice receipt: 100 PC at 3.00 Stock 100 200 300 100 100 Δ 80.420.20 3.60 Stock Coverage With multiple delayed invoice receipts: Danger of Incorrect Valuation! Even though all receipts between 2.300.10 2.Δ 60.40 Goods issue: 200 PC at 2..220..Posting Example: Moving average price 3 Procedure Begin.in stock Stock Value 200.00 100 360.00 Invoice receipt: 100 PC at 3.were valuated! .20 2.in stock V Price 2.and 3.00 2.660.20 Goods receipt: 100 PC at 2. inventory: Goods receipt: 100 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 . 00 2.- 240.40 3 Invoice receipt: 100 at 2.- 3 .400.- Standard Price 2.20 Stock 100 200 200 Stock Value 200.- 2 Price difference 2 Vendor 3 40.- 220.00 2.200.Posting Example: Standard Price Procedure 1 Initial situation: 2 Goods receipt: 100 at 2.00 Stock 1 2 GR/IR account 3 200.- 20.400.- 240. 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. 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. Period-End Closing: Valuation Problems Finished Products Raw Materials I Distribution of Price Differences? Valuation Period D Actual Prices? Raw Materials II Ending Inventory: Raw Materials . Costing Methodology Valuation Method by Material: Finished Goods Intermediates Standard w/ ML Standard w/ ML Raw Material Packaging Moving Average Actual Moving Average Actual . • The valuation area may is defined: . • Level at which material value is managed.by plant .Valuation Area Organizational unit dividing up a company for the purpose of valuating stocks in a standardized and consistent manner. .Product Cost Flow MAT COCCA Cost Center X Manufacturing Cost Cost Center 1 Cost Center2 MM: RM BOM Cost Center Y Cost Center 3 COPC Routing Act1 Production Cost Center Act2 VAR. VAR. . VAR... Production orders COPA Cost Object F. Goods Inventory . Costs to Produce Product testing costs Change Over costs (setup costs) Fixed & Variable Cost . Hr. Mat’l Costs Routing Mach. Cost Element 3.Product Cost Flow Plant Cost View Sales & Mktg. Cost Center Utilities Salaries Supplies Maintenance Depreciation Training Direct Conversion Insur. Setup Costs Fixed & Variable Cost Three Views Available: 1. Costs Lab Tests Costs Mach. Hrs. Mat’l Costs Routing (Activity Types) Mach. Produced Lab tests Setup Hrs. View Mfg. Raw Mat’l 1 Costs Raw Mat’l 2 Costs Pkg. or lbs. Cost Component 2. Cost Itemization PA (Profitability Analysis) (SAP Value Fields) Cost of Goods Sold Raw Mat’l 1 & 2 Costs Pkg. & Taxes Laboratory/QC Waste Treatment Shops & Stores General Services Indirect Conversion Total Product Cost Process Order BOM Raw Mat’l 1 Raw Mat’l 2 Pkg Mat’l Product Unit Cost (Cost Component View) Cost of Goods Mfg. Product Costing A Ltd. Product Cost Planning Quantity structure in PP created Activity type planning completed Adjust costing master data/ parameters Execute costing run Not OK Overhead cost planning completed Plan prices of raw materials were entered Standard Cost Calculated Review for Yes Approval OK Mark Standard Cost Estimate Automatic Release of Standard Price Standard price hase been released . Simultaneous Costing Cost estimate has been released Manufacturi ng order has been released Cost object has been created Simultaneous Yes Costing Product cost are allocated . Product Cost Allocation .Product Costing A Ltd. Product Costing A Ltd. Period End Closing Product Costing Product cost are allocated Revaluation activity types at actual prices Calculation of WIP Yes Periodic Varaiance calculation Settle cost object PE Product Costing has been done . aster Updates .aster Updates Price Update in Actual Costing Provisional Posting GL Postings & Reversal Material M.Product Costing A Ltd. Material Ledger/Actual Costing GL Postings Revaluate Stock MM Goods Movements Recorded Material Price Determination Allocation of Follow up Costs to Finished/Semi Finished Products Material M. Product Cost Planning: Overview 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 . Product Costing: Overview Create Cost estimate with quantity structure Standard Cost Estimate (once a year) Prepare Product Cost Collector Production Costs Mark cost estimate with quantity structure Release cost estimate with quantity structure Create Cost Object Preliminary Costing Post Materials Costs Debit Secondary cost Receive Finished Stocks Month End Closing Credit Production Output WIP Calculation Variance Calculation Settlement . .What is a Product Cost Estimate? A tool for planning costs and establishing prices for materials. Integrated with Production Planning (PP).e. I. Master Recipe for costing purposes. Additive You use additive costing to enable you to manually add costs that cannot be calculated by the system to a material cost estimate. Cost Estimate WITHOUT Quantity Structure Utilizes a material master data and activity types entered manually into cost estimate. It is used to calculate the cost of goods sold for each product unit. Cost Estimate With Quantity Structure Utilizes a Bill of Material (BOM) and routing. Product Cost Planning: Overview Cost estimate with quantity structure Report Quantity structure Costing variant Cost estimate without qty structure Material costs Production costs Overhead Valuation Price update . Product Cost Planning: Overview 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 Standard Cost Estimate Inventory Cost Estimate Inventory Cost Estimate Product Costing: Overview Standard Cost Estimate (once a year) Create Cost estimate with quantity structure Mark cost estimate with quantity structure Release cost estimate with quantity structure Material cost estimates with q. s. Quantity Structure BOM Routing Valuation Purchase price Activity Type Price Overhead Costing Used for: Costing Results Items M Material E Activity E Activity G Overhead Standard Cost Estimate Stock Valuation Profit & Loss Statement Cost Elements 400000 Raw materials 943201 Production hours 943901 UT: Cooling Var. … Values 600 000 610 000 612 000 … SAR SAR SAR SAR Total Material Internal Activity External Activity Overheads Product S Costing structure . Product W Costing structure .Total Material - .Material cost estimates with q. s.Total Material Internal Activity External Activity Overheads W Z1 S1 S2 Z2 - Costing structure – Upper level Internal Activity External Activity Overheads S3 Costing structure – Lower level Material Internal Activity External Activity Overheads Product Z Costing structure . Costing Variant Costing Variant Quantity Structure Determination Valuation Variant Quantities Prices Cost of Goods Manufactured . overheads via costing sheet .prices update in material master COSTING VARIANT Defaulted dates for costing Valuation control for: .external activities .internal activities .materials .subcontracting .Costing Variant Strategy for transfer of the existing cost estimates Determination of : .Bills of Material .Routing Costing Sheet Determination of: . Quantity Structure for Product Cost Planning Quantity Structure for Product Cost Planning - Master Data + + + + + + + Material Master Bills of Material Work Centers / Resources Routings Master Recipe Production Version Procurement Alternatives / Mix Ratios . Quantity Structure for Product Cost Planning Material master data Accounting views Costing views MRP views Master Recipe Recipe header Operations Materials list BOM .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 . 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 -… .Quantity Structure: Material Master Data Material Master Data: Material Master Data is an object in SAP R/3 that consists all relevant data for raw materials. semifinished and finished products divided into views. Material cost estimates .in case of external MRP system . .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. Cost of goods manufactured due to the manually entered cost elements or mathematical operation. Product cost planning with quantity structure: Materials Cost Centers / Activity Types Primary Costs USE: . Quantity * activity price = cost of goods manufactured due to the internal activities during the production process.quantity struc. Quantity Structure: Production Version 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. • Validity period. • Production line. . Quantity Structure 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 Structure Costing Structure for Product Cost Planning - Master Data + + + + Materials Cost Centers Activity Types Cost Elements Cost Component Structure + . Costing Structure for Product Cost Planning 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 . are referred to as cost elements. Items in a chart of accounts that are relevant to cost.Costing Structure 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. . Cost Center They represent a defined location of cost incurrence. Cost Elements Secondary costs elements are used exclusively in CO to identify internal cost flows such as assessments or settlements. They are used for entering all costs within the entire cost accounting system. They do not have corresponding general ledger accounts in FI and are defined in CO only. Center Projects COGS Product Cost Estimate Profitability Segment . Center Maintena nce Prod.Planning Overview Company General Service C. C. Support Production C. Center Executive Management Admin. Costing Structure Activity types define the type of activity that can be provided by a cost center (work activity. Activity Type . and so on). production hours. 000 10.) 473120 (telephone) 44.Activity Price Calculation Cost center: R&T Planned costs: 430000 (salaries) 440000 (miscl.000 Planned costs: 84.000 30.000 Cost center 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 . 4 Planned Price Calculation Prices for 1UTSTF are calculated. ..TEG Steam service 1203004 1UTSTF Steam . 1 Primary costs planning on all Cost Centers.fixed …. 5 Product 22000058 .Costing Structure Planning 1203000 Utilities (Common) 2 1203000 3 Cost Splitting 1. Perform cost splitting Product Cost Estimate Product 22000057 ..LLDPE Activity Types Used: 1UTSTF Steam .. Assign CC 1203004 to Splitting Structure U4 Steam service 2.fixed 1UTSTV Steam – var. …. 943954 UT: Steam fix …. Cost Component Structure Valuation Purchase price Activity Type Price Overhead x Quantity Costing Used for: Costing Results ID 101 110 111 … Cost Component Raw Materials Catalyst Chemicals … Values Fixed & Variable 600 000 0 0 … SAR SAR SAR SAR Standard Cost Estimate Stock Valuation Profit & Loss Statement . Cost Component Structure COOM COPC Product Cost Planning Z9 -Primary Raw Materials Primary cost elements Raw Materials ZZ Process view Raw Materials Cost Centers Utilities Personnel Exp. Internal Activity Allocation Utilities Variable Production Fix Production Structure of manufacturing costs Personnel Exp. Depreciation Structure of primary costs Depreciation Structure of primary costs . Product Costing: Overview Create Cost estimate with quantity structure Standard Cost Estimate (once a year) Mark cost estimate with quantity structure Release cost estimate with quantity structure . Group and Profit Center valuation views after releasing the cost estimate .standard cost estimate is populated in appropriate valuation views Includes variable and fix cost elements Base for variances calculation.Price update Standard price Only one validated standard price per product per period. 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. The price represents most desired (or most likely) costs Only one price per product over the year (recommended) Determined during costing runs . Previous price Replaced standard price by current one due to releasing the cost estimate Stored in material master data (accounting & costing view).Price update 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. Price update 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 . Price update 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 Product Costing: Overview Create cost object Prepare Cost Object Preliminary costing Post Materials Costs Production Costs Debit Secondary cost Receive Finished Stocks Month End Closing Credit Production Output WIP Calculation Variance Calculation Settlement . Cost Object Controlling: Overview 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 Object Controlling: Overview 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 Object Controlling: Overview Product Cost by Order or by Period Full settlement (by Order) Actual costs = Work in process Actual costs Goods receipts = Work in process Partial delivery Actual costs Goods receipts = Variances Delivered / Technically completed Time Releasing an order Periodic settlement ( by Period) Actual costs Goods receipts = Work in process + Variances Time Period 1 Period 2 Actual costs Goods receipts = Work in process + Variances Actual costs Goods receipts = Work in process + Variances Period 3 . Cost Object Controlling: Overview Functions Funkcje Type of settlement rule Work-in-Process Product Cost by Order Product Cost by Period FULL PERIODIC WIP calculated on base of actual costs Variance = Actual Costs - 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 . Cost Object Controlling: Overview Functions of Product Costs by Period: Create product cost collectors. 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. . Profitability Analysis. Transfer data to: Financial Accounting. Calculate and analyze variances for each period. Create a preliminary cost estimate for product cost collectors. Profit Center Accounting and Material Ledger. BOMs and Routings .Variances processing and analysis .Settlement processing .SPC1 – SPC3 costing run.Cost Object Controlling: Overview Product Costing .Inventory deviations postings . save . verification.Organizational measures: marking and releasing .Cost estimate release Master & control data definition . PREM costing Production postings (backflush) .Material Master Data.Cost estimate marking .Various analysis available Period-end closing tasks .Product Cost Collectors incl. Actual Overview Company General Common Services Executive Management SBU / Sales C. Center Maintena nce Production C. Center R&T C. Center Projects Overhead Variances Variances Product Cost Collector Profitability Segment . Product Costing: Overview 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. . when you are using production orders) when you want to analyze the costs by period rather than by lot In process manufacturing (that is.Objects in Cost Object Controlling Product cost collectors in the following production environments: In order-related production (that is. • Production line. . • Validity period.Objects in Cost Object Controlling Product Cost Collector Product <FERT or HALB > Routing • Group • Group counter Bill of Material • Usage • Alternative Product Cost Collector Production Version • ID. Objects in Cost Object Controlling Product <FERT or HALB> PROCESS ORDER 1 Product Cost Collector PROCESS ORDER 2 Master Recipe Operation List/Routing Materials List/BOM Production Version Operation 10 Phase A Material X Material Y Operation 20 Resource Requirements . Cost estimate marking .Organizational measures: marking and releasing .Inventory deviations postings . save . BOMs and Routings .Settlement processing .Cost estimate release Master & control data definition .SPC1 – SPC3 costing run. verification.Variances processing and analysis .Material Master Data.Various analysis available Period-end closing tasks .Preliminary costing Product Costing .Product Cost Collectors with Preliminary costing (PREM) Production postings (backflush) . 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. i.e.Preliminary costing Costing variant PREM . i.e. cost estimate update not required Changes in routings take effect after cost estimate update . different quantity structures allowed over the period Changes in BOMs take effect immediately. Preliminary costing Product Cost Collector Item Caustic Soda Ethylene EDC Materials Internal activities Overheads Total Plan 1.500 2.500 8.000 2.000 0.500 1.000 Actual .500 4. Settlement processing . BOMs and Routings .Inventory deviations postings .Simultaneous costing – actual costs Product Costing . save .Variances processing and analysis .Cost estimate release Master & control data definition .SPC1 – SPC3 costing run.Cost estimate marking .Material Master Data.Organizational measures: marking and releasing . verification.Various analysis available Period-end closing tasks .Product Cost Collectors with Preliminary costing (PREM) Production postings (backflush) . 800 Caustic Soda Ethylene Record consumption & output Record process data & batch characteristics Final Confirmation & Back Flush EDC Materials Internal activities Overheads Deal with Back Flush & transaction errors Total 8.600 2.000 7.600 4.500 1.500 Actual 1.000 2.000 0.800 2.Simultaneous costing – actual costs Confirm order operation Production output & Back Flush Product Cost Collector Item Plan 1.200 0.400 Adjust theoretical yield & consumption to actual .500 2.500 4. .Confirmation Types & Functions .Process Orders Order header Confirmation types Operations Components n n n n n n n n n Individual confirmation Individual order confirmation Collective Collective confirmation confirmation Milestone Milestone confirmation confirmation Progress confirmation Order confirmation Confirmation with reference Costs Material Machine Labor Utility .. 100 20 50 Confirmation functions Confirmation status n n n n Partial Partial confirmation confirmation Final confirmation Final confirmation n n n n n n n n n n n n n Output goods receipt Confirm with goods movement Defaults for remaining time Backflush components Check operation sequence Check delivery tolerances Backflush Plant data utilities collection interface Backflushing Reduce Reduce capacity capacity requirements requirements Determine actual costs Determine actual costs . Back Flushing (Repetitive Orders) 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 . Final Confirmation & Technical Completion 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 . Failed Transactions and Corrections 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 . Summary Non-feedstock raw materials are staged daily to the production area for planned manufacture As each production quantity is confirmed. update the stock records and provide valuation of production according to standard cost approach. plus material & resource consumptions. a back flush of the proportional quantities of raw materials and utilities consumed is recorded The results from the output receipts. . List of Transactions Simultaneous costing transactions: MF60 – Stage Materials MFBF – Back Flushes MF41 – Month-End Corrections COR6 – Confirm Orders & Back Flush COR2 – Reverse Confirmations . Finished Products 119430 5.100.462001 .100 * 50 = 5.000.500.000.943201 + 7.000.400000 + 1.quantity * price = value of the goods receipts from order Order Material 430004 + 5.5.000.- CO FI .Actual Postings Status – PARTIALLY DELIVERED Production Output 462001 5.Actual costs CO Production Order Step 6 – Goods Receipt from Order into Warehouse .000. Summary The results from the output receipts. update the stock records and provide valuation of production according to standard cost approach.Actual costs . . plus material & resource consumptions. Product Costing: Overview Month End Closing WIP Calculation Variance Calculation Settlement . . variance calculation. If you don’t enter a production process in the individual processing mode of the period-end closing transaction. WIP calculation. but only enter the data for the material and plant. CLSD (Closed). settlement. this period-end closing transaction will be performed for all production processes for that material.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). Functions available in period-end closing: overhead calculation. DLFL (Deletion flag). DLT (Deleted). WIP Settlement Hierarchy of Cost Objects Should be periodically Must be periodically Impossible Possible .Period and year-end closing Functions Funkcje Type of settlement rule Work-in-Process Product Cost by Order Product Cost by Period FULL PERIODIC WIP calculated on base of actual costs Variance = Actual Costs - WIP calculated on base of target costs Variance = Actual Costs - Variances Goods Receipts Goods Receipts . WIP Report: 462001 .000 = 8.500.400000 + 1.Period-end closing Status – RESULTS ANALYSIS CARRIED OUT Order Material 430004 + 5.600 .5.943201 + 7.000.5.- Work-in-Process 13.600 .Period and year-end closing CO Production Order Step 7 – Work-in-Process Calculation .000.100. 600.Work In Progress (WIP) 119460 8.462001 .- CO FI WIP is being updated on the order as statistical value for information purposes.100.000.400000 + 1.500.Period-end closing Status – RESULTS ANALYSIS CARRIED OUT Work In Progress (WIP) 462201 8.5.000.Order Material 430004 + 5. .600.Period and year-end closing CO Production Order Step 8 – Settlement of .943201 + 7. 000.000.100.5.+ 7.462001 . .+ 5.000.- 462001 .Period and year-end closing CO Production Order – new period Step 9 – Repetition of the steps from 3 to 7 .000.7.- As a result of the actual postings in the new period there is a new balance on the order.Actual Postings Status – PARTIALLY DELIVERED or DELIVERED Order Material 430004 943201 400000 400000 + 5.+ 1.500. 462001 .+ 5.+ 1.5.000 = 8.5.000.600 .500.12.7.000.462001 .600 .000 = 6.200 + 5.000.+ 7.600 Work-in-Process in previous period 13.Period-end closing Status – PARTIALLY DELIVERED Order Material 430004 943201 400000 400000 WIP Report (cumulated): Work-in-Process 18.100.600 Cumulative: 15.Period and year-end closing CO Production Order – period 2 Step 10 – Work-in-Process Calculation (variant 1) .- .000. Period and year-end closing CO Production Order – Period 2 Step 11 – Settlement (variant 1) .600.Work In Progress (WIP) 462201 6.100.000.+ 7.462001 .500.Period-end closing Status – RESULTS ANALYSIS CARRIED Work In Progress (WIP) 119460 6.+ 5. Order Material CO + 5.5.000.000.000.600.+ 1.462001 .- FI 430004 943201 400000 400000 .As WIP is reported as cumulative value.7. 000.600.Period and year-end closing CO Production Order – period 2 Step 12 – Calculation of Variances and Settlement (variant 2) .600 + 5.Period-end closing Price Difference Production Difference 464018 6.- WIP 119460 8.+ 5.100. .5.000.+ 1.000.- Status – TECHNICALLY COMPLETED Order Material CO FI 430004 943201 400000 400000 WIP 462201 8.- Production Output 462001 Negative variance: Actuals > Plan.+ 7.000.- 462001 .462001 .600.500.600 As a result of a posting the balance of the order was posted to production difference account and cumulated WIP was reversed. 6.7. : 10 pcs COPC Standard Cost Estimate Materials 600 Labour Depreciation 1.000 400 Target Cost Ver.100 300 Actual Costs Material Master Accounting View Standard Price 200 Materials Labour Depreciation 800 1.200 400 2.000 400 Settlement Profitability Analysis Variance 400 COPA MM Stock . 0 10pcs * 200 Goods Receipt Variance Price 150 Quantity 50 Structure 200 FI Accounting Price difference Stock 2.2.400 .Period and year-end closing Variance: Integration Product Cost Collector Material CATALYST Quantity prod. Period and year-end closing Variance Category Cost Element Group PA Assignment lines Value Field + + + . 000.- = Result of a period PrCtr 1 Company Code FI Profit Center ECPCA Company Code Settlement FI Profitability Segment COPA .Variances/WIP 400.Change in Stock = Result of a period – Sales deductions – Manufacturing costs by standard price (Contribution margin I) – Variances Actual costs Goods receipt -2.Period and year-end closing Product cost collector Period accounting COPC Material: Quantity: COPC MEG 10 pieces Cost of goods sold Revenue Revenue Actual costs 2.400.- – Sales deductions – Overheads plus Variances +/. PRF PRA Production Variances * PRU GL (PL) 4640020 Price Diff -Transfer Postings Lot size-/fixedcost variance Remaining variance Scrap Material Ledger Closing Release Future Price UMB Gain/loss from revaluation GL (PL) 464021 Gains/Loss on Inventory Revaluation Price Diff Purchasing Price Diff .Multi Level Level PRV Material ledger fr.level s price dif.Good Issue Price Diff Transfer Postings Adjustment to COGS from capitalising Variances Adjustment to COGS from Inventory Revaluation Gross margin Material Ledger Closing .Single Level PRY Cost (price) differences (mater.low.Period and year-end closing - FI * GL (PL) 464017 Price Diff -Purchasing SD PA Revenue M St M Pri andar ce d Co or S ndi D t i o Typ n e Purchasing.acct(mat erial ledger) GL (BS) 119610 ML Provisions Gains/Loss on Inventory Revaluation .Good Issue Resource-usage variance Remaining input variance Mixed-price variance Output price variance Material Ledger Closing . Production PRD Cost (price) differences PRF PRA PRU Revenue COGS COGS - * GL (PL) 464018 Production Variance Material Ledger Closing .ledg er) PRF PRA PRU - Input price variance Input quantity variance * GL (PL) 464019 Price Diff .Do not revaluate Stock LKW Accruals and defer. Stock Movement. Period and year-end closing Periodic Costs Product Cost Collector Item Caustic Soda Ethylene Plan 1.800 1.500 1.000 Actual 1.500 2.000 Process costs EDC Materials Internal activities Revaluation Overheads Total % % Overheads .200 0.000 0.000 2.800 2.600 9.500 4.600 2.600 4.500 8. Period and year-end closing Period-end closing Periodic costs Process costs Revaluation Overheads Calculations and analysis Work-in-Process Scrap Variances Postings FI/CO Settlement . Period and year-end closing Product cost collector Period accounting COPC Material: Quantity: COPC MEG 10 pieces Cost of goods sold Revenue Revenue Actual costs 2.Change in Stock = Result of a period – Sales deductions – Manufacturing costs by standard price (Contribution margin I) – Variances Actual costs Goods receipt -2.- – Sales deductions – Overheads plus Variances +/.- = Result of a period PrCtr 1 Company Code FI Profit Center ECPCA Company Code Settlement FI Profitability Segment COPA .000.400.Variances/WIP 400. Do not revaluate Stock LKW Accruals and defer.Good Issue Resource-usage variance Remaining input variance Mixed-price variance Output price variance Material Ledger Closing . PRF PRA Production Variances * PRU GL (PL) 4640020 Price Diff -Transfer Postings Lot size-/fixedcost variance Remaining variance Scrap Material Ledger Closing Release Future Price UMB Gain/loss from revaluation GL (PL) 464021 Gains/Loss on Inventory Revaluation Price Diff Purchasing Price Diff .Single Level PRY Cost (price) differences (mater.acct(mat erial ledger) GL (BS) 119610 ML Provisions Gains/Loss on Inventory Revaluation .Good Issue Price Diff Transfer Postings Adjustment to COGS from capitalising Variances Adjustment to COGS from Inventory Revaluation Gross margin Material Ledger Closing .ledg er) PRF PRA PRU - Input price variance Input quantity variance * GL (PL) 464019 Price Diff . Stock Movement.Period and year-end closing - FI * GL (PL) 464017 Price Diff -Purchasing SD PA Revenue M St M Pri andar ce d Co or S ndi D t i o Typ n e Purchasing. Production PRD Cost (price) differences PRF PRA PRU Revenue COGS COGS - * GL (PL) 464018 Production Variance Material Ledger Closing .Multi Level Level PRV Material ledger fr.low.level s price dif. Period and year-end closing Variance Category Cost Element Group PA Assignment lines Value Field + + + . Material Ledger: Overview 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. valuation for reporting purposes. . and profit center valuation) in multiple currencies. group valuation for reporting purposes.Material Ledger: Overview Functions of Material Ledger: Cost accounting using actual prices Storing values of stock in three different valuations (legal valuation. . the material ledger calculates and maintains the actual cost for these materials.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. . This actual cost can then be utilized to valuate the material stock accounts. transfers and price changes. It acts as a subledger for selected materials that captures all goods movements. On the basis of this data. invoice values. valuation of all goods movements is done with the preliminary valuation price which is normally the standard price. Actual Costing. All variances from the preliminary valuation are maintained in the ML. Parallel currencies and/or valuations of material stocks. .Objectives of the Material Ledger 1. This is not mandatory. All goods movements in the ledger can be maintained in 3 currencies. 2. During the period. revaluation of ending inventory can be performed with the determined actual price. Prerequisite for usage of transfer pricing functionality. The values are translated into other currencies using the historical exchange rates. Actual prices can be calculated for statistical purposes only. 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 D D Level Level Level Level Production External Procurement External Procurement D Multi .Level Settlement Production D D Level Production Level Level Level Multi -Level External Procurement External Procurement D . Level Settlement Production D D Production Material Valuation with Multi-Level Actual Costing Preliminary Valuation During the Period Revaluation at Period End with Actual Price D D D External Procurement External Procurement D D .Multi . 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 .Material Ledger Overview Actual Costing Revaluation of stock at actual prices or accrual of variances. ML Overview – Parallel Currencies 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 . Price control 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. . Price control 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 . Price control 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 .Price determination control Multiple currencies/valuations Price control S Price determination 2 Transaction based Standard price V V ML can record up to 3 different currencies / valuations. Price determination control ‘3’ Cost centers Orders Activity types Internal orders ‘S’ Level 3 Cost centers Orders Internal orders ‘3’ ‘S’ Level 2 Activity types ‘2’ ‘V’ External Procurement Level 1 . Actual Values Overview 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 Overview Actual data -> Actual Costing Overview Preliminary valuation price Actual Costing Price differences Updating single-level variances Single-level price determination Multilevel price determination . Preliminary valuation price ‘S’ Cost centers Orders Activity types Internal orders Level 2 ‘S’ Cost centers Orders Internal orders Level 1 Activity types ‘V’ External Procurement Actual Costs Preliminary valuation . Actual Values Overview Actual data -> Actual Costing Overview Preliminary valuation price Actual Costing Price differences Updating single-level variances Single-level price determination Multilevel price determination . Actual Costing Price differences Stock transfers (standard price in another plant) External procurement (purchase order or invoice value) Internal production (order settlement) . Actual Values Overview Actual data -> Actual Costing Overview Preliminary valuation price Actual Costing Price differences Updating single-level variances Single-level price determination Multilevel price determination . Pr. Price diff. Pr. . Inven. .Updating Single-Level Variances ‘S’ Cost centers Orders Activity types Internal orders 462001 464018 . Price diff. ‘S’ Cost centers Orders Activity types Internal orders 462001 464018 . . Inven. ‘V’ ‘V’ External Procurement Actual Costs Preliminary valuation . . Actual Values Overview Actual data -> Actual Costing Overview Preliminary valuation price Actual Costing Price differences Updating single-level variances Single-level price determination Multilevel price determination . ‘V’ External Procurement Price differences are not applicable Actual Costs Preliminary valuation . Price diff. ‘S’ Cost centers Orders Activity types Internal orders 119430 464017 . Price diff. . End. . End Inven. . Inven.Single-Level Price Determination ‘S’ Cost centers Orders Activity types Internal orders 119490 464017 . Actual Values Overview Actual data -> Actual Costing Overview Preliminary valuation price Actual Costing Price differences Updating single-level variances Single-level price determination Multilevel price determination . Price diff. ‘V’ External Procurement Price differences are not applicable Actual Costs Preliminary valuation . ‘S’ Cost centers Orders Activity types Internal orders 119490 464017 . . Inven. . End.Multilevel Price Determination ‘S’ Cost centers Orders Activity types Internal orders 119490 464017 . End Inven. Price diff. . 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 .Period End Overview 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. 50/100) Vendor 280 GR/IR allocation 260 260 CL Price difference (464017) 10 20 CL 10.50 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 SAR (700 PC * 26.5 VB Material consumption (400002) 325 ML accrual (119610) .Period End Overview – Closing Entry (1) With Revaluation Material: ACT-LCD## Status: Closing entry performed Price control: V (only old periods) V price: 26.5 325 locked Stock value : 185. Period End Overview – Closing Entry (2) Without Revaluation 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 locked 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 . Period End Overview – Periodic Unit Price Period opened ( beginning inventory Receipts Single.level price determination + Variances Cumulative inventory (prelim. valuation) + Cumulative variances Cumulative inventory Periodic unit price = Periodic unit price . Information System Overview Materials to be costed Product Cost Planning Reports Summarized Analysis Object List Object Comparisons Detailed Reports . Report Selection The Report Tree can be used to select Reports in the Information System. 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. . 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 . Information System Overview Materials to be costed Product Cost Planning Reports Summarized Analysis Object List Object Comparisons Detailed Reports . Information System Overview . Information System Overview Object List Detailed Reports Displaying Documents . Information System Overview Materials to be costed Product Cost Planning Reports Summarized Analysis Object List Object Comparisons Detailed Reports . The standard Report Tree supplied by SAP should not be changed. . The Report Tree is the central collection point and hierarchical outline of all Reports in an application component. A personalized Report tree can be created to which standard Reports as well as one's own creations can be assigned.Report Selection The Report Tree can be used to select Reports in the Information System. Information System Overview . Information System Overview Object List Detailed Reports Displaying Documents . Report Output 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 Product Costing Information System 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 Product Cost Planning Reporting SAP Standard Reports Customer report: Vehicles SAP report: Employee List SAP report: Telephone List Customer report: Distribution Channels Customer report: Buildings SAP report: Org. Units SAP report: Events Customer report: Insurance SAP report: Birthday List Ad Hoc Queries Custom-built Reports Cost Object Reporting SAP Standard Reports Organizational management standard reports menu path Organizational management standard reports . Material Ledger Reporting Some Standard Organizational Management Reports identified for Sabic are: Structure Display/Maintenance Existing Organizational units Existing Positions Existing Unoccupied Positions .