Product Costing

© RGL Consultancy dec. 2010

Product Costing v0

www.rglconsultancy.nl www.rglconsultancy.nl

Product Costing

CONTENTS: 1) Introduction 2) Master data A) Material B) BOM C) Routing D) Work Center E) Activity output/prices F) Business process & prices 3) Customizing settings A) Costing variant B) Costing type C) Valuation variant D) Costing Sheet E) Date Control F) Qty. Struct. Control G) Costing variant continuation H) Cost Component Structure 01 I) Template J) Check Costing Variant 4) Process demonstration A) Create Costing Run B) Analysis of the Cost Estimate 1. Material 102-110 2. Material 102-120 3. Material 102-130 4. Material 102-100 5. Material P-102

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1) Introduction Product costing is an essential part within Production Planning(PP). Planning(PP). Understanding how the system calculates the cost price of a product is important to know in order to control this process. In this document I will show the master data and customizing settings which the system uses in product costing and manually re-calculate some of the prices in order to obtain a good understanding of what the system did.

2) Master data The product which will be cost estimated as an example is material no. P-102. In Paragraph 4 a costing run will be created for this purpose and used to calculate calculat e the costs of the product. Then using an analysis report the costing results will be analyzed. In this paragraph all the master data which will play a roll in the cost estimate process will be listed in detail. A) Material Display “costing 1” material view of material P-102 in plant 1000: 1000: Call up the transaction as follows: Logistics Production Master Data Material Menu Path Current Transaction Transacti on code MM03 →

Click on button

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→

→

→

Display

→

Display


Product Costing v0


1) Introduction Product costing is an essential part within Production Planning(PP). Planning(PP). Understanding how the system calculates the cost price of a product is important to know in order to control this process. In this document I will show the master data and customizing settings which the system uses in product costing and manually re-calculate some of the prices in order to obtain a good understanding of what the system did.

2) Master data The product which will be cost estimated as an example is material no. P-102. In Paragraph 4 a costing run will be created for this purpose and used to calculate calculat e the costs of the product. Then using an analysis report the costing results will be analyzed. In this paragraph all the master data which will play a roll in the cost estimate process will be listed in detail. A) Material Display “costing 1” material view of material P-102 in plant 1000: 1000: Call up the transaction as follows: Logistics Production Master Data Material Menu Path Current Transaction Transacti on code MM03 →

Click on button

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→

→

→

Display

→

Display


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Select version 0001 and then click on button

In this window you see the group no.(50000004) and group counter (1) of the routing which the system will use and the alternative BOM no. (3) and BOM usage(1). Go back by clicking on button

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(2x) , then display “costing 2”view :


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Costs are assigned to a cost element. In case of raw materials generally the standard price of the material is used as the cost and the valuation class of the material is used to retrieve the cost el ement. If for example example P-102 was a raw material with valuation class 7920, 7920, the cost element is found in customizing by first retrieving the account modification key.

Call up the customizing transaction as follows: IMG Materials Management Valuation and Account Assignment Menu Path Account Determination Account Determination Without Wizard Define →

→

→

Tr. code / Table

→

→

Account Grouping for Movement Types OMWN / -

Call up the customizing transaction as follows: IMG Materials Management Valuation and Account Assignment Menu Path Account Determination Account Determination Without Wizard →

→

→

Tr. code / Table

Configure Automatic Postings OBYC / -

But P-102 is an assembled product which could be taken in stock after production. Than the cost element is determined as follows:

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→

→


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B) BOM Display the Bill Of Material(BOM) Material(BOM) of material P-102 in plant 1000: Call up the transaction as follows: Logistics Production Master Data Bill of Material Menu Path Display Transaction code CS03 →

→

Enter selection criteria then click on button

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→

→


→

Material BOM


Product Costing v0

www.rglconsultancy.nl

Note here the status of the BOM which is 1(acti ve). In the Admin. Data tab we check its validity:

Click on button

P-102 is a multi-level BOM as items 10,20,30,40 and 50 are marked as assembly items(BOM themselves). To get a complete overview of this BOM with all it s materials, quit this tx. and execute the following. Call up the transaction as follows: Logistics Production Master Data Bill of Material Menu Path BOM Explosion Material BOM Multilevel BOM Transaction code CS12 →

→

→

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→

→

→

Reporting

→


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Note column “level no.” at the left., showing the different BOM levels.

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C) Routing Display the Routing of material P-102 in plant 1000: Call up the transaction as follows: Logistics Production Master Data Menu Path Routings Display Transaction code CA03 →

→

→

Enter material and plant no. and then click on button

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→


Routings

→

Routings

→

Standard


Product Costing v0


Click on button

D) Work Center Display work center 1310 in plant 1000.

Call up the transaction as follows: Logistics Production Menu Path Display Transaction code CA03 →

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→

Master Data

→

Work Centers

→

Work Center

→

© RGL Consultancy dec. 2010 Click on button

tab Costing:

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E) Activity output/prices Display activity output/prices of cost center 4220 & 4230 in controlling area 1000.

Call up the transaction as follows: Accounting Controlling Menu Path Output/Prices Display Transaction code KP27 →

→

Cost Center Accounting

→

Planning

→

Activity

→

Enter selection criteria and then click on button Above selection criteria are based on the valuation settings in paragraph 3C tab ActivityTypes/Processes.

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F) Business process & prices In the customizing as will be seen later use will be made of business processes 300900 and 400900. To display a business process. Call up the transaction as follows: Accounting Controlling Activity-Based Costing Master Data Menu Path Business Process Individual Processing Display Transaction code CP03 →

→

→

Click on button

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→

→

→

© RGL Consultancy dec. 2010 Tab: Allocation

Tab: Template

Click on button

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Product Costing v0

Display cost price for business process 300900 & 400900. Call up the transaction as follows: Accounting Controlling Activity-Based Costing Menu Path Quantities/Prices Display Transaction code CP27 →

→


→

Planning

→

Process

→

Enter selection criteria and then click on button Above selection criteria are based on the valuation settings in paragraph 3C tab ActivityTypes/Processes.

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3) Customizing settings The central customizing object in product costing is the “costing variant”. I will explore in this paragraph the settings of costing variant PPC1 and its sub-objects. This costing variant is namely generally used to create a cost estimate.

A) Costing variant Call up the customizing transaction as follows: IMG Controlling Product Cost Controlling Product Cost Planning Menu Path Basic Settings for Material Costing Material Cost Estimate with Quantity Structure Define Costing Variants →

→

→

→

→

Tr. code / Table

OKKN / -

Select the line with costing variant PPC1 and then cl ick on button

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→


B) Costing type

Tab: Save Parameters

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© RGL Consultancy dec. 2010 Tab: Misc

Click on button C) Valuation Variant

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Tab: ActivityTpes/processes

Note the strategy for ActivityTypes/Processes which is “Plan price average of all fiscal year periods”. Based on this, the selection criteria for prices was chosen. Tab: Overhead

D) Costing Sheet

Select line COGS and then double click on “Costing sheets rows” in folder Dialog structure:

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Select row 10 and then double click on line “Base” in folder Dialog Structure =>

Click on button Select row 20 and then double click on line “Overhead rate” in folder Dialog Structure =>

Click on button Select row 20 again and then double click on line ”Credit” in folder Dialog Structure => 20 / 55


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Click on button Following same procedure for the other conditions in the costing sheet =>

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Tab: Misc.

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Back to Costing variant “PPC1” ,tab: Control

E) Date Control

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© RGL Consultancy dec. 2010 F) Qty. Struct. Control

Tab: Routing

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G) Costing variant continuation Tab: Additive Costs

Tab: Update

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© RGL Consultancy dec. 2010 Tab: Assignments

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H) Cost Component Structure 01

Next we check the customizing settings of cost component structure 01. Call up the customizing transaction as follows: IMG Controlling Product Cost Controlling Product Cost Planning Menu Path Basic Settings for Material Costing Define Cost Component Structure →

→

→

→

Tr. code / Table

OKTZ / -

Select cost comp. str. 01 and then double click on line “Cost Components with Attributes” =>

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→


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Select line with cost component 10 and then click on button

www.rglconsultancy.nl to view its details =>

From this screen double click on line “Assignment: Cost Component - Cost Element Interval” =>

Double click on line “Update of Additive costs” =>

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Double click on line “Cost Component Views” =>

Double click on line “Assignment: Organiz. Units - Cost Component Struct” =>

Double click on line “Cost Component Groups” =>

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I) Template

Template for overhead cost distribution from Activity-based costing. Call up the customizing transaction as follows: IMG Controlling Product Cost Controlling Product Cost Planning Menu Path Basic Settings for Material Costing Templates Assign Templates →

→

→

→

Tr. code / Table

→

→

KTPF / -

Relevant template here is COPC-10-1 “Order Processing – COGS”, which will be retrieved using OH key = SAP10 and environment=001. Check its settings. Call up the customizing transaction as follows: IMG Controlling Product Cost Controlling Product Cost Planning Menu Path Basic Settings for Material Costing Maintain Templates Display Templates →

→

→

→

Tr. code / Table

Template CPT3 / -

Double click on object COPC-10. 30 / 55

→

→

→


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J) Check Costing Variant

At last we run a check on the costing variant and get a list of all the settings for this variant.

Click on button Menu Path

or call up the customizing transaction as follows: IMG Controlling Product Cost Controlling Product Cost Planning Basic Settings for Material Costing Check Settings CKC1 / →

→

→

→

Tr. code / Table

Click on button This gives a list of all the customizing setting of this costing variant.

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→


Product Costing v0


4) Process demonstration A) Create Costing Run A costing run will be setup and processed up to and including costing, than I will switch to a report to analyze the results of the costing . Create costing run. Call up the transaction as follows: Logistics Production Product Cost Planning Material Costing Menu Path Costing Run Edit Costing Run Transaction code CSK40N →

→

→

Click on button

Click on button

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→

→


Click on button

Product Costing v0

or first check the Valuation tab.

Tab: Valuation

Note the valuation variant which is 001 and the costing sheet which is COGS. Click on button

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.



In row “Selection” click on button

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.



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Enter mat’l no., plant no. and removed “Background Processing” flag. Next click on button

and then click on button

Click now on button the screen.

. After the system reported that run has been saved click on button

In row “Struct. Explosion” click on button

.

Remove flag Background Processing , then click on button After system reported that run has been saved, click on button

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.

to update


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Click on button

2x.

Click on button

in row “Struct. Explosion” .

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Continue with clicking on button

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in row “Costing”.

Flag “Log by Costing Level” and remove flag at “Background Processing”. Check costing levels by clicking on button

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At this point you could unselected one or more levels. Click on

to continue.

Next click on button


Click on button in row “Costing”. Each mat’l which is being costed is shown at the bottom of the screen during this process.

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Click on button

Product Costing v0

in row “Analysis”.

Select variant name SAP&11 and then click on button

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© RGL Consultancy dec. 2010 Next click on button



At this point we can click on button

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to view the cost estimate.


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Tab: Material Overview

Click on button

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in row “Analysis” of Costing Run.



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We can see the costs above on an it emized level. Click on button

Click on button

to leave this transaction.

B) Analysis of Cost Estimate The costs estimate of material P-102 will be analyzed. Not all cost items will be analyzed but only of different item categories. The analysis is to show where the cost price and the cost element of an item comes from. An overview of the cost estimate can be retrieved with the following report. Call up the transaction as follows: Logistics Production Product Cost Planning Information System Menu Path Summarized Analysis Analyze Costing Run Results of Costing Run Transaction code S_ALR_87099930 →

→

→

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→

→

→


Product Costing v0


Enter the costing run no. and date, then click on button

Position the cursor on material P-102 at the bottom of the list and then go to the menu : Goto Display Cost Estimate →

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Above you can see a breakdown of the costs of material P-102 according its BOM explosion. Cost are build up starting with the materials at the lowest level of the BOM and are rolled up to the next higher level material. I will therefore start the analysis with materials 102-110,102-120 and 102-130 of BOM 102-100, followed by an analysis of the cost estimate of material 102-100 and will finish with an analysis of the cost estimate of material P-102. Cost estimates of mate rials 102-200, 102-300, 102-400 and 102-500 are assumed to be similar to that of material 102-100. Go back to ”Analyze/Compare material cost estimates” overview screen of the report. 1. Material 102-110: Position the cursor on material 102-110 and then go to the menu: Goto

→

Itemization =>

We see item cat. I (delivery) and cost element is 400000. It look likes the price comes from a purchasing info record, but actually the price comes from the standard price in the material master as can be seen from the next screenshot:

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The valuation class is 3000 so I lookup in customizing what the cost element should be using the logic and paths showed in paragraph 2A =>

As the origin of the cost price and the cost element has been determined, this completes the analysis for material 102-110. 2. Material 102-120: Position cursor on material 102-120 then go to the menu: Goto

→

Itemization =>

The accounting view 1 of the material master in next screenshot explains the price and the cost element =>

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This completes the analysis for material 102-120. 3. Material 102-130: Position cursor on material 102-130 then go to the menu: Goto

→

Itemization =>

The accounting view 1 of the material master explains the price and the cost element =>

This completes the analysis for material 102-130. 46 / 55


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4. Material 102-100: This is a material which is assembled from the 3 materials we just saw. Which means that the costs of this material consist of the costs of these 3 materials plus the costs to assemble it , plus possible overhead costs.

Position the cursor on material 102-100 and then go to the menu: Goto

→

Itemization =>

Itemized overview of material 102-100:

The costs of the 3 components can be found as item no.s 4,5 and 6 all marked with item cat. M(Material). Item cat. E refers to costs due to production activities. I will analyze item no.s 1,2 and 3 . Than I will analyze item no. 16 with item cat. X, followed by item no. 18 with item cat. G. This is a list with item categories with their description =>

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Material 102-100 has its own routing(see par. 2C regarding Routing) which is =>

Double click on work center 1112, then go to t ab Costing =>

I will now go thru the items 1,2,3,16 and 18. Item no. 1(setup costs):

Formula SAP005:

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Setup time = 10 MIN * 1 = 1/6 H = 0.167 H Item detail(select the item and then click on button

):

The cost prices are in accordance with the master price data of cost center=4220 and activity type=1422 in paragraph 2E, as shown here again:

This means that the cost price for item 1 is: (3.357,74 / 10 ) * 0.167 = 56,07 euro Cost element matches with the master data.

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Item no. 2(machine costs):

Formula SAP006:

Machine time = 30 MIN * 10 / 1 = 5 H Item details(select the item and then click on button

):

The fixed and variable prices are in accordance with the master price data of cost center=4220 and activity type=1420 =>

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Product Costing v0

This means that the cost price for item 2 is: Fixed: (6.253,88 / 100 ) * 5 = 312,69 euro Variable: (576,38 / 100 ) * 5 = 28,82 euro --------Total: 341,51 euro Also the cost element matches. Item no. 3(labor costs):

Formula SAP007:

Labor time = 30 MIN * 10 / 1 = 5 H Item details(select the item and then click on button

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):



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The fixed and variable prices are in accordance with the master price data of cost center=4220 and activity type=1421 =>

This means that the cost price for item 3 is: Fixed: (4.861,03 / 100 ) * 5 = 243,05 euro Variable: (449,62 / 100 ) * 5 = 22,48 euro --------Total: 265,53 euro Cost element matches. Item no. 16( Business process ):

Item details(select the item and then click on button

):

The fixed and variable prices are in accordance with the master price data of business process 300900 in paragraph 2F =>

Also the cost element matches.

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Item no. 18(overhead):

Item details(select the item and then click on button

):

See Costing sheet in paragraph 3D. Raw material costs(condition B100): 20,50 + 230,00 + 0,80 = 251,30 euro Overhead (condition C010/D010): 10% of 251,30 = 25,13 euro Fixed value (condition E00): 50% of overhead = 50% of 25,13 = 12,57 euro Cost element 655100 from E00:

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5. Material P-102: This is the final assembled material.

Position cursor on material P-102 and then go to the menu: Goto

→

Itemization =>

We see 8 line items with item cat. M, of which 5 are assembly items and 3 are stock items judging from the cost element assigned to them. Item no. 9 is familiar from previous mat’l 102-100, so I will analyse only items 10 - 13. Item no. 10( Business process ):

The fixed price is in accordance with the master price data of business process 400900 in paragraph 2F =>

Also cost element 629000 matches. Item no. 11,12 & 13(overhead):

See Costing sheet in paragraph 3D for all the details. Raw Material(condition B100=> cost element=400000): 511,00+16,38+0,80 = 528,18 euro

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Product Costing

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