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SAP – Controlling – Production Cost

SAP – Controlling – Production Cost

  •      Cost Object Controlling
  •      Product Costing
  •      Material Ledger

Cost Object Controlling Overview

  • Cost Object Controlling is a management tool for tracing the costs incurred in manufacturing a product
  • Within Product Controlling, you can monitor product costs:
    • By period (Product Cost by Period) for repetitive manufacturing
    • We use Production Cost Collector
    • By order (Product Cost by Order) for discrete manufacturing
  • The Product Cost by Period and by Order component allows you to do the following:
    • Analyze the costs of manufacturing a product in the production cost collector or in the production order/process order
    • Calculate and analyze variances between the target costs and the actual costs for each period
  • In SAP system, the material valuation area is to be carried out at plant level to ensure that costing of materials must be performed at the plant level
  • All legal entities are using the Cost Estimate with Quantity Structure functionality to determine the prices of the materials through creation of a standard cost estimate for costing materials that have a quantity structure
  • The results of the standard cost estimate are used to valuate the materials at standard prices. When you release the standard cost estimate, the price in the material master is updated as the standard price and the materials are revaluated. From this point on, all the material movements are valuated at the new standard price.
  • Global Costing:

    • All new material masters all relevant master data have been completed successfully, a new standard cost estimate must be created, marked, and released prior to any goods movements
    • Creation of a material standard cost estimate valid for the period of one year
    • Before year end, Finance needs to create a new standard cost estimate for all materials in the company for the next year
    • Mark the standard cost estimate as the future price before year end
    • Release the standard cost estimate as the current price on the 1st January

Cost Components

    • Material cost estimate with cost component split provides a breakdown of the price into detail components
    • Used for analysis purpose in Product Costing and in Actual Costing and in Profitability Analysis
    • Examples of possibles cost components:
      • Input Materials
      • Freight
      • Duties
      • Tolling fees
      • Labour
      • Machine Costs
      • Energy
      • Waste
      • Quality
      • General Factory Ohd
      • Material Overhead
      • Building Overhead
      • Group uplift

Actual Costing / Material Ledger

  • Actual Costing / Material Ledger fulfills two basic objectives:
    • The ability to carry material prices in multiple currencies/valuations
    • Actual Costing:
      • Uses Periodic Unit Price to valuate material inventories, such as raw materials as well as semi-finished and finished products
      • Periodic Unit Price is updated after all goods movements are revaluated with actual results from
        • Production variances
        • Purchase price differences
        • Invoice differences, exchange rate differences
  • PUP – During the period
  • During the period all transactions are valued at standard cost as a preliminary valuation
    • SAP collects all valuation relevant transaction data in the material ledger for a period
      • Price Differences
      • Exchange rate differences
      • Production variances
    • Differences from the preliminary valuation price are posted to price difference accounts
  • PUP – At the end of the period
  • All material movements are entered for the month. The Material Ledger is closed.
  • Actual price (periodic unit price) is calculated for each material for the period
  • Period end revaluation consists of two levels:
    • Single-level price determination
    • Multi-level price determination
  • PUP – Closing: Single-Level Price Determination
  • SAP calculates the PUP based on the sum of the price differences, exchange rate differences, and production variances in relation to the cumulative inventory quantity and value
  • Weighted average cost is used to determine PUP
  • PUP updated in Material Master (statistical)
  • No variances are rolled to the next production level
  • Consumption
  • PUP – Closing: Multi-Level Price Determination
    • An actual quantity structure is determined for all materials within a plant based on goods movements
    • Variances associated with consumption of lower level materials are rolled up to the higher levels of this actual structure
    • For e.g., the variances associated with the raw materials consumed in the finished product are rolled up to the finished product calculation of the PUP


  • PUP – Closing: Closing Entries
    • Revaluation of inventory with the multi-level prices calculated. Postings are made to balance sheet stock accrual account for the increase or decrease of stock values based on the comparison of PUP against standard cost in the previous period and auto-reversal of the accruals in the current period
    • Actual vs. Standard cost component split is calculated
    • Periodic revaluation on cost of sales made to CO-PA for differences between actual and standard cost component split

Material Ledger Standard Reports

    • CKM3 – Material Price Analysis
    • S_P99_41000062 – Material List: Prices and Inventory Values
    • S_ALR_87013181 – Material Ledger Data Over Several Periods

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      Author's profile photo krish S
      krish S

      Good work,

      Author's profile photo Erwin Leitner
      Erwin Leitner

      Hello Fernando,

      Many thanks.

      All the best