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Author's profile photo Hrusikesh Dalai

Basics of Standard Costing – Understanding the Cost Component Structure-Part 3

This document is in continuation of my second document http://scn.sap.com/docs/DOC-49167 Basics of SAP Standard Cost estimate- understanding costing variant-Part 2 and 3rd in the series

This document explains the Cost Component Structure (CCS) and components assigned to CCS.  Explaining various settings in background as previous part.

Cost Component Structure (CCS)

The cost component structure determines how the results of material costing are updated. The cost component structure groups the costs for each material according to cost component (such as material costs, internal activities, external activities, and overhead). If the material is used in the production of another material, the cost component split (which breaks down the costs according to material costs, internal activities, external activities, overhead, and so forth) remains in the system when the costs are rolled up.

In the cost component split, you also define the following for material costing:

  • Which part of the costs are fixed costs
  • Which costs are costs of goods manufactured and what are sales and administration costs
  • Which costs are relevant for stock valuation, commercial inventory valuation and tax inventory valuation
  • When the cost component structure is assigned to the organizational units, you can specify that two cost component splits are created:

Main cost component split
This is the principal cost component split, meaning that it is used in the standard cost estimate, which can be used to update the material master. The main cost component split can be a cost component split for cost of goods manufactured or a primary cost component split.

Auxiliary cost component split
this can exist in addition to the main cost component split, and is not used in the standard cost estimate. It can be used for analysis purposes, in that it can be displayed with the cost estimate and passed on to Profitability Analysis.

.

Step 1 – T Code OKTZ

/wp-content/uploads/2013/11/screenshot_331282.png

Screenshot 1


I have created Z1 and Z2 CCS for our analysis purpose. You can use two cost comp structure for reporting purpose and different reporting need.

Material cost estimates are created in the Product Cost Planning component. Sales order cost estimates and order BOM cost estimates are created in Product Cost by Sales Order component. The cost components separate the results of a cost estimate into raw materials, material overhead, external activities, setup costs, machine costs, labor costs, production costs, and other costs.

  • Display the cost components in the cost estimate

  T code ck13- view of Cost estimate Cost element and cost component like Mat, Labor, OH etc.

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                         Screenshot 2

The above screen shows the distribution of cost as per the Cost component structure

T-code OKTZ

In Cost Center Accounting, the cost component structure determines how the results of the activity price calculation are updated. The cost component structure groups the costs for each activity type of the cost center according to cost components (such as material costs and labor costs). If an internal activity allocation is carried out, the cost component split (which breaks down the costs according to material, labor costs, and so forth) is retained at cost rollup.

If the cost component split is not to be retained, you can create a switching structure for the cost component structure for Cost Center Accounting. In the switching structure, you specify which sender cost component goes into which receiver cost component

See below

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     Screenshot 3

From screenshot 2 you will notice there is a Column called cost element. We get those from settings in Cost component structure setting by assigning cost elements for respective cost component.

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     Screenshot 4

Different Settings in Cost component Structure in see below.

Control

Cost Share- which includes Variable, Fixed and variable Cost

Indicator for Roll up Cost Component

This indicator determines whether the costing results of a cost component are rolled up into the next-highest costing level (cost roll up).

You can specify which cost components are rolled up into the next-highest costing level according to the criteria specific to your organization.

Example

If the sales and administration costs and the cost of goods manufactured are to be costed simultaneously in a costing level, you can proceed as follows:

  • You set this indicator for the cost components identified as the cost of goods manufactured. These costs are rolled up into the next-highest costing level.
  • You do not set this indicator for the cost components identified as sales and administration costs. These costs remain on the costing level on which they were originally calculated.

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     Screenshot 5

Also the filter criteria for itemization are important for example anything which we wanted for statistically analysis purpose we can check not relevant for inventory valuation.Some examples below shows based on the settings how the result will affect. Below screen you will see the cost element separated by the Material, Labor and Overhead as we defined in CCS.

Cost estimate itemization view (T CODE-CK13n)

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     Screenshot 6

Target/Actual Comparison: Cumulative report (T CODE- KKO0), there is additional configuration required in OKKN. You can build your own report using report painter too.The cost components we defined in CCS will flow into these reports based on our section in Report painter.

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Screenshot 7

In this document i tried to explain in a simple manner the use of cost component structure. This is a basic and beginners understanding of cost component structure. In my Next series of documents i will try explaining Costing Sheet,Activity Planning,and Summary of Standard Costing and its integration with production Planning.

Refer next document here-

http://scn.sap.com/docs/DOC-49880- Basics of Standard Costing-Understanding Overhead cost Flow.

Refer to previous Document here-

http://scn.sap.com/docs/DOC-49167 Basics of SAP Standard Cost estimate- understanding costing variant-Part 2

http://scn.sap.com/docs/DOC-48908– Basics of SAP Standard Cost estimate- Understanding the flow of cost settings-Part 1

Best Regards

Hrusikesh Dalai

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      53 Comments
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      Author's profile photo Former Member
      Former Member

      Hrusikesh,

      Nice document easy to follow. Good job keep it up.

      I hope you will write many more documents in SCN

      Thanks

      Fransisco

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Thank you for reading it Fransisco, I appreciate your feedback. 🙂

      Best Regards

      Hrusikesh

      Author's profile photo Former Member
      Former Member

      Hrusikesh,

      I am loving your series, eagerly waiting for your next document. 🙂

      Well done again

      Thank You

      David

      Author's profile photo Rajneesh Saxena
      Rajneesh Saxena

      Dear Hrushi

      Very good going. Keep it up and maintain the same pace. I suggest you also to incorporate common problems which we face during whole Co process, may be at the last document of this series.

      Regards

      Rajneesh Saxena

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Rajneesh,

      Thank you for your suggestion, i will try to include those in my series.

      BR

      Hrusikesh

      Author's profile photo Former Member
      Former Member

      Incredible !! you are doing good job. Keep it up

      Best Regards

      Prasad

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      I appreciate your comment and thank you for the motivational words.

      Best Regards

      Hrusikesh

      Author's profile photo Lakshmi Sama
      Lakshmi Sama

      Hello Hrusikesh,

      This is really a nice doc and you did a great job. Thanks for sharing your knowledge and keep sharing 🙂

      Regards,

      Lakshmi S

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Thank you Lashmi for your comments. I am glad you like it.

      Appreciate your kind words.

      BR

      Hrusikesh

      Author's profile photo Venkata V
      Venkata V

      Dear Hrushikesh,

      Its very helpful. Great work.

      A post on Product Costing will be very useful. Awaiting your further posts.

      Regards,

      Sravan.

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Sravan,

      Thank you for kind words, A post on product costing is already there in five part series in Controlling Space. i will try to summarize at the end of the series.

      BR

      Hrusikesh

      Author's profile photo Dawood Khalid
      Dawood Khalid

      Very well explained 🙂

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Thank you Dawood 🙂

      Author's profile photo Former Member
      Former Member

      Good one...Thanks for your efforts.

      BR,

      Naresh K.

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      I appreciate your feedback Naresh.

      Thank You

      Hrusikesh

      Author's profile photo Former Member
      Former Member

      Hi Hrusikesh Dalai

      great work, wishing for more postings.

      Regards

      Srini

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Thank you Srini, i appreciate your feedback.

      Best regards

      Hrusikesh

      Author's profile photo Former Member
      Former Member

      This document realy give exhautive knowledge on stardard cost estimation. I wish Hrusikesh

      to complete his next postings.  

      Author's profile photo Mohsin Abbasi
      Mohsin Abbasi

      Hi Hrusikesh,

      Such a nice Presentation...............:P

      Best Regards

      Mohsin Abbasi

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Hi Mohsin,

      I am glad you like it. Thank you for rating it.

      BR

      Hrusikesh

      Author's profile photo sravanreddy kalledi
      sravanreddy kalledi

      Nice presentation, keep it up..........

      regards

      sravan k

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Sravan,

      Thanks for rating it. I am glad you like it.

      regards

      Hrusikesh

      Author's profile photo Former Member
      Former Member

      Hi Hrusikesh,

      Well done. documented & explained nice way. Expecting more from you 🙂

      Keep it up.....

      Thanks & Regards,

      VINOD.V

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Vinod,

      Thank You for your valuable comment and appreciation.

      please refer some more documents of the series here

      Refer next document here-

      http://scn.sap.com/docs/DOC-49880- Basics of Standard Costing-Understanding Overhead cost Flow.

      Refer to previous Document here-

      http://scn.sap.com/docs/DOC-49167 -Basics of SAP Standard Cost estimate- understanding costing variant-Part 2

      http://scn.sap.com/docs/DOC-48908- Basics of SAP Standard Cost estimate- Understanding the flow of cost settings-Part 1

      BR

      Hrusikesh

      Author's profile photo Former Member
      Former Member

      Hi Hrusikesh,

      Good work keep it up.....

      Regards,

      Ravisankar

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Thank You Ravisankar. I appreciate your valuable comments.

      BR

      Hrusikesh

      Author's profile photo Dibyendu Patra
      Dibyendu Patra

      Hmm....

      Got a very clear idea about cost component structure..

      Thanks Hrusikesh.

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Thank You Dev, I appreciate your feedback.

      Thanks

      Hrusikesh

      Author's profile photo Sampat Kumkar
      Sampat Kumkar

      Hi Hrusikesh

      Thanks for sharing Part III document, cleared now how the costs are getting updated in CK13...

      Regards

      Sampat

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Hello Sampat,

      I am glad you like it. Thank you for the comments

      BR

      Hrusikesh

      Author's profile photo Former Member
      Former Member

      Very clear and simple

      Bravo!

      PB Ducharme

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Hello Mr PB Ducharme,

      i am glad you like it and thanks for rating it. It motivates when fellow members appreciates the documents.

      Thanks

      Hrusikesh

      Author's profile photo Sheryl Perry
      Sheryl Perry

      Hrusikesh,
      Today I was handed the responsibility of supporting costing and then asked to make a change.  Your series has become my "How-to Manual".  It is very succinct yet very thorough.  Having screenshots helps immensely.

      Thank you very much,

      Sheryl P.

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Hello Sheryl,

      Congratulation for your new assignment you will love your new assignment and i am glad this document helped you anyway.

      I appreciate your comment and feedback.

      Thanks

      Hrusikesh

      Author's profile photo Mariks .
      Mariks .

      Thanks for sharing valuable knowledge...

      Author's profile photo Former Member
      Former Member

      Dear Hrusikesh Dalai thank you for sharing knowledge.. 🙂

      Regards

      Sada Bandla

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Thanks you for your appreciation.

      Author's profile photo Former Member
      Former Member

      hi,

      Those are five star series,

      Devendra

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Thank you

      Author's profile photo Rudra Prasanna Mohapatra
      Rudra Prasanna Mohapatra

      Hi Hrusikesh,

      Very nice document . Thanks for sharing . Just a query on Primary Cost Component Structure. Is it that this structure should just contain the primary cost elements?

      In system, it allows to include even secondary cost elements over here? Request you to please throw some light on the same.

      Regards

      Rudra

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Rudra,

      Yes in the config as per the business requirement you need to define that.  System will allow any cost element there.

      Refer

      Primary Cost Component Splits - Product Cost Planning (CO-PC-PCP) - SAP Library

      Thanks

      Hrusikesh

      Author's profile photo Rudra Prasanna Mohapatra
      Rudra Prasanna Mohapatra

      Hi Hrusikesh,

      Thanks for answering my question regarding primary cost component split.

      I was expecting, that this cost component will show just the primary costs, like material components and depreciation (as mentioned in sap documentation.)

      and this would skip the activity costs , that are the secondary costs. But it does not do that and allows all the cost elements, both primary and secondary.

      My question is , what is the significance of the tick . Is it , that this tick is just to remind the configurer to add just the primary cost elements in this cost component split ?waiting for your answer.

      Regards

      Rudra

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Yes your understanding is correct.I think you kind of know the answer,Significance of the tick is to show  primary cost component split is an alternative way of showing the cost of goods manufactured of a product.


      SAP is a system it will behave the way you want it to behave , SAP  will not stop you from adding secondary cost element to the split but question should be why you wanted to do that? what is the business case?


      Thanks

      Hrusikesh

      Author's profile photo Mukthar Ali Ahamed N
      Mukthar Ali Ahamed N

      Good explanation...

      Regards,

      Mukthar

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Thanks for the rating, will probably work hard to get the 5 😉

      Author's profile photo Amarendra M
      Amarendra M

      Great Work & Explanation ... Thanks..

      Author's profile photo Hrusikesh Dalai
      Hrusikesh Dalai
      Blog Post Author

      Thanks Amarendra

      Author's profile photo Former Member
      Former Member

      Thanks Amarendra But if there is some special issue like finish goods 's standard cost is variable to output valus ,how can we do it in sap, lst 's say 1.JPG

      Author's profile photo FICO Application Team
      FICO Application Team

      If i have multiple Cost component structures assigned to the Company codes which one to be assigned to OKN0.

      Author's profile photo Michael Kozlowski
      Michael Kozlowski

      really good work!

      Best regards

      Michael

      Author's profile photo Arvind Pereira
      Arvind Pereira

      Hi Hrusikesh,

       

      The document is quite detailed, good work.

      regards

      Arvind Leo Pereira

      Author's profile photo Farhad Mohamadzadeh
      Farhad Mohamadzadeh

      Hrusikesh,

      Nice document easy to follow.

      Do you have any document like this That explan relation between Sales Condition and CO-PA Value Fields ?

      this is Very vital for me.

      Thanks

      Farhad

      Author's profile photo Cristiane Franca da Silva Magalhães
      Cristiane Franca da Silva Magalhães

      Nice presentation!!!

      I Would like you showed about Purchase Order x OKTZ, used como report the transaction CKM3N in the  vision CV - Cost Components.

      I have dificult to understand this integration between CO x MM.