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Author's profile photo Hrusikesh Dalai

Basics of Costing – Understanding Actual Cost

Hello Friends,

I try to put together a common document for Actual Cost, the information is available in SCN forums and i try to put it together in a document form so it is available at one place,

In my earlier Documents I have explained about standard costing and various settings required for executing Standard Cost estimate. In this document we will talk about more on Actual Costs.

T-code KKBC_ORD – Looking at below screenshot it shows the actual cost postings at different time of transactions and its origin. I will try to explain where does these things flow from.

Capture.JPG.png

Figure 5.1

Note- KKBC_PKO can be used to see the above transactions as well.

There are several business transactions where we got actual costs; based on posting origin we can divide the transactions External Postings ( Any other module origin such as FI, PP, SD, MM) to Controlling called Primary Cost.

Business transactions within controlling module called Secondary costs we will see in detail about these in this document. I must say there is various documents and discussion in Forum about these things. However i would like to elaborate more on what is the financial impact during different stages of transactions

Primary Costs

We will take example of production order here, During Goods are issued from Inventory P/L account is debited and B/S account is credited automatically. For this we generally create identically primary cost element of consumption account. Posting to these consumption accounts (primary cost elements) also generate parallel postings to a controlling cost object. In this case

At GI:

  1. (BSX) Raw Mat a/c (or Semi-finished a/c or others depending on the val. class)
  2. (GBB – VBR) Prod. Order Consumption a/c or material consumption a/c (also called offsetting entry)

At GR:

  1. (BSX)  Semi-finished a/c or others depending on the val. class)
  2. (GBB – AUF) Prod. Order output a/c or Prod. Output a/c

Figure 5.2

Outside buys, sub-contracting scenarios where we purchase services or goods are recorded as credit to GR/IR account and debit to external expenses account.

Secondary Costs

When the production activities confirmed, the cost center is credited and product cost collector is debited. A production cost center receives debit due to primary costs such as payroll, Electricity etc. Confirmation of these activities allocates these activities across many products.

Capture.JPG.png

Figure 5.3

Credits

Finished goods are derived from the production order. The credit value is calculated by multiplying standard price by finished goods quantity delivered to inventory .Total variance is the order balance

Capture.JPG.png

Figure 5.4

This balance post after the variance calculation, this is basically the difference between standard cost and actual cost. Now let’s talk about actual cost

Post Actual Cost Let’s create and release a production order CO01.

Capture.JPG.png

Figure 5.5

Confirm Activities CO11n, while confirming you can see there are different this is when the actual Secondary cost get posted to Controlling.

There is no accounting entry for activity confirmation only CO postings happens

          Dr  Production order

                     Cost center Cr

Capture.JPG

Fig 5.6

and during Activity confirmation posts accounting with below entry

Dr. Activity cost GL(P/L)

          Activity cost GL(P/L) Cr

During closing activities we execute several other transactions to settle the costs, Overhead calculation and the variances. I will try to cover these in my next postings.

Note-This is basics document and intended for basic understanding of Actual Cost.I will continue to edit the document after the suggestion.

Best Regards

Hrusikesh Dalai

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      Author's profile photo Former Member
      Former Member

      Hrusikesh,

      I am liking your documents, I am still reading your other documents about standard costing, This one is simply great very simple to understand.

      keep it up!!

      Sushma

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

      Sushma,

      I am glad you like it, Thanks for the comment it is always great to receive that first feedback.

      Hrusikesh

      Author's profile photo Satish Shivaputrappa Kerur
      Satish Shivaputrappa Kerur

      Hrusikesh

      It's very good document.

      Thanks & Regards

      Satish

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

      Thanks Satish,

      i appreciate your comment.

      BR

      Hrusikesh

      Author's profile photo Former Member
      Former Member

      plz anyone help me for sap fico support project document..

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

      Maheswar,

      Sorry i never heard if we have any specific document for that, You may need to specify what documents you need and then seach the forum.

      BR

      Hrusikesh

      Author's profile photo Sumit Koshal
      Sumit Koshal

      Hi Hrusikesh

      Nice document, can you please share a document on actual activity rate calculation and revaluation of production order with actual activity rates T.codes KSII and CON2.... because that will complete the cycle.

      I am actually looking for these closing activities of CO

      Regards,

      Sumit Koshal

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

      Sumit,

      My next document will emphasize on the same. I hope it to complete it soon.

      BR

      Hrusikesh

      Author's profile photo Former Member
      Former Member

      hi all i am new to this site could any one please tell me where will i get asset accounting material and controlling material . thanks

      Author's profile photo Former Member
      Former Member

      very good article mr.Hrusikesh ..

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

      Thanks Mr Sada for your comments.

      BR

      Hrusikesh

      Author's profile photo Mariks .
      Mariks .

      Thanks for sharing valuable information...

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

      Thanks Mariks and i appreciate your ratings.

      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

      Devendra,

      I appreciate your comment and motivating words.

      Thanks

      Hrusikesh

      Author's profile photo Former Member
      Former Member

      Hi Hrusikesh,

      Thanks for your comment,Your contribution definitely superb,

      It is the big task for the consultant to explain the subject in simple and easiest manner,You have made it through your FIVE STAR SERIES.

      Really great,

      With Regards,

      Devendra

      Author's profile photo RAHEEM BAKSH
      RAHEEM BAKSH

      Hi Hrusikesh Dalai

      Great explanation and good effort to cover on this topic.

      Regards

      Raheem 

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

      Thanks Raheem appreciate your comment

      Author's profile photo Sudeep A
      Sudeep A

      Good document.. Nice explanation.

      Regards,

      Sudeep.

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

      Thanks Sudeep.

      Author's profile photo Former Member
      Former Member

      Hrusikesh,

      i am great admire of your series. This helped me a lot.

      THanks for simplifying it.

      PRasad

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

      I am glad it helped you Prasad. Thanks for the wonderful words.

      Author's profile photo Former Member
      Former Member

      Hi..

      I think that if you use standard cost for raw material and calculate actual cost through material ledger, KKBC_ORD don’t  report actual Data.

      Because raw material’s cost in KKBC_ORD report is only standard cost, not actual cost.

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

      Yes i agree Big Choi ! Sorry This document covers the topic where Material ledger is not active. I am sorry i should include this somewhere in my Notes. Thanks for clarifying and explaining.

      Best Regards

      Hrusikesh

      Author's profile photo Former Member
      Former Member

      Hi,

      All the goods movements in process order or production order happens only at Standard price. The actual cost column gives Actual qty x Standard price. Here system will not take actual price.

      Regarding activities, after revaluation of order we get actual hours consumed x actual price calculated in KSII. 

      Regards

      Anand

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

      Anand,

      thank You for looking at it, I agree well this document is intend for basic understanding of Actual cost i will come up with my next document which will cover more topics like variances and period end closing activities.

      Thanks.

      Hrusikesh

      Author's profile photo Former Member
      Former Member

      Hi Harkush

      I like your documents. almost I have read all and can say that you are doing a commendable service.

      BR Shalabh

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

      Shalabh,

      I am glad you liked it.

      Thanks

      Hrusikesh

      Author's profile photo Former Member
      Former Member

      Very good article. Simple and easy to understand. Clear explanation

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

      Thank you for your comment!

      Author's profile photo Former Member
      Former Member

      Hi Hrusikesh,

      Thanks a lot for sharing this document.

      I have one question: In accounting principle we have 4 types of valuating the inventory throughput method, direct or variable costing method, full absorption method and the activity based costing method. SAP supports only activity based costing method or all.

      Can you please share the configuration document related to Activity costing set up?

      Thanks in advance:)

      Regards

      Subhasis

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

      Subhasis,

      Ans-All method .

      SAP has flexibility in design which can support all of these methods.

      I have not having any document but there are several available in SCN and sap help.

      Thanks

      Hrusikesh

      Author's profile photo Muhammad Umar
      Muhammad Umar

      Hi,

      Very Informative material.

      Regards

      Muhammad Umar

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

      thanks you find it useful.

      Author's profile photo Mohit Singla
      Mohit Singla

      Hi,

      It was helpful. Appreciate your efforts.

      Regards

      Mohit Singla

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

      Glad it helped you.

      Author's profile photo Munigadapa Ramesh
      Munigadapa Ramesh

      Dear Hrusikesh Dalai,

      Thanks for such a simple and clear documentation.

      regards

      Ramesh

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

      Thank You Ramesh

      Author's profile photo Lakshmi Sama
      Lakshmi Sama

      Hello Hrusikesh,

      Thanks alot for sharing such a wonderful document.

      Regards,

      Lakshmi S

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

      Thank You Lakshmi

      Author's profile photo Erwin Leitner
      Erwin Leitner

      Hello,

      Thank you very much for sharing knowledge.

      all the best Erwin

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

      Hi Evin,

      Thanks for rating it.

      Author's profile photo Former Member
      Former Member

      Hi Hrusikesh,

      Nice article given in a simple manner.  Would suggest if you can give it with a simulated scenario and provide the entries etc. to suit the scenario it would reach other in a better way.

      Thanks for the effort.

      Good Luck.

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

      Thanks Ganesh This document is very generalise idea for beginners and those who wanted to understand Costing basics.

      However i will try to come up with something as you suggested in future.

      Author's profile photo Former Member
      Former Member

      Good material

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

      Thanks Krishna for rating it!!

      Author's profile photo Robin McGee
      Robin McGee

      Thanks a lot for that. I’ve just started working on the
      CO-PC-ACT component and this information is very useful.

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

      I am glad it is useful to you. thanks for reading it.

      Author's profile photo Former Member
      Former Member

      Hello Hrushikesh,

      This is one of the superlative document by time. Excellent presentation. Thank you very much for sharing your exceptional knowledge on the forum and people who is really looking for learning product costing. This is something really easy and understanding.

      I have request to you that can you please understand us the report KKS2 which is for "Calculation of Variance" in your variance analysis report.

      Your help would be great for people here.

      Regards,

      Sharu.

      Author's profile photo Former Member
      Former Member

      Hi Hrushikesh,

      That was great explanation and simple too! Thanks for sharing.

      Would like to read something on "Project settlement to profitability segment" and explanation of related configurations.

      Thanks,

      Krishna Raj

      Author's profile photo Former Member
      Former Member

      Hi Hrushikesh,

      Nice explanatory document,  but C011N, it is the planned activity cost only right, but month end, we need to calculate actual activity and overhead rate and revaluation of the production order or PCC.

      Regards,

      Satya

      Author's profile photo Krishnan Vinayakam
      Krishnan Vinayakam

      Hi Hrushikesh,

      Great show - much enlightened due to this article

       

      Thanks & Regards

      Krishnan

      Author's profile photo David Marquez
      David Marquez

      As clear as crystal, thaks a lot