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.

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

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.

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

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.

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

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