SAP CONTROLLING – PRODUCT COSTING PART-1
PRODUCT COST PLANNING
Material cost comprises:
- Material Cost.
- Direct OH (Conversion cost)
The resources which are directly involved in the production to convert raw material into finished product.
- Indirect OH.
It is nothing but Service department Cost.
PROCESS OF COST DETERMINATION:
- Production dept. gives the Bill of Material and Process sheet.
- BOM contains the list of components of raw materials with quantities required to produce the product.
- Process sheet contains the process steps which is nothing but
The production department designs all the above process steps and the finance dept. prepare budget or resource rate for the specific activity.
Material cost is arrived through bill of material (Qty’s * Price).The price is taken from the purchasing department.
Conversion cost is the cost of all the activities directly involved in the production which is specified in the above Routing.
OBJECTIVES OF PRODUCT COSTING:
- To determine cost of a product or service.
- To determine detailed cost of a Product.
- Managerial decision making.
- Valuation of Inventory and WIP.etc.
COMPONENTS OF PRODUCT COSTING:
- Product Cost Planning:
Product Cost Planning (CO-PC-PCP) is an area within Product Cost Controlling (CO-PC) where you can plan costs for materials without reference to orders, and set prices for materials and other cost accounting objects.
- To determine cost estimate of the product.(Standard price)
We can use this price for valuation of Inventory.
- Cost component Structure. (OKTZ)
- It gives the breakup of cost of the product.
- Costing Sheet. (KZS2)
- To Calculate the Indirect Overhead.
- Costing Variant for standard cost estimate. (OKKN)
- Costing type
- Valuation Variant.
- Date control.
- Quantity structure Control.
- Transfer control.
- Reference variant.
- Cost Object Controlling:
- Calculation of plan cost and Actual cost for Order.
- Costing variant for plans.(costing type 06)
- Costing variant for Actuals.(costing type 07)
- Period end Process.
It contains the following Activities.
- Revaluation of Activities.
- Actual overhead calculation.
- CO Production settlement(Distribution of costs between main product and Byproduct)
- WIP calculation.
- Variance Calculation.
Cost Object Controlling (Scenarios):
- Product cost by order.
- Production order.
- Process order.
- Controlling production order.
- Product cost by period. (Product cost collector)
- Product cost by Sales order.
INTEGRATION OF PRODUCT COSTING WITH LOGISTIC MODULES:
With Production planning:
Integration points are:
- In PP, Order type will be assigned to Settlement profile.
- Result Analysis key.
- Costing variant for plan and actuals.
- In case of PP master data point of view. Work center comprises cost centers and activity types.
Work center: (CR01)
It refers to a place where tasks or Activities are performed. It represents the place, or machines, or group of machines or combination of any of them etc.
It contains sequence of operations. And for each operation, it specifies on which work center to be performed and on what activities to be performed and planned execution time for them.
- Routing is defined at material and plant combination.
Product Cost Planning
- Quantity structure Control.
It specifies the priority of sequence of which BOM and Routing to be used in the cost estimate of the product. The quantity structure control can apply to either a specific plant or to all plants. You enter the quantity structure control in the costing variant. When the cost estimate is created, the system selects the quantity structure control ID through the costing variant.
When you create a cost estimate for a material, you always use a costing variant. This variant is the link between the cost estimate and the quantity structure control.
When determining the BOM and routing, the system also checks the following:
- Whether the BOM and the routing are valid on the quantity structure date
- Whether the lot size in the BOM and in the routing are the same as the costing lot size
If, for example, the system finds a BOM according to the parameters in the quantity structure control, but this BOM has a lot size or validity period that does not correspond to the cost estimate, the BOM is ignored. The system continues searching for a BOM using the next selection criteria until it finds one that is valid.
A material can be represented in various alternative BOMs. You can specify that a particular BOM alternative be used for the cost estimate at a certain date.
Bill of material:
The priority is defined based on the usage of the Bill of material.
Usage: Specifies the application areas for which the BOM is used. When creating the BOM, we will specify the usage.
- If we have multiple BOM’S in the same application area or with same usage number, then system picks the first BOM.
- In case you want to pick a specific BOM, then you need to specify that BOM in the alternative selection of Multiple BOM’S.
The priority is defined with the combination of Task list type, Usage and status.
Task list type: It specifies the type of Routing.
Status: Released etc.
- Date Control:
- Validity of the cost estimate.ie.The cost estimate is valid from which date to which date.
- Which date BOM and Routing to be used in the cost estimate of the product.
- Which date price to be used in the cost estimate of the product.
Costing date from:
It could be either 1.Past Date
- Future Date
- Current Date.
- Past date: If it is past date, we can generate the cost estimate but not possible to save the cost estimate. It is not possible to mark and release the cost estimate.
- Future date: It is possible to generate, save and mark the cost estimate. It updates material master costing 2 tab future price. It is not possible to release the cost estimate. It is possible to release the estimate once it reached to the future date.
- Current date: It is possible to Generate, save, mark and release the cost estimate.
Quantity structure Date: It specifies which date BOM and Routing to be used.
Valuation Date: It specifies which date price to be used.
Determines the validity of the cost estimate and for costing date to, minimum date should be until the end of the fiscal year and max is unlimited. This is because system requires for the calculation of the variance.
- Qty. structure date should be always to be dependent on Costing Date from date.
- Valuation date should be always to be dependent on Costing Date from date.
- If you select manual entry, you can overwrite the date control values in frontend CK11N while executing the cost estimate.
Marking Standard Cost Estimates
To transfer the results of a standard cost estimate as the standard price in the material master, you must mark and release the standard cost estimate.
You can mark the following:
- One or more standard cost estimates
- More than one standard cost estimate within one costing run
When you mark a standard cost estimate, the costing results are written to the costing view of the material master as the future planned price.
- Marking the standard cost estimate has been allowed. The marking allowance specifies the company code and period in which you can mark a standard cost estimate with a given valuation variant and costing version. You cannot mark cost estimates/costing versions with different valuation variants in this period.
- You mark the cost estimate and transfer the costing results into the material master as the future standard price.
- You can mark the cost estimate more than once at any time (until you release it).
- You can cancel the allowance for marking and thus the marking of standard cost estimates
- If you want to work with multiple valuation views, you can mark all of the views (legal valuation, group and profit center).
It specifies which costing variant and costing version cost estimate allowed to be permitted for the specific period to the specific company code.
Note: It is not possible to use multiple costing variants and versions to allow to use in same period and company code to mark and release the estimate.
- Valuation variant is a Key that controls which prices the system selects to valuate the quantity structure of a material cost estimate or order, or to valuate the costing items of a unit cost estimate.
- The valuation variant controls how the materials and activities in the cost estimate are valuated. The valuation variant specifies the following parameters:
- Which price in the material master (such as the standard price) or in the purchasing info record (such as the net order price) is used to cost a material in the BOM
- Which planned or actual price is used to valuate the internal activities
- Which version in Cost Center Accounting is used to valuate internal activities
- Which costing sheet is used to calculate overhead
- Whether and to what extent a BOM item or an operation in the routing is relevant to costing
- The different valuation strategies for materials, internal activities, external activities, and subcontracting are stored as strategy sequences.
- A global valuation variant is valid for all plants. A local valuation variant is valid only for a specific plant. You define valuation variants in Customizing for Product Cost Controlling.
Cost Object Controlling:
- In Cost Object Controlling there is a valuation variant that can be used for the valuation of work in process at target costs and for the valuation of scrap variances.
- In this valuation variant, you specify which cost estimate is used to calculate the target costs.
Valuation variant contains the strategy i.e. which priority of sequence of source of price to be used while valuating materials, Activities ,Sub contracting, External processing, and also it specifies which costing sheet to be used to calculate the indirect overheads.
- We can maintain different valuation strategies for the same valuation variant depends on the plant wise. System follows the first priority plant dependent then it follows the global definitions.
- Material valuation
Here you define the sequence in which the system searches for prices from the accounting view or costing view of the material master record to valuate materials. You can also access prices from purchasing info records and condition types.
For material cost estimates, you also specify whether additive costs can be added to the selected price.
Sub strategy will appear only if you have selected the price from purchase info record in main strategy.
Additive Costs: Any costs you want to add manually as a part of Indirect Overhead.eg.Storage.
Raw mat X–.100 RS +20% Additive cost.
Include additive costs means the valuation variant specifies whether to consider or not to consider the additive cost in the cost estimate of the product. If not activated, additive cost is not considered.
Purchasing: Assignment of Conditions to Cost Comps:
Purpose: To get the delivery and freight charges separately in the cost estimate of the products & also to display the delivery and freight charges separately in the cost estimate of the product. We need to assign the origin group the MM condition type’s .Then, we need to assign the origin group to the cost component in cost component structure.
- Activity Types / Processes
- Here you define the sequence in which the system searches for prices in activity type planning or actual activity price calculation in Cost Center Accounting or Activity-Based Costing to valuate the utilized activity types and business processes.
- Plan/actual version
It specifies which version price to be applied in the cost estimate of the product.
You also specify which plan/actual version is used.
- Here you define the sequence in which the system searches for prices in the purchasing info record. In purchasing, the quota arrangementsare used to create a mixed price for materials that are manufactured with external vendors with parts provided by the customer.
- You can specify whether the quota of the individual vendors that are entered in the list for the material to be processed should be determined through the planned quota arrangement or the actual quota arrangement.
- External processing
Here you define the sequence in which the system searches for prices in the purchasing info record or routing operation for valuation of the external activities.
- External processing is also another form of sub-contracting type. It is nothing but outsourcing of a particular activity eg.cleaning, painting Activity etc.
- The val. Variant ext. processing strategy tab specifies which pricing strategy to be used to valuate the out sourcing activity.
GROSS PRICE: price before deducting Rebate and Discount.
NET PRICE: Gross price – Rebate- Discount.
Condition Table: we can assess or read the price from the pricing condition records.eg.freight and insurance.
- You can link the valuation variant for definition of overhead to a costing sheet. You can also enter a costing sheet for the allocation of overhead to raw materials, if you want to use specific overhead conditions for raw materials.
- If you want to differentiate overhead application according to material groups, you must have groups and made the necessary settings for the costing sheet in the step Define costing sheet.
- You can also specify whether overhead is calculated for subcontracted materials in material costing
It specifies whether to consider the total price or part of the price to be considered in the cost estimate of the product.
The standard system provides a number of predefined price strategies.
- For material valuation, you can choose up to five (5) strategies for each valuation variant.
- For activity types/processes, you can choose up to three (3) activity prices for each valuation variant.
- For subcontracting, you can choose up to three (3) strategies for each valuation variant.
- For external processing, you can choose up to three (3) strategies for each valuation variant.
You can modify these valuation variants to suit your requirements by changing the standard strategy sequences as necessary.
- Enter an alphanumerical key and a name for the new valuation variant.
- Define a strategy sequence for the valuation of material components.
- a) To do so, select a price from the material master.
If you access prices from purchasing info records and condition types, you can enter up to three sub-strategies. If you take prices from condition types, you must assign these condition types to origin groups in Customizing. (See Raw)
- b) For each material valuation strategy, you can specify whether additive costs are to be included in the valuation of the material component.
- Define a valuation strategy for activity types and processes and assign a plan/actual version from cost center planning.
- Define a strategy sequence for subcontracting and choose a quota arrangement for subcontracting.
- Define a valuation strategy for external processing.
- Assign a costing sheet under Overhead applied to semi-finished finished materials to the valuation variant.
- Specify whether overhead rates should be calculated for subcontracted materials.
You can enter a costing sheet for the application of overhead to raw materials under Overhead on material components.
If overhead should be calculated for subcontracted materials, you can specify this here.
- Save your entries.
- Assign the valuation variant to a Costing variant.
If you want to use different valuation strategies or different overhead rates in plants that belong to the same company code, you can define plant-specific valuation variants by assigning a valuation variant to a plant. Choose the push button Valuation variant/plant. If you don’t do this, the valuation variants apply to all your plants.
- Materials valuated separately with the material ledger
- The standard price is not included in the material ledger data, but rather the current planned price which, as a rule, does not vary from the standard price. In the valuation variant, specify that the system should also look for the current planned price for the valuation of materials. This ascertains that, even in the case of separate valuation, a price is found for the valuation of materials.
- It contains the control parameters or it groups the costing parameters like costing type, valuation variant, Date control, Qty. structure control, and transfer control. These parameters are required to generate the cost estimate.
- Costing variants form the link between the application and Customizing, since all cost estimates are carried out and saved with reference to a costing variant.
- We can define multiple costing variants for std. cost estimate purpose but we can use maximum one costing variant per company code for the specified period.
Control Parameters in the Costing Variant
The costing variant contains all the control parameters for costing.
The costing variant for a material cost estimate contains the following control parameters:
- Costing type
- Valuation variant
- Date control
- Quantity structure control
- (only relevant for cost estimates with quantity structure)
- Transfer control (optional)
- Reference variant (optional)
- Although it is technically possible to have two costing variants with the same costing type and valuation variant, this should be avoided to prevent data from being overwritten.
- The reason for this is that the key structure for the costing results in the database uses the costing type and the valuation variant, rather than the costing variant.
- Since this costing variant can be used for cost estimates both with and without quantity structure, you must also make the settings that are only relevant for cost estimates with quantity structure even if you are only executing a cost estimate without quantity structure.
In Quantity structure you determine the following:
- How the costing lot size is handled
- Whether cost estimates without quantity structure are included Whether transfer control can be changed when calling the cost estimate Whether an active standard cost estimate can be transferred if the cost estimate for a material contains errors
Pass on lot size:
This field determines whether costing lot size of all the components is based on the higher level material or costing lot size of the components to be considered in the cost estimate of higher level products. There are 3 options:
- Only with individual requirement.
Pass on lot size: No:
In this case, the components are costed according to the component lot size which is specified in the costing 1 view of the material master.e.g. A finished product’s costing lot size is 10 pc. Where the component Sfg.X having lot size 100 pc.In this case, the cost estimates creates for the SFGx based on the lot size of the 100 pc.Then the cost estimate for the finished goods will be created on the costing lot size of 10 pc.That means, it takes component cost estimate price based on the costing lot size of 100 pc. In the cost estimate of finished goods.
For 10pc of Fin. Goods X, 10 pc of Sfg, x is req.
Fin. Good X lot size is 10 pc.
Sfg x lot size is 100 pc.
For SFG X., 100 PC
Raw mat. -100kg*100 =10000
Cleaning -10hrs *2000 = 20000
Machine hrs. -100hrs *300=30000
Per unit cost; 60000/100= 600
Sfg x price 600
Pass on Lot Size: Only with individual requirements:
In this case, the cost estimate generates the cost estimate of the component based on the lot size of higher level material and it ignores the costing lot size of the components.
Pass on Lot Size: Always:
In this case, all the materials in the multilevel BOM, It is costed based on lot size of the final components (higher level component).This option is normally used in the sales order cost estimate.
E.g. Applicable for above both
For 10pc of Fin. Goods X, 10 pc of Sfg x is req.
Fin. Good X lot size is 10 pc.
Sfg x lot size is 100 pc.
SFGX: 10 pc
Raw mat: 10*100 = 1000
Cleaning: 10 hrs. *2000 = 20000 (fixed cost)
Machine: 10hrs*300 = 3000
Value of SFGX WILL BE 24000
Ignore prod cost EST without Qty Structure:
This indicator determines whether a cost estimate with Qty structure can access the data which is generated by the cost estimate without qty. structure. By selecting this indicator, we can save the time i.e. unnecessary searching for the data which is produced by cost estimate without qty. structure.
Transfer control can be changed;
This indicator controls whether allowed to change or not allowed to change the default transfer control during the execution of the cost estimate.
Transfer Active std. cost est. if mat costed w/ Errors.
- If this indicator is not activated, then system won’t allow to release of cost estimate of higher level products unless rectifying the cost estimate of lower level products.
- If this indicator is activated, we can release the cost estimate even though the lower components are having errors and it uses the alternative cost estimate if any available. If there is no alternative cost estimate, then system throws the error message.
In Additive Costs you determine the following:
- Whether you can transfer the cost components that were entered in the form of an additive cost estimate
- Whether the additive costs for materials with the special procurement types stock transfer or production are included in another plant.
- We can add the additive cost manually like freight, OH, insurance in the additive cost estimate of the product or material.
- This field controls whether the cost estimated created with this costing variant can allowed to include or enter manual cost in the form of additive cost estimate.
- Option 1: Ignore additive cost.
It won’t allow to add the additive cost.
- Option 2: Include
It allows to add the additive cost.
Option 3: Include the OH cost and apply the OH:
In this case, we can include the additive cost and also we can calculate the OH on the additive cost.
Include additive cost with stock transfers:
The system will allow to include the additive cost for stock transfer between the plants.
E.g. we can include the additive cost i.e. transportation cost for stock transfer between the plants.
In Update you determine the following:
- Whether the costing results can be saved and what values are updated
The cost component split is always updated. You must specify whether the following values are also updated:
- Whether the user can change the update parameters and the parameters for transfer control.
- Which reference variant you want to use for group costing.
This indicator allows to save the cost estimate. We need to select this indicator if we want to update the price to the material master also we need to select this indicator for using this cost estimate for below scenarios:
- for variance calculation.
- Variance calculation.
- Result analysis.
Save error log:
We can save error log for reference purpose.
Defaults can be changed by the user:
If this indicator is activated, then we have the option during the cost estimate to change the default settings for saving message log and also itemization. Normally, itemization and log update are required for every cost estimate for analysis purpose. Giving the option i.e. to change the parameters to the user not required. Hence, don’t select this indicator. If this indicator is not selected and by default it update the log and also itemization and it won’t give any option to the user to change itemization log message.
It provides the cost details at individual line item level of material, activities, and Indirect OH. Itemization is a useful information when analyzing and reviewing the cost at detailed level whereas cost component provides the summarization level. Further grouping of cost component can be called as cost component group.
In Assignments you determine the following:
- Which cost component structure is used for the cost estimate.
- Which costing version is used.
- Whether the cost component split can be saved in the controlling area currency in addition to the company code currency
- Whether you can cost across company codes with this costing variant
In the note Miscellaneous you determine the following:
- Whether a log is created to collect the system messages.
In this, we need to specify how the error log to be recorded and handled.
Transfer control & Reference variant:
- The transfer control specifies or controls how the existing cost estimate is to be used in the cost estimate of the other product.
Business case (purpose):
Usually we will perform the cost estimate yearly once for all the existing products. During the year, if any new products created, we will run the cost estimate for the new products.
Eg1: The new product contains all the new components .In this case, we will run the cost estimate for all the components which are new products.
Eg2: The new product contains few components as old and some new components. In this case, how the system should reuse the cost estimate of the existing product in the cost estimate of other products.
If we regenerate the new cost estimate for existing products, then stem generates the variant for all the existing products which is using the existing component.
Through the transfer control, we can specify to use the existing cost estimate or not in the cost estimate of the other products.
Transfer only with collective requirements material (field):
- This indicator specifies how the existing cost estimate to be used in the sales order cost estimate. If this indicator is activated, then system ignores the existing cost estimate and rerun new cost estimate of the existing product in the sales order cost estimate.
- If this indicator is not activated, then system considers the existing cost estimate for both individual requirements as well as the collective requirement(The existing cost estimate can be reused in the sales order cost estimate)
This indicator refers the current year.
- In the period, if you keep blank, then it refers only the current period.i.e. System searches for existing cost estimate in the current period only.
- In current and previous cost estimate, the period refers the number of periods in the past. I.e. before the date of the cost estimate.
- In case of future cost estimate, the period refers the number of periods in the future i.e. after the start date of the cost estimate. And in the past (before the start date)
- You define transfer control in Customizing for Product Cost Controlling. You use transfer control to specify how the system is to search for available cost estimates in order to transfer existing costing data into another cost estimate.
- You define a reference variant in Customizing for Product Cost Planning and enter it in the costing variant. The reference variant contains a transfer control ID, which finds the cost estimate to be copied.
It is a Parameter that establishes the technical attributes of a cost estimate. It specifies the purpose and usage of the cost estimate. It specifies whether allowed to update the estimate to the material master or not and also it specifies which price field to be updated in the material master. It also specifies which valuation views to be costed.
- Each costing type allows only one valuation view.
For a material cost estimate, the costing type controls the following:
- How the cost estimate is used, and which field in the material master is updated with the cost calculated in the cost estimate (such as the standard price, commercial price, or tax valuation price)
- Which costs are used as the basis for allocating overhead
- Which valuation view (legal, group, or profit center) is costed
For a base planning object, the costing type determines which valuation view is costed.
- In the following image, we can see the three tabs available under Costing Type.This bifurcation in Costing Type is done by SAP to provide further flexibility at the most granular level possible.
Under this tab we define where the price calculated during the cost estimate should be updated by the system. In the above image, we can see that the standard Costing Type updates Standard price. This in other words mean, when a material cost estimate is released, it will update standard price in material master.
Following options are made available by SAP for updating the results
- Standard Price
- Tax-Based Price
- Commercial Price
- Prices other than standard price
- No Update
Note: We also need to keep in our mind that standard system contains costing types that write to the material (standard price), and hence the system does not allow to create our own costing types to do this i.e. updating standard price.
This tab contains configuration related to updating dates when the cost estimate is saved and is divided into following two parts:
Cost Estimate with Quantity Structure
Here we have to select whether the date will be saved in standard cost estimate and following options are available for us to opt from:
- Without Date
In this, the standard cost estimate cannot be saved and hence cannot be used for future analysis purpose. It is not possible to generate the std. cost estimate.
- With date
The with date option can be used in the plan cost and also in the preliminary cost estimate and we cannot use in the std. cost estimate.
- With Start of Period
Always the std. cost estimate, it saves with the start of period (from the beginning date of the period). E.g. we are running cost estimate on 6th august and system will always saves the cost estimate in the back end from the beginning of august i.e. 1st august.
- This part becomes very important in case of product cost collect and hence, SAP has provided separate Costing Type for Product Cost Collector which contains relevant configuration to be opted for. Hence, it also becomes very important to identify the requirement and try to find if any standard costing type or costing variant is provided by SAP for the scenario (in most of the cases you will find the answer as YES) and if yes, go for it. If you do not find appropriate standard configuration, take a cautious approach while customizing.
Note: For the standard cost estimate, you must update automatic costing with the with start of period indicator. This ensures that the results of the standard cost estimate can be used as the standard price for that period. For the other costing types, you can update the costing results with the with date indicator, for example. In this case the current date becomes part of the key.
- Additive Cost Estimatesthe purpose is to allow to enter the additive cost with effect from which date, either with date or without date or with start of the period. It will always considers the start of period in case of standard cost estimate.
This tab contains following two parts
Cost Portion for Overhead Application
- This part works as a calculation base for calculating the overheads. Here we have to select the cost component view that will be used for calculating overheads (Costing Sheet).The cost component view can be used as a calculation base in the OH calculation for the semi-finished goods in the cost estimate of the finished goods. This option is used as a calculation base on the COGM component field to calculate the OH for the semi-finished goods during the cost estimate of the final component.
- Partner Cost Component Splits
Key that uniquely defines a combination of partner and direct partner.
- To view the partner cost breakup details in the subsidiary companies in the cost estimate of the product. This option is applicable only for group valuation view. We can set the partner split parameters in the combination of company code and plant or the combination of comp. code, plant, profit center and business area combinations. It won’t applicable for your legal valuations.
Cost component Structure
- It gives the breakup of the cost estimate of products like material cost, packing mat cost, consumables, Mach. Cost etc. The cost component structure contains the cost components (grouping of costs or cost elements)
- Each cost component specifies whether it is relevant for valuation of inventory or not and also it specifies under which cost components to be updated. Eg.COGM, COGS, Inventory, and Tax inventory etc. Each cost component specifies whether it is to be rolled up or not.
- Any component which is relevant for inventory should be rolled up and shown under COGM view.
- The cost component can have maximum of 40 components in case of all components are variable. In case of all components are fixed, then the CCS can have maximum of 20 components.
Variable – 1
Fixed – 2
- There are two types of CCS. One is Main CCS and the other is Auxiliary CCS.
Cost Component Structure Contains Cost components:
- Material cost
- Packing material cost.
- Cleaning cost.
- Machining cost.
- Labor cost.
- Material OH.
- Admin OH.
- Cost component represents the grouping of cost or cost elements.
- Each cost component specifies which portion of cost to be displayed and to be considered for valuation of inventory.eg. Variable cost, or consider fixed and variable cost.
- Each cost component specifies whether to be rolled up or not. Every cost component should be rolled up or not. Every cost component should be roll up cost component which is relevant to COGM & inventory valuation
- Each cost component specifies whether it is relevant for inventory valuation or not.
- Each cost component, we need to specify which views to be updated eg.COGM, COGS, or tax inventory or commercial inventory.
- Main CCS can be called as Primary CCS.It is only possible to update to the material master std. price field. Auxiliary CCS is not possible to update to the material master std. price. We can able to transfer both main CCS and Auxiliary CCS to COPA. Auxiliary CCS can be used to view the breakup of the cost in the alternate view.
Cost component groups:
- It is nothing but further grouping of cost components within the CCS.It displays the cost at higher summarized level.eg.Mat cost, Dir OH, IOH etc. We can define maximum of 99 cost component groups but we can be able to use maximum 25 cost component groups across the cost component structures within the controlling area.
- One cost component can have maximum of 2 cost component groups. One cost component group can be assigned to multiple cost components.
Types of Cost component structure:
- Main CCS.
- Only possible to update to the material master std. price.
- Auxiliary CCS.
- Cannot be possible to update to the material master std. price.
Note: Both can be possible to update to the costing based COPA.
Main CCS: The main CCS can also be called as primary CCS or Principle CCS.Main CCS is mandatory for the standard cost estimate. Main CCS cost estimate is only possible to update to the material master std. price field and also possible to transfer to the Costing based COPA.
Auxiliary CCS: The purpose of this is to view the breakup of the cost estimate of product in the alternate view in addition to main CCS.The auxiliary CCS cost estimate is not possible to update to the material master std. price field and is possible to update to the costing based COPA.
Primary cost component split:
- The purpose of this to view the activity cost in terms of primary cost element wise. Then, we need to activate the relevant CCS with the primary cost component split indicator.
- The primary cost component structure can be activated either for Main CCS or Auxiliary CCS or Both.
- We can activate PCC.split for those CCS designed or structured with primary cost elements.
- The below activities or settings are to be done to get the primary split:
- Need to assign the primary split CCS in the versions.
- Need to perform the system calculated activity price.
Delta cost component Split:
- It displays the profit between two company codes under the delta cost component split in group valuation view.
- The delta cost component split is not relevant for inventory valuation. It is not required to assign any cost element to the delta cost component. We can define maximum one delta cost component per one CCS .It is relevant only for group valuation.
Int. / Ext. cost split:
The purpose is to view the cost estimate for the raw materials in terms of grouping of cost like procurement cost, freight, insurance etc.
Assignment to the Organizational unit:
- We can assign maximum two CCS i.e. Main CCS and Auxiliary CCS to the combination of Company code, Plant and Costing Variant. But recommended is to always use the same CCS across all the plants for all the costing variants for the specific company.
- If you have different CCS for different plants, then it is not possible to read the cost estimate from other plants which belong to different CCS’s.
- Even though we can define and assign different CCS for each plant wise within the company code. But it is not recommendable to define multiple CCS within the company code i.e. for each plant wise. The reason is that, we cannot assess the cost estimate from one plant to another plant which belong to different CCS’S. That is why, we will maintain uniform CCS across the plants within the company code.
Define the CCS: (OKTZ)
Click on NEW ENTRIES.
Enter the following and Save:
Select C1 and click on cost components with attributes.
Click on New entries.
Enter the following and Save:
Creation of cost component group:
Click on new entries.
Enter the following and Save.
Assign C1 cc group to 01 Raw material cost component.
Create the cost components up to Consumables and assign to the relevant group.
Same will applicable till packing cost.
Same with IOH.
Assign the cost components to CCS:
Select the cost component and click on assignment. And click on new entries.
The names will automatically come when you click enter.
101000: Raw material cost element.
101001: Raw material import cost element.
943000: Secondary cost element.
941000: 41 Category cost element.
Enter the following and Save.
Cost component views:
The PURPOSE of this that which cost component view cost to be displayed to view the cost break up.
Click on New entries and save.
Select C2 and click on Cost Component with attributes.
Click on new entries.
Do the same for similar kind of components.
For Salaries, power and Misc. exp.
Go back and select all cost components and click on assignment of cost elements to CC’S.
Enter the following and Save.
Assign the Auxiliary CCS to the Organizational unit or Company code.
Assignment: Organiz. Units – Cost Component Structure:
Activate the CC structure and activate C1 and C2 and activate primary split to C2
Assign the primary cost component split in the CO versions.
Select the 0 version and click on settings for each fiscal year.
Select 2016 and Double click.
Assign the Auxiliary CCS (c2) here and tick the below indicator and save.
Notes on the various indicators:
- Cost share Indicator:
It specifies whether the fixed and variable costs or only variable costs are to be displayed in the cost estimate.
- Cost Roll up:
This indicator determines whether the costing results of the cost component are rolled up to the next highest costing level. By activating this indicator, we can specify that which cost component is rolled up to the next highest costing level. We need to select this indicator for those components which is relevant to the COGM &Inventory valuation.
- Cost component group:
The purpose of this is to view the cost estimate break up at the higher summarization level. It is the further grouping of the cost components. One cost component can have maximum 2 Cost component groups.
Further criteria for cost component view on itemization:
In this tab, we can specify the cost components to be displayed under which cost component view.
This indicator controls which cost component is relevant foe inventory valuation.
COGS> which cost component is to be under COGS view.
Initial cost split:
It is to view the cost estimate of raw materials into different groups like procurement cost, overhead or freight charges, insurance etc.
Delta profit for group costing:
This option is used in multiple valuation concept and prerequisites is needed. To use this function, only into material ledger multiple valuation concept is activated. The purpose is to display the internal profits between company codes under the separate cost component in the group valuation view. We can select maximum one cost component with delta profit indicator for cross component structure .The delta profit cost component is not relevant for inventory valuation and also not required to assign any cost element to the cost component which is activated as delta profit indicator.
Overhead: THE COST WHICH IS OTHER THAN MATERIAL COST.
- Overhead is of two types:
- Direct OH : Expenditure of dept. which are directly involved in the production.
Basis of Allocation:
- Activity types are used as a base to allocate DOH.Activity types are specified in Routing. When you do the activity confirmation (CO11N), OH is allocated to the production order.
- Indirect OH: Service dept. cost.
Basis of Allocation:
Based on Activity type:
- Separate activity types are defined for IOH allocation purpose.eg.Seperate activity types are created for Main.Dept. Admin Dept., Procurement dept. etc.
Routing and Work center:
- Here we will add the created new IOH activity types to the original activity types in the Routing. Drawback is increases WC master data and increases routing operations and activity types number limitation per Work center. We can recover the 100% overhead and it won’t arise under or over absorption of overhead.
- When you do the confirmation of activity, it will updated to the production order.
- It contains formulas and Rules along with using the activity types. Advantage is PP master data won’t be disturbed and we can recover the 100% overhead and it won’t arise under or over absorption of overhead. While executing the template allocation program, the OH is allocated to production order at the month end.
Not based on Activity type:
- It is the pure traditional method. Costing sheet method is used to allocate IOH to production order. OH is allocated on an assumption basis. We cannot recover the 100% overhead and it will always arise under or over absorption of overhead. In the period end process, while performing the Actual OH calculation program, OH is allocated.
- It specifies what % of OH to be applied or what quantity rate of OH to be applied on which amount and under which conditions to be applied and from which cost center to be allocated and which OH cost element to be used to debit in the order and credit in the cost center.
- Costing sheet components:
- OH rate.
- Dependency Key.
- OH type.
- Credit key.
Grouping of cost elements on which OH rate is applied.
- OH rate:
Specifies OH% to be applied. It contains dep key OH type.
- Dependency key:
It specifies the conditions, the OH rate is to be applied in which conditions.
- OH Type:
It differentiates the plan and actual OH type.1-Actual and 2-Plan OH. We can maintain different OH rate for Actual and Plan OH by using OH type.
- Credit Key:
- It species which cost center to be credited during the actual OH calculation and also it specifies which OH cost element to be used to credit in the cost center and to debit in the order.
- One credit key represents one cost center.
- Dependency key is the plant in both the cases.
- One OH rate key (c100) is required for mat OH of 10% and 11% & another OH key (C101) is required for activity OH for 15% and 20%.
- One credit key (C3) is required for procurement department and one (C4) for admin. Department.
- Costing sheet is assigned to Valuation variant in OH tab
Click on NEW entries and enter following.
Click enter and Save.
- Select the material cost and click on details.
- Give your Controlling Area.
Cost portion: It specifies which type or portion of the cost to be grouped for OH calculation purpose.
Total: It considers both Fixed and Variable Cost.
- Click on New entries.
- Give mat. Cost element group and SAVE.
Do same for the base C11.
Percentage overhead RATE:
Click on new entries.
Enter following and SAVE.
Click on new entries and enter following and save :
- Select C3 and click on details:
- Click on new entries AND ENTER following.
- Select C4 and click on details:
- Click on new entries AND ENTER following.
- If you specify value in the Fix % field, then in that case, the specified fixed %is applied on the OH amount as a Fixed OH and remaining balance becomes the variable OH.
Base total 1000
The OH rate is 15%.
Therefore the OH amount will be 150.
On OH amount 150.
Fixed OH (70%) 105
Variable OH (REMAINING) 45
Define Costing Sheet:
Click on New entries:
- Select the costing sheet and click on costing sheet rows.
- Click on new entries.
Enter as above in the following and save.