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Preliminary Costing in SAP Product Costing – Detailed

Overview
Published by Pradeep on February 11, 2021

Last Updated on January 14, 2022 by Pradeep

What is SAP Preliminary Costing?

Preliminary Costing is the first step in cost object controlling, which involves preliminary costing

for manufacturing orders. It allows you to determine the planned costs of a product cost collector

or manufacturing order.

What we do in Preliminary Costing?

In preliminary costing, we evaluate bill of materials (BOM) components and routing activities
using the valuation variant specified in the costing variant. You determine the costing variant by

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the order type, which is a required field when creating an order. Then, the system calculates
overhead expenses using the costing sheet if specified in the valuation variant.

We can display a list of production orders with T Code– COOIS.

The CONTROL tab displays production order fields relevant to the costing of the order.

Control tab- Preliminary Costing in SAP

Let’s check the fields in the costing selection of the production order CONTROL Tab.

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Related: SAP Product Costing – Know Everything

Fields in Production Order Control Tab in




Preliminary Costing
It’s important to know the use of available fields in the Production order and how these are

important for the costing system.

Costing Variant for Planned Costs
The costing Variant Plan field specifies which costing variant you use to determine plan costs.
Likewise, the order type determines the default costing variant which in turn determines the
valuation variant.

You can maintain the default values for order types with Transaction OKZ3. This setting further
allows you to display and maintain values for a combination of plant and order type. In my
example, it is ZC11 which in turn determines the valuation variant C11.

Costing Variant for Actual Costs

the Costing Variant Actual field specifies which costing variant you use to determine production
order actual costs. The order type determines the costing variant – in my example, it is ZC12,
which in turn determines the valuation variant C12.

Costing Sheet in Preliminary Costing

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A costing sheet determines the allocation of overhead costs from cost centers to manufacturing
orders. The costing sheet field from the valuation variant, which in turn is determined by the
costing variant.

Overhead Key
An overhead key allows you to assign specific overhead rates to individual orders or to groups of
orders. This functionality gives you flexibility in assigning overhead for frequent calculation and
maintenance of overhead rates.

Result Analysis Key

We use the result analysis Key to determine the period-end Work In Process (WIP) calculation.
The system only calculates WIP on orders with an entry in this field.

Variance key in Preliminary Costing

The system calculates variances at the period ending on manufacturing orders and product cost
collectors containing a variant key. This key defaults from the Costing 1 view when you create

manufacturing orders and product cost collectors.

The variance key also determines if you subtract the value of scrap from actual costs before

variances are determined.


Determine Plan Costs
The determine PLAN Costs field determines when the system saves manufacturing order plan
costs. If you click on the field display the three possible entries are available.

Do Not Determine planned Costs when Saving

If you specify to not calculate any planned costs when saving the manufacturing order, you can
calculate planned costs of the order at any time. You can select this option to reduce the time
required when saving many manufacturing orders.

Determine Planned Costs when saving, If Released

A manufacturing order status” Released” indicates that you can post actual costs to the order. If
you create manufacturing orders well in advance of releasing them, you can consider selecting
this option to save time when initially saving many manufacturing orders.

Determine Planned Costs When saving

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This is the most common setting. It indicates that planned costs are calculated when the
manufacturing order is initially created and saved. This allows us to correct any costing errors
earlier than the other two options.

Also Read: Product Costing Interview Questions

Display Planned Cost

We can display production order planned costs by selecting Goto-Costs-Analysis from the
Production Order menu.

The production order planned costs display in the “Total PLAN Costs column” let’s discuss each
section.

Goods Issue
When you create the production order, the system copies the BOM to the production order. You
can determine the planned goods issues to the production order from the BOM. Then further
display it as a plant and material combination in the origin column.

Confirmation
When you create the production order, the system copies the routing to the production order.
Further, it determines the planned activity confirmations from the operations in the routing. Finally
displays as a cost center and activity combination in the Origin column.

Overhead

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You determine the Overhead by the costing sheet in the production order Control Tab as
Displayed. A costing sheet determines the allocation of overhead costs from cost centers to
manufacturing orders. Subsequently, the cost center that receives the credit is displayed in the
origin column.

Goods Receipt
You are typically entering a material when you create a production order The production order
contains all of the information necessary to manufacture the material. When you place the
manufactured material into inventory, the production order receives a credit based on the
standard price of the plant and material shown in the Origin column.

Why Preliminary Costing is required for You?

If you are in implementation and working on SAP Controlling part, you require to know this area
of Costing.

In this blog, we looked at preliminary costing for manufacturing orders. We discussed relevant
fields in the production order costing tab and how to display a preliminary cost estimate.

Hence, if you are learning SAP Product Costing as part of your S/4HANA Finance training then

also you should gain a good knowledge of Preliminary costing in SAP.

Since Preliminary Costing is a technical subject of Product Costing, it involves calculation and

analysis. So, you do get in deep studying this subject.

Watch Related Video: Preliminary Cost Calculation in SAP

You may be interested in: Product Cost Planning in SAP

Categories: SAP HANA SAP PRODUCT COSTING

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