Cost Object ControllingCost Object Controlling SAP AG + Icons Meaning Caution Example Note June 1998MV SAP AG Cost Object Controlling Contents Cost Object Controlling .. Cost Object Controlling Cost Object Controlling and Cost Accounting Systems in the R/3 System. Cost Object Controlling in Make-to-Stock Production... Cost Object Controlling in Mass Production Environments Using Sales Orders... Cost Object Controlling in Complex Make-to-Order Environments.. ‘Sequence of Steps in Cost Object Controlling: Scenario Cost Objects in the R/3 System. Master Data of the Controlling Module in Cost Object Controllin Master Data of the Production Planning Module in Cost Object Controlling, Checking the Production Planning Master Data Before Costing. Master Data of Production Planning - Process Manufacturing (PP-P!) in Cost Object Controllin Control Parameters in Cost Object Controlling, Overhead Planning Process Costs Planning Process Costs: Scenario... Process Cost Allocation. Contro! Parameters for Process Cost Allocation ‘Overhead Calculation. Control Parameters for Overhead Calculation Example for the Use of Calculation Bases... Example for the Use of Origin Groups... . Posting and Allocation of Actual Data in Cost Object Controlling. GIL Account Postings in Financial Accounting ‘Goods Movements in Materials Management... Postings of Actual Costs in Controling... Control of Actual Postings in the Controling Module. Time Sheet... ss Example for Revaluating Activities at Actual Actwvity Prices Basics of Variance Calculation Total Variances, Variances from Production, and Variances from Planning Target Cost Versions Variance Categories and Scrap .. Variance Categories on the Input Side Variance Categories on the Output Side. ‘Scrap Calculation and Variance Calculation: System Activities. Calculation of Target Costs Calculation of Control Costs. Calculation of Scrap... ‘Assignment to Variance Categories. ‘June 1998 3Cost Object Controlling SAP AG Example for Assignment of Variances to Variance Categories nnn. eens 9B Caloulation of Input Price Variances. 94 Calculation of Input Quantity Variances. 95 Calculation of Resource-Usage Variances 96 Calculation of Remaining Input Variances. 97 Calculation of Lot Size Variances 98 Calculation of Output Price Variances 99 Calculation of Remaining Variances. 100 Cost Object Controlling (Period-End Closing). 101 Using the Worklist of Revaluation at Actual Activity Prices. seve 103 Using the Worklist of Overhead Calculation. 104 Using the Worklist of WIP Calculation. 106 Using the Worklist of Variance Calculation nnn sonnnenes 107 Using the Worklist of Actual Cost Distribution. 109 Using the Worklist of Results Analysis 110 Product Cost by Period. m Material 114 Standard Cost Estimate for Material 116 ‘System Data for Materials in Repetitive Manufacturing 118 Run Schedule Headers... 119 Checklist for Creating a Run Schedule Header 121 Production Cost Collectors 124, Special Features of Production Cost Collectors for Sales-Order-Related Production: Process Flow. 126 Creating Production Cost Collectors for Run Schedule Headers Automatically 128 Creating a Production Cost Collector Manually. 131 Cost Object Hierarchies. 133 Cost Object Nodes 134 Basic Information on Cost Object Hierarchies... ssnnnnnnnnnnnnnnnnnn 135 Objects That Can Be Assigned to Cost Object Nodes 136 Example for Cost Object Hierarchies 137 Checklist for Creating a Cost Object Hierarchy... a . snnee 139 Settlement Rules for Cost Object Hierarchies 140 Creation of a Cost Object Hierarchy: Scenario 142 Creating a Cost Object Hierarchy... 143 Displaying a Cost Object Hierarchy with Costs. 145 Finding a Cost Object Node 148 Product Cost by Period: Scenario. 149 Example for Product Cost by Period 154 Preliminary Costing 155 Version-Specific Cost Estimate 156 Simultaneous Costing in Product Cost by Period: Scenario. 158 Reporting Point Backflush 160 Valuation at Operations in Product Cost by Period 162 Conversion of Reporting Point Backflushes. 165 Updating the Version-Specific Cost Estimate... 168 Entering Reporting Point Backflushes..... 169 Goods Receipts in Product Cost by Period sence sevnnnnnes 170 Example for Goods Receipt 172 4 June 1998WY SAP AG Cost Object Controlling Entering a Goods Receipt with Backflush.. 1 173 Entering a G/L Account Posting for a Cost Object Node... eennnnnnnnn 174 Entering a Goods Issue for a Cost Object Node 175 Entering Internal Activity Allocations for a Cost Object Node 176 Time Sheet. . nT Period-End Closing in Product Cost by Period: Scenario ‘Actual Cost Distribution on 183 ‘Actual Cost Distribution: Process. nnn 185 Target Cost Calculation as Basis for Actual Cost Distribution 186 Example for Actual Cost Distribution 189 Distributing Actual Costs... 190 Example for Actual Cost Summarization 192 Allocate Process Costs. 7 senennnnnes 193 Revaluation of Activities at Actual Activity Prices in Product Cost by Period. 194 Revaluating Activities at Actual Activity Prices 197 Overhead in Product Cost by Period 199 Calculating Overhead. 201 Work in Process in Product Cost by Period 203 Example for Reporting Point Backflush and Work in Process 210 Example for Flow of Values with WIP at Target Costs 2 Checking the Control Parameters for WIP Calculation... ennnnnnnnnnssens 244 Example for Line ID in WIP Calculation 218 Example for Work in Process That Can Be Capitalized 216 Work in Process in the Balance Sheet, 217 Defining the Cutoff Period in Product Cost by Period ...wnsniiisnnnnenennnnene 219 Calculating Work in Process in Product Cost by Period 220 Variances and Scrap in Product Cost by Period ssseennnnnnnnnnnnnnnnnees B22 Variances and Scrap with a Valuated Sales Order Stock 229 Calculation of Scrap in Product Cost by Period 232 Example for Scrap Calculation. 234 Variance Calculation in Product Cost by Period: Flow of Values ... sonennnnnne 235 Calculating Variances in Product Cost by Period 238, Settlement in Product Cost by Period ... ssonennnnnnnnnnnnnnnssneeeeeee 2B Settlement Rules for Production Cost Collectors 246 Displaying a New Distribution Rule for an Order 248 Settling Variances for a Cost Object Hierarchy: Scenario 250 Example for Settlement of a Cost Object Hierarchy. 251 Checklist for Settling a Cost Object Hierarchy 254 Defining Settlement Rules for a Cost Object Hierarchy. 256 Settling Variances for Orders Within a Cost Object Hierarchy: Scenario 257 Displaying a New Distribution Rule for a Cost Object Hierarchy... 258 Archiving Cost Object Hierarchies 259 Product Cost by Order 260 Materials in Product Cost Controlling 263 Material Types 265 Special Features of Co-Products 269 Special Features of By-Products. am ‘June 1998 5Cost Object Controlling SAP AG Special Features of Intra Materials... sennnnnnnnnnnnnnnnnnvsens BTR Calculating the Cost of Material Input by Material Type 273 Valuation of the Output Quantity in Dependency on the Material Type 274 ‘Standard Cost Estimate for Material 275 Production Order in Cost Object Controlling 277 Special Case: Co-Products and By-Products on Production Orders 280 CO Production Orde 281 Creating a Production Order Without Quantity Structure. 282 Process Orders in Cost Object Controlling 283 Collective Orders... 286 Product Cost by Order: Scenario. 288 Product Cost by Order for Production Orders with Quantity Structure: Example 291 Product Costing with Process Order: Example. 292 Activities Relevant to Costing When Creating a Production Order with Quantity Structure293, Routing Selection 295 Master Recipes in Cost Object Controlling 299 Material List in Process Manufacturing 301 Distribution of the Planned Costs by Period... sesnnnnnnnnnnnnneee 303 Generation of Settlement Rules 304 Checking the Settlement Rule 309 Overhead in Product Cost by Orde 310 Preliminary Costing of Orders with Quantity Structure 311 Checking the Control Parameters for Preliminary Costing. 313 Status Codes in Costing 314 Result of Preliminary Costing 315 Special Features of Preliminary Costing of Collective Orders 3817 Preliminary Costing of Production Orders Without Quantity Structure, 318 Creating a Cost Estimate for a Production Order Without Quantity Structure 320 Simultanoous Costing in Order-Related Production: Scenari 321 Checking the Control Parameters for Simultaneous Costing, 323, ‘Special Features with Actual Costs in Joint Production, 324 Releasing an Order 325 Viewing Actual Costs in the Order..rnne svnnnnnnnnnnnnnnnnnnnnnnnnnnns 326 Goods Issues in Product Cost by Order. 327 Creating a Goods Issue for a Stock Material for a Production Order (Planned). 330 Creating a Goods Issue for a Stock Material on a Production Order (Unplanned). 331 Confirmations in Product Cost by Order. 332 ‘System Activities Relevant to Cost Accounting: Confirmations in Product Cost by Order 335 Special Types of Confirmations sonninnnnnninnnnnnnnnnnnnnne 336 Confirmation Data When Confirming Operations. 337 Confirming Yield, Rework, and Scrap 339 Integration of Rework for Production Orders ... on 344 Creating a Confirmation for an Order. sevnnnnnnnnnnnnin sennnnnnnnen SAB Creating a Confirmation for an Operation 344 Goods Receipts in Product Cost by Order 345 Crediting the Order or Order Item with Goods Receipts 347 Debit of Material Stock Accounts from Goods Receipts 348, Creating a Goods Receipt for an Order 349 6 June 1998WY SAP AG Cost Object Controlling Time Sheet... Period-End Closing 380 Product Cost by Order: Scenari Revaluation of Activities at Actual Activity Prices in Product Cost by Order... 355 Revaluating Activities at Actual Activity Pri¢@S ....nn:mnnnnnnnnnnn 357 Allocating Process Costs. 359 Overhead Allocation in Product Cost by Order 360 Calculating Overhead 361 Work in Process in Product Cost by Order. 362 Checking the Control Parameters for WIP Calculation 366 Example for Line ID in WIP Calculation 367 Example for Work in Process That Can Be Capitalized 368 Selection of Orders for WIP Calculation 369 Valuation of Work in Process with Actual Costs 371 Example for Flow of Values with WIP at Actual Costs. 373, Work in Process in the Balance Sheet in Product Cost by Order. 376 Defining the Cutoff Period in Product Cost by Order 378 Calculating Work in Process in Product Cost by Order 379 Variances and Scrap in Product Cost by Order 381 Checking the Variance Key 387 Flow of Values in Variance Calculation in Product Cost by Order. 388 Example for Variance Calculation for a Production Ordet ..nnnnnnn 391 Variances and Scrap with a Valuated Sales Order Stock. 393 Calculating Variances in Product Cost by Order. 396 Settlement in Product Cost by Order. 398 Settlement of Cumulative Variances for Production Orders: Scenario 403 Checklist for the Settlement of Variances to Profitability Analysis. 404 Settlement Profile ssn ssnnnnnnnnnnnnnnnnnnnnsnns 408 Settlement Structure. 407 PA Transfer Structure 408 Source Structure 409 How Delivery and Settlement Are Linkd....nnnnmnnnnnnnnninnnnnsnnnnsesnnn 410 Settlement in the Case of Stock Shortage att Example for Settlement in Case of Stock Shortage. 412 Settlement of Scrap 413 Example for Settlement in Case of Scrap ..unnnsnnnnnnnninsnnnnne soe AN Settlement of Collective Orders 415 Settlement of Collective Orders: Scenario. 47 Settlement in Joint Production: Scenario 418 Examples for Settling in Joint Production... ss 420 Checklist for Settlement in Joint Production 422 Example for the Use of a Source Assignment. 424 Displaying a Distribution Rule in Product Cost by Order 425 Archiving of Settlement Documents. 427 Product Cost by Sales Order 428 Selected Logistical Processes and Cost Objects in Product Cost by Sales Order Example for Sales-Order-Related Production with Requirements Planning, 438 ‘June 1998 7Cost Object Controlling SAP AG Example for Variant Processing ....nm “ sn sone 439 Example for Assembly Processing 440 Control of Assembly Processing aut Special Requirements in Assembly Processing with Planned Orders. snes MAB Special Requirements in Assembly Processing with Production Orders. 444 445 447 Sales Order Item That Carries Costs and Revenues Valuated Sales Order Stock.. Valuated Sales Order Stock: Valuation 450 ‘Standard Price Calculation with a Valuated Sales Order Stock. 453, ‘Accessing Customer Exit COPCP002 456 Product Cost by Sales Order with a Valuated Sales Order Stock: Scenario 487 Example for Product Cost by Sales Order with a Valuated Sales Order Stock: Flow of Quantities and Values... nnn sennnnn nnn Nonvaluated Sales Order Stock ..n. Nonvaluated Sales Order Stock: Valuation 468 Nonvaluated Sales Order Stock: Scenario. 469 Example for Product Cost by Sales Order with a Nonvaluated Sales Order Stock... 472 Constraints on Nonvaluated Sales Order Stocks. Checklist for Product Cost by Sales Order. Control of Requirements Type Determination ‘System Activities When a Sales Order Is Created .. Creating a Standard Order. Overhead in Product Cost by Sales Order Calculation of Planned Values in Product Cost by Sales Order. Revenue Planning Displaying Conditions and Condition Types. Sales Order Costing Product Cost Estimate for Sales Order Item Costing Lot Size in Sales Order Costing, ‘Transfer Strategies in Sales Order Costing Creating a Product Cost Estimate for a Sales Order item Unit Cost Estimate in Sales Order Costing Creating a Unit Cost Estimate for a Sales Order Item Copying Costing Items from a Base Object Cost Estimate... 511 Exploding Base Object Items. 512, Exploding a Material. 513 Postprocessing of Product Cost Estimates with Unit Costing, 514 Editing a Product Cost Estimate with Unit Costing . ese sone 516 Calculation of Planned Costs in Assembly Processing. 518 Calculation of Planned Costs in Variant Manufacturing 519 ‘Simulating a Cost Estimate (Configuration Simulation) 521 Update of Planned Costs. Posting Actual Values in Product Cost by Sales Orde ‘ommitments. 527 ‘Actual Costs in a Valuated Sales Order Stock with Sales Order item That Carries Costs and Revenues 528 Reporting of Funds Commitments in Inventory. 530 Actual Costs with a Nonvaluated Sales Order Stock ... B31 a June 1998WY SAP AG Cost Object Controlling ‘Actual Revenue in Product Cost by Sales Order 1. 533 Resource Related Billing. nnnniinnnnninnnnnnnnnnnnnnneeees 55 Manual Entry ofthe Cost of Sales.. 538 Entering the Cost of Sales Manually. 539 Time Sheet 540 Period-End Closing in Product Cost by Sales Order: Scenario . 541 Allocating Process Costs. 545 Revaluation of Activities at Actual Activity Prices. . 546 Revaluating Activities at Actual Activity Prices 548, Overhead Allocation in Actuals in Product Cost by Sales Order...c.nnnnnnnnnnnnnnseee: 550 Calculating Overhead. 582 Results Analysis... 1. 553 Results Analysis: Sequence. snnnnnnnnnnnnnnnnnnnene - 587 Order Status Codes in Results Analysis 558 Setting the Status for a Sales Order Item 559 Methods of Results Analysis 560 Revenue-Based Method with Profit Realization (01). sevens 562 Percentage-of-Completion Method (03). 565, Quantity-Based Method (04) 568 Completed Contract Method (09) 871 Inventory Determination, Without Planned Costs, Without Milestone Billing (10)... 572 Inventory Determination, Without Planned Costs, with Milestone Billing (11) 574 Inventory Determination, Reserves for Follow-Up Costs, Without Milestone Billing (12)577 Update of Costs to Line IDs 580 Checklist for Results Analysis: Line IDs. seennnnnnnnnnnnneee 584 Posting Rules 589 Cutoff Period 590 Setting the Cutoff Period 591 Performing Results Analysis... fnnnenn 592 Results Analysis in Dependency on the Sales Order Structure. 593 Manual Changes to Automatic Results Analysis Data. 595, Manual Entry of Results Analysis Data 598 Entering Results Analysis Data Manually... snnnnnnnnnsse BOT Manual Entry of the Cost of Sales 602 Entering the Cost of Sales Manually. 603 Deleting Results Analysis Data 604 Settlement of Sales Order Items. 605 Settlement of Results Analysis Data 610 Transfer of Results Analysis Data to Profitability Analysis... 611 Settlement of Results Analysis Data to Financial Accounting and Profit Center Accounting614 Settling Results Analysis Data 616 Commitment Carryforward at Yearend Closing, 617 Carrying a Commitment Forward 618 Costs for Intangible Goods and Services. 619 Goneral Cost Objects 624 Control Parameters for General Cost Objects. 623, ‘June 1998 9Cost Object Controlling SAP AG Creating a General Cost Object 627 Cost Object Groups. Creating a Cost Object Group General Cost Objects with a Cumulative Time Base: Scenario.. 629 Example for General Cost Object with Cumulative Time Base. 631 General Cost Objects with a Periodic Time Base: Scenario. Example for General Cost Object with Periodic Time Base. 633 Overhead in Costs for Intangible Goods and Services Cost Planning for General Cost Objects. 636 Cost Planning for General Cost Objects with a Periodic Time Base snnnennns 687 Planning Layouts. 639 Planning Costs with the Planning Layout for Activity Type Planning, 640 Planning Costs Using Statistical Key Figures. 644 Example of Planning with Statistical Key Figures. 642 Creating the Link to the Logistics Information System (LIS), 643 Planning Statistical Key Figures By Period 644 Transferring Key Figures from the Logistics Information System (Plan) 645, Simultaneous Costing, Entering a G/L Account Posting for a General Cost Object 647 Entering a Goods Issue for a General Cost Object. 64g, Entering an Invoice Receipt for a General Cost Object... senennnnnnnnnnnsssees 64D Entering Internal Activity Allocations for a General Cost Object 650 Time Sheet Period-End Closing for General Cost Objects: Scenario .. Allocating Process Costs. Importing Statistical Key Figures from the LIS (Actuals), Revaluating Activities at Actual Activity Prices. Calculating Overhead for General Cost Objects Using the Worklist of Overhead Calculation Settlement in Costs for Intangible Goods and Services Control Parameters for Settlement. Creating a Settlement Rule for a General Cost Object. 665 Archiving and Deleting General Cost Objects. 70 June 1998WY SAP AG Cost Object Controlling e¢ Cost Object Controlling ‘June 1998 "1Cost Object Controlling SAP AG Cost Object Controlling . Cost Object Controlling Purpose Cost Object Controlling is an area within cost accounting that answers the question: Which objects incurred costs? It assigns the costs incurred by your company to units within the ‘company such as products, product groups, or orders. This component offers real-time cost management functions that determine the cost of goods manufactured in all your plants. You can determine the cost of goods manufactured or the cost of goods sold for company activities. This component enables you to do the following: ‘* Calculate planned costs for the planned order quantity on the basis of orders in Logistics ‘+ Calculate the planned costs for customer-specific make-to-order products + Collect actual costs for all cost objects ‘+ Compare actual costs with target costs and with planned costs, and analyze ‘= Determine price floors for products or orders You can use the functions of Cost Object Controlling by lot or by period, The Cost Object Controlling component supplies information for the following business functions: + Price setting and general price policy + Inventory valuation + Cost of goods manufactured + Profitability analysis + Profit center accounting Implementation Considerations Here are some of the ways you can utlize this component: ‘* To find out whether the actual costs of an order matched or exceeded the planned costs + To determine what production variances occurred between actual costs and target costs, and why these occurred ‘* To decide whether to accept a particular sales order (whether the sales order will be profitable or not) + Toestablish where your company has particularly low costs and therefore what cost, objects it should concentrate on ‘© Inmake-or-buy decisions, to determine whether it would be more profitable to manufacture a cost object in-house or to outsource it 2 June 1998WY SAP AG Cost Object Controlling Cost Object Controlling + To determine whether and how the cost of goods manufactured can be reduced Cost Object Controlling also can provide special information on: + Scrap costs ‘+ Cost savings from new production techniques. ‘+ Cost behavior during capacity bottlenecks ‘The cost of goods manufactured for finished products calculated in Cost Object Controlling and the work in process calculated for orders can be used to capitalize the inventories in your balance sheet. « Integration Before you can use Cost Object Controlling, you calculate the planned costs for each product in a cost estimate. You can use different costing methods in Product Cost Planning (CO-PC-PCP) for this purpose. You can view the data of Cost Object Controlling in the information system for Product Cost Controlling (CO-PC-IS). When you settle, you can transfer the data of Cost Object Controlling to other areas of the system: + You can transfer the data to Actual Costing / Material Ledger (CO-PC-ACT) © You can transfer the data to Financial Accounting (Fl) for purposes such as capitalizing unfinished and finished products and automatically creating reserves. + You can transfer the data to Profitability Analysis (CO-PA) to analyze the costs by market segment. + You can transfer the data to Profit Center Accounting (CO-PCA) to analyze the results. by profit center. « Features All postings of actual data that refer to a cost object result in an immediate debit of the cost object. The closing activities in at the end of the period allow you to do the following: ‘© Compile periodic reports on a regular basis + Revaluate activities at actual activity prices ‘= Allocate overhead using process cost allocation and by applying overhead rates to cost objects © Calculate work in process + Determine variances between target costs and actual costs, + Transfer the data to other objects and components The period-end closing procedure enables you to generate periodic reports. You can view the planned costs and actual costs at the level of the plant, product group, or individual cost objects, The data are always available in real time. ‘June 1998 3Cost Object Controlling I SAP AG Cost Object Controlling Drilidown techniques enable you to access detailed information. FD) From the evaluations at plant level, you drill down to the product groups and from there down to materials/products or individual orders. Starting with Release 4.0, Cost Object Controlling in the R/3 System is divided into the following components: © Product Cost by Order + Product Cost by Period ‘+ Product Cost by Sales Order ‘© Costs for intangible Goods and Services See also: ‘The following sections provide information on the following: ‘© Basic information on Cost Object Controlling ‘© What cost objects are, and what cost objects are available in the Product Cost Controlling component ‘+ The relationship between Product Cost Planning and Cost Object Controlling + What master data you use ‘+ The different types of Cost Object Controlling that are available This documentation also provides detailed background information on the functions provided in Cost Object Controlling and the many different scenarios. For detailed information on creating standard cost estimates to calculate the planned costs of your materials, see the document Product Cost Planning. For detailed information on evaluating data in the information system, see the document Product Cost Controlling Information System. The present documentation does not contain detailed information on cost accounting for projects. For information on this subject, see the document Project System. 4 June 1998WY SAP AG Cost Object Controlling Cost Object Controlling and Cost Accounting Systems in the R/3 System ¢ Cost Object Controlling and Cost Accounting Systems in the R/3 System ‘The basis of Cost Object Controlling in the R/3 System is standard costing. The system calculates the target costs by multiplying the confirmed quantity produced by the standard costs per unit, The resulting value is compared with the actual costs for cost analysis purposes. * Absorption Costing and Variable Costing Cost accounting in the R/3 System can be designed as absorption costing or variable costing {also called direct costing). If you are using variable costing, when you define your cost components in Customizing for Product Cost Planning under Basie Settings for Material Costing -» Define Cost Components > Cost components with attributes in the detail screen you should only flag the variable part of the activity types as relevant to inventory valuation. With internal activity allocations the relevant cost centers are only credited with the variable part of the activity type prices—even if they are made ina confirmation. You can pass the fixed part of the activity type prices to Profitability Analysis (CO-PA) at the end of the period. The variable cost of goods manufactured of the sales are passed to Profitability Analysis when you invoice, Variances between the standard cost of goods ‘manufactured and the actual cost of goods manufactured can be passed from Cost Object Controlling to CO-PA at the end of the period. « Inventory Valuation © Standard Price Materials whose price control indicator is set to $ are valuated in Financial Accounting at their standard price. This is recommended for semifinished products finished products. The moving average price is shown as a stalistical value in the material master record. * Moving Average Price When materials whose price control indicator is set to V are received from in-house manufacturing processes, they are initially valuated with a value you defined, such as the standard price. When you settle, the material stock account is debited with the variances. This results in a new moving average price. ‘You can valuate raw materials with the standard price or the moving average price. * Actual Costing You can use the Actual Costing / Material Ledger component to calculate a periodic unit price for the previous period. You can use this price for statistical purposes or to revaluate your inventories. + Inventory Costing If you do not want to use any of the above methods to valuate your inventories in the year-end closing, you can use Product Cost Planning component to create inventory cost estimates for determination of the cost of goods manufactured for commercial and tax valuation, and use these cost estimates to valuate your inventories in the commercial balance sheet or tax balance sheet. ‘June 1998 6Cost Object Controlling SAP AG Cost Object Controlling and Cost Accounting Systems in the R/3 System See also: Document Product Cost Planning Document Actual Costing / Material Ledger 16 June 1998WY SAP AG Cost Object Controlling Cost Object Controlling in Make-to-Stock Production « Cost Object Controlling in Make-to-Stock Production In make-to-stock production, you can use Cost Object Controlling as follows: Product Cost by Order You can manage your costs at the level of production orders and process orders. You can analyze cumulative costs or period costs. Product Cost by Period You can manage your costs by period at the level of production cost collectors. You can create production cost collector for run schedule headers, for the combination ‘material / production version at plant level, or only for materials at plant level You can also use cost object hierarchies for cost management when you have costs that cannot easily be assigned to particular orders, production cost collectors, production versions, or materials. You can also use cost object hierarchies in conjunction with production orders or process orders. See also: For detailed information, see the following documents: Product Cost by Order [Seite 260) Product Cost by Period [Seite 111 ‘June 1998 7Cost Object Controlling SAP AG Cost Object Controlling in Mass Production Environments Using Sales Orders ¢ Cost Object Controlling in Mass Production Environments Using Sales Orders From the SAP point of view, you are in a mass production environment using sales orders when you have configurable products with super bills of material and super task lists whose individual variants you define through the characteristic values in the sales order but for which no further customer-specific changes are made. This means that the configuration in the sales order completely describes the variant, Due to the large number of sales order items in mass production environments using sales orders, the main focus here is not on the cost of the sales order but on the cost of the product. The use of a valuated sales order inventory in this scenario means that you do not have to manage the costs of sales order items. This eliminates the need for results analysis and settlement of the sales order item in Controlling. WIP is calculated at the level of orders (such as production orders) and production cost collectors, for which variance calculation is now possible. Mass production environments using sales orders are often encountered in advanced-technology industries and in the automotive industry. Sales orders are processed as in make-to-stock environments. Cost Object Controlling in this scenario is not managing the costs of sales orders but the costs of products. ad If you are using a nonvaluated sales order inventory, then in mass production environments using sales orders you manage the costs of sales orders at the level of a sales order item that has costs and revenues. If you make customer-specific changes to a variant, this scenario no longer corresponds to a mass production environment using sales orders—it is now a complex make-to-order environment See also: For more information on product costs, see the following Product Cost by Order [Seite 260) Product Cost by Period [Seite 111 For information on valuated and nonvaluated sales order inventories, as well as on complex sales-order-related production, see the following Product Cost by Sales Order [Seite 428 For detailed information on variance manufacturing, see the documentation Logistics General: Variant Configuration Guide. 18 June 1998WY SAP AG Cost Object Controlling Cost Object Controlling in Complex Make-to-Order Environments ¢ Cost Object Controlling in Complex Make-to-Order Environments ‘The central feature of complex make-to-order environments is that products are modified or even completely redesigned in response to particular orders. The manufacturer needs to be able to plan and monitor the costs and revenues of such production environments effectively. Different processing methods are available for this scenario: + Cost management directly through the sales order item (make-to-order), This method has the following options: — You can use a valuated sales order inventory in conjunction with sales order items that have costs and revenues. This is the type of processing recommended by SAP. = You can use a nonvaluated sales order inventory in conjunction with sales order items that have costs and revenues. * Cost Object Controlling for projects (engineer-to-order) for complex manufacturing such as plant engineering. This method has the following options: You can use a valuated project inventory in conjunction with WBS elements that have costs and revenues. = You can use a nonvaluated project inventory in conjunction with WBS elements that have costs and revenues. See also: For more information on Cost Object Controlling in complex make-to-order environments, see the following section: Product Cost by Sales Order [Seite 428 For detailed information on managing costs in engineer-to-order environments, see the documentation Project System. ‘June 1998 19Cost Object Controlling SAP AG ‘Sequence of Steps in Cost Object Controlling: Scenario « Sequence of Steps in Cost Object Controlling: Scenario Cost Object Controlling involves the following steps: 1. Preliminary Costing This calculates the planned costs for each order. The planning variances can be determined by comparing the results of preliminary order costing with the standard cost estimate for the material Simultaneous Costing Each time a relevant posting is made, simultaneous costing collects the costs for the internal activities, the external activities, and the material used. It provides you with an overview of the costs that have been incurred up to a certain point in time. Here you ‘can make sure that each posting that is relevant to Controlling is assigned to both a cost element and a cost abject. Final Costing Final costing evaluates the order at the end of the period. It is normally performed as period-end closing ‘The period-end closing process involves revaluating activities with actual activity prices, calculating the actual overhead using process cost allocation and overhead calculation, calculation of the work in process, variances, and scrap costs, and settlement which passes the data on to other objects and/or other components. Period-end closing in Cost Object Controlling normally follows period-end closing in Cost Center Accounting, Product Cost Planning Pieduct Gost Penning, i 1 ' ' Standerd cost Proliinary Simultaneous Final costing! estimate costing costing period-end closing Periods / milestones / reporting points Non-order-olated Time matoralicostng Confirm Final detvery! ¢ Y 3 operations and completion of reporting points "order (actual activities, ' ' material consumptions) | [aan Cost Object Controlling 20 June 1998BY SAP AG Cost Object Controlling Cost Objects in the R/3 System ¢ Cost Objects in the R/3 System Cost objects are the units to which costs can be assigned according to cause by means of Cost Object Controlling. The costs incurred in a company can be assigned to the following cost objects: © General cost objects © Products ‘© Orders (production orders and process orders) ‘© Production cost collectors ‘© Cost object hierarchies and their cost object nodes ‘* Sales document items (item in an inquiry, quotation, or sales order) ‘+ Projects and their WBS elements = Networks * General Cost Objects For intangible goods and services, Cost Object Controlling uses general cost objects (cost object IDs). For these general cost objects, you can: ‘* Calculate planned costs and actual costs + Pass actual costs on to other objects in the R/3 System (such as profitability segments or G/L accounts) + Analyze planned costs and actual costs You can evaluate general cost objects by period or cumulatively. * Products For materials, the planned costs are calculated in cost estimates created in Product Cost, Planning. These cost estimates serve the following purposes: * Calculate the costs for a product before an order to commence manufacturing is placed ‘+ Optimize the cost of goods manufactured of a product by means of comparative cost estimates ‘+ Provide information for the following functions: — Comparing a cost estimate and an order = Variance calculation — Contribution margin accounting = Inventory valuation * Orders / Production Cost Collectors Internal activities are managed using orders (production orders and process orders) or Production cost collectors. At the order level, Cost Object Controlling is used to: ‘June 1998 24Cost Object Controlling SAP AG Cost Objects in the R/3 System ‘© Calculate the order-related costs ‘+ Calculate the work in process for each order ‘© Optimize the order-related costs For production orders, process orders, and production cost collectors for run schedule headers, variances are calculated and seitled to Profitability Analysis. The confirmed scrap can also be valuated in variance calculation, Only costs are collected on these orders. When the orders are complete, they are delivered to inventory. There is no direct link between the sales order and the production order. Costs and revenues cannot be compared to each other until the profitability analysis stage (CO- PA). You can also create production cost collectors in repetitive manufacturing for a material or for a ‘material and production version. * Sales Document Items Activities that are performed on the basis of complex make-to-order production are processed using sales order items. Here Cost Object Controlling is used to: + Caleulate the order-related costs + Compare the revenues with the cost of sales + Automatically create reserves for anticipated losses + Provide basic information for Profitability Analysis Orders such as production orders and process orders can be generated for sales orders. Cost Object Controlling includes both the costs that can be assigned directly to the sales order item and the costs that arise in production, * Cost Object Hierarchies Cost Object Controlling uses a hierarchical structure in the following cases: ‘+ When the production setup makes order processing impossible (that is, when there are actual costs that cannot be assigned to any particular order). In this case production is managed using a project or a cost object hierarchy. The structure is broken down into cost object nodes (cost abject IDs) such as individual machines or processes. Costs that cannot be assigned to orders can be assigned to a production line or product group, for example. Costs can be controlled for the hierarchy as a whole, or at the order level after actual cost distribution. ‘+ When you require an overview of the individual orders. In this case individual orders are grouped together to form a hierarchy, and the totaled costs are calculated for each node of the hierarchy. + Projects If an undertaking is too complex to be processed as an order, a project can be used instead. A project can also be used when there are actual costs that cannot be assigned to any particular order. 22 June 1998BY SAP AG Cost Object Controlling Cost Objects in the R/3 System {A project is subdivided into work breakdown structure elements (WBS elements). Cost Object Controlling can be used both at the level of the individual WBS elements and at the level of the project as a whole. See also: ‘The present documentation does not contain detailed information on cost accounting for projects. For information on this subject, see the document Project System. ‘June 1998 23Cost Object Controlling SAP AG ‘Master Data of the Controlling Module in Cost Object Controlling ¢ Master Data of the Controlling Module in Cost Object Controlling The following master data in Gost Center Accounting is used in Cost Object Controlling + Cost centers Organizational unit at which costs are incurred. Each work center is linked to one and only one cost center. The following are planned for each cost center: — The activities to be performed by the cost center, and the prices ofthe activities — Which costs an object is debited with when it uses the activities of the cost center + Activity ype The activities performed at a cost center are expressed as activity types. Activities are valuated with activity prices, which are either set manually by the user or established by the system iteratively for all cost conters. In the latter case, the system computes the activity prices by dividing the planned costs of a cost center assigned to the activity types by the planned activity (or, depending on the system setting, by the capacity). ‘Actual costs are collected for each cost center. You can determine actual activity prices for the individual activity types, and revaluate the object that used the activities of the cost center. © Cost element Each posting of costs must be assigned to a cost element. The system differentiates between the following cost elements: — Primary cost elements (external goods and services) ‘Secondary cost elements (activities in your company) ‘The cost element type specifies the business transactions for which a cost element can be used ‘The following primary cost elements are used in Cost Object Controlling: — 01: Primary cost elements, general ‘These can be debited with all primary postings (such as Fl or MM). Accounting documents are generated for these postings. = 22: Cost elements for external settlement ‘These are required, for example, for settling order or project costs to CO-external objects. CO-external objects are such things as fixed assets (AM), materials. (MM), or G/L accounts (Fl). Settlement generates an accounting document, The primary cost elements are linked to G/L accounts in Financial Accounting, ‘The following secondary cost elements are used in Cost Object Controlling: 21: Cost elements for internal settlement ‘These are used for settling order or project costs to CO-internal objects. CO- internal objects are such things as orders, profitability segments, cost centers, and projects 24 June 1998WY SAP AG Cost Object Controlling Master Data of the Controlling Module in Cost Object Controlling — 31: Cost elements for results analysis ‘These are used for saving the data generated during WIP calculation or results analysis on the order or project. = 41: Cost elements for overhead ‘These pass overhead costs from cost centers to orders, projects, and so forth. — 43: Cost elements for direct internal activity allocation ‘These are used by the system in internal activity allocation to allocate costs, ‘The secondary cost elements are only used within the Controlling component. + Cost element groups These group together similar cost elements. In Cost Object Controlling, the cost element groups are used to group together costs for settlement as well as for creating reports. ‘June 1998 25Cost Object Controlling SAP AG Master Data of the Production Planning Module in Cost Object Controlling « Master Data of the Production Planning Module in Cost Object Controlling When you create a standard cost estimate or a production order in the Production Planning module, the system accesses different types of master data to create the quantity structure for costing, ‘The Production Planning component normally contains the following data for each finished or semifinished product: * BOM = Lists all material components that are required to manufacture the product. = Can contain materials that have their own BOMs. ‘The BOM usage indicates whether the BOM is relevant to costing, You specify the following for each BOM item: — Whether the material component is taken into account in the cost estimate Whether the material component is kept in stock or procured externally — Whether the input quantity is independent of the lot size (that is, independent of the quantity produced) — Whether the material should be treated as a co-product The following illustration shows how the BOM is exploded and valuated in costing: Bill of Material Expl Valuation acc. to BOM structure ‘valuation variant Frame t pe 600.00 USD Forks 1 pe 180.00 USD Handlebar t pe 60.00 USD —+| Gears tpc |-—»| 84.00 USD Bottom bracket 1 pe 36.00 USD Saddle 1 pe 448.00 USD Seat pin t pe 36.00 USD © Routing Describes the sequence of the operations required to manufacture a product. = Specifies such things as’ ~ Whether an operation is included in costing = Whether an operation is processed internally or externally - Whether and how an operation is confirmed - What material components and production resources are required in the operation - Whether a goods receipt is posted when the operation is confirmed - Whether rework is carried out through the operation The routing contains standard values for the execution of the operation. The system calculates the planned costs for the internal activities in the operation by interpreting 26 June 1998WY SAP AG Cost Object Controlling Master Data of the Production Planning Module in Cost Object Controlling these standard values using the formula in the work center. In the routing, the base quantity (such as the piece quantity) is normally constant. The required times (such as the processing time for each operation) are maintained through the standard values. You can also use rate routings instead of routings. Rate routings are employed mainly in repetitive manufacturing. They are used for quantity-based planning. The reference time is constant, while the production quantity is established separately for each article. You define one sequence of operations. You can use the production time and the associated units to specify a production rate for the operation. The production rate is calculated by dividing the production quantity by the production time. In repetitive manufacturing, operations that are defined as milestones automatically become the basis for the definition of reporting points when the run schedule header is created + Work centers ‘These are organizational units at which an operation is performed. A work center can be a machine, a person, a production line, or a group of workers, The work center is assigned to a plant. Each work center is linked to a cost center in its master record. The cost center is assigned to a controlling area. The work centers assigned to a cost center can be in different plants. The plant is assigned to only one company code, which is in tum assigned to a controlling area. In cost center planning, the activities performed at the work center are planned using activity types. The system calculates the amount of activity required using the formula in the work center and the standard values in the operation. It then calculates the planned costs for the operation by valuating this activity with the activity prices in Cost. Center Accounting, The following illustration shows the link between the data in the work center and the data in the routing: 1 [Work center“! [Reais | Dererminconsans | | pstancordvates | 1D cos conter i | Deceneral operation | {Activity pe | 1 date } In repetitive manufacturing you can use a production line instead of a work center. The production line must be defined as a work center in the Production Planning ‘June 1998 27Cost Object Controlling SAP AG Master Data of the Production Planning Module in Cost Object Controlling ‘component. It provides information on the quantity that can be produced in a given time period, Material master records Ammaterial master record contains all information necessary to manage the material, The following views are important in Cost Object Controlling: = Accounting view = Costing view ‘The accounting view: — Controls the valuation of the material and the assignment of the material to a G/L. account and therefore to a primary cost element — Shows the total and the value of all valuated stocks of the material Contains prices that can be transferred from inventory cost estimates for the ‘material (such as the tax price 1 and commercial price 1) The costing view controls the following for Cost Object Controlling: — Whether the material number (the Origin) is updated in the cost element itemization in the Controlling module Here you ensure that the material number for material costs is displayed in the information system. Whether the consumption of the material is subdivided according to origin groups This allows you to create groups of raw materials or trading goods, for example in order to calculate overhead using uniform criteria, ~The basis on which overhead costs forthe material can be calculated (overhead group) If you have entered an overhead group, you can link it to an overhead key and define conditions for selected groups of semifinished and finished products. — Whether variances for orders are calculated through this material The variance key in the material master record is transferred into the production order. It specifies that such orders are selected when the variances are calculated. The costing view also controls the following: — Whether the material is normally costed in product costing or unit costing What lot size is used in costing — How BOMs and routings are selected for cost estimates with quantity structure costing — What status the material has This information in this view is transferred from: — The standard cost estimate for the material when the standard cost estimate is marked and released (such as the fulure standard price, the current standard price, and the previous standard price) 28 June 1998WY SAP AG Cost Object Controlling Master Data of the Production Planning Module in Cost Object Controlling — The modified standard cost estimate or the current cost estimate for the material (such as planned price 1) ‘The co-production extras contain an apportionment structure that determines the apportionment of the total costs for an order to the individual co-products. See also: For more information, see the document PP Production Planning. June 1998 29Cost Object Controlling SAP AG Checking the Production Planning Master Data Before Costing Checking the Production Planning Master Data Before Costing You should check the following before creating a cost estimate: BOM + BOM usage (is the BOM relevant to costing?) + Validity period of the BOM + BOM status (can the BOM be selected for costing?) * Lot-size range in which the BOM is valid + Validity period of the BOM item + Indicator for relevaney to costing of the BOM item Whether the individual material components are included in the standard cost estimate and in the preliminary cost estimate for the order depends on the indicator for relevancy to costing: if this indicator is not set, the material component will not be included in costing. For the inventory cost estimate, this indicator specifies the factor with which the costs of the material component are calculated, Routing + Key date + Lotsize range in which the routing is valid + Control key of the operation * Indicator for relevancy to costing of the operation > Whether the operations listed in the routing are costed depends on the control key and the indicator for relevancy to costing, If the control key says that the operations are costed, you can use the indicator for relevancy to costing to specify which factor is used for the inventory cost estimate to cost the activities in the operation. Otherwise the indicator for relevancy to costing is set to X (relevant to costing) or blank (not relevant to costing), In repet ive manufacturing, you also specify whether the operation should be defined as a milestone. Milestones are necessary for reporting point backflushing. Work Center ‘© Link to cost center = Activity types © Formulas You can specify up to six activity types for each work center. You create the activity types in Cost Center Accounting. The standard value key determines how many activity types you can enter for each operation. 30 June 1998WY SAP AG Cost Object Controlling ‘Checking the Production Planning Master Data Before Costing In the work center, you assign each activity type to a formula. Using the formula in the work center and the standard values in the operation, the system calculates how much activity for an activity type is expected in a given operation To enable a formula to be used to calculate the production costs, the indicator Costing allowed in Customizing for Product Cost Controlling must be set for this, formula. You should also make sure that the formula parameters are linked to values that have been entered in the routing. ‘June 1998 34Cost Object Controlling SAP AG Master Data of Production Planning ~ Process Manufacturing (PP-Pl) in Cost Object Controlling ¢ Master Data of Production Planning - Process Manufacturing (PP-Pl) in Cost Object Controlling The produ n costs in process manufacturing are calculated using the master recipe and the resources. The production costs can be calculated separately for each phase. Master recipes ‘Amaster recipe describes the production of materials in a production run. You can create a master recipe either with reference to a material (the primary product) or to the process. A master recipe specifies: — What resources are required — What operations are carried out, and in what sequence — What phases the operations are divided into — Whether and how a phase is confirmed — What material components are required to carry out the phase Whether the material component is taken into account in the cost estimate — What intra materials, valuable materials, and remaining materials are produced during the production run — Whether the costs for the valuable materials are calculated according to equivalence or by using the net realizable-value method — Whether a goods issue is posted when the last phase is confirmed ‘The master recipe contains standard values for carrying out the phase. To calculate the planned costs for the phase, these standard values are interpreted in connection with the formula in the resource. ad From Release 3.0C onwards itis no longer possible to cost the operations in the master recipe and in the process order. To avoid duplicate calculation of costs, only the phases are costed. To correct errors in the dataset, you should delete the indicator for relevancy to costing from the operations in existing master recipes and process orders. Resources Resources include the means of production and the employees required in the production process. The resource is assigned to a plant. ‘The master record of each resource points to a cost center. The cost center is assigned to a controlling area. A cost center can have resources from different plants assigned to it. Each plant is unique in a company code (and therefore also in a controlling area). In cost center planning, the activities required for the resource are planned using activity types. Note the differences between primary and secondary resources: 32 June 1998WY SAP AG Cost Object Controlling Master Data of Production Planning ~ Process Manufacturing (PP-Pl) in Cost Object Controlling — The primary resource is that part of the installation or processing unit at which an operation is carried out. All phases automatically contain the same primary resource as the operation ‘An operation or phase can also have additional resources, These resources are called secondary resources. Both the costs incurred for the primary resource (such as heating costs for a reaction chamber) and the costs incurred for the secondary resource (such as personnel costs) can be assigned to the product or products through activity types. ‘The amount of activity expected for an activity type is calculated from the formula in the resource and the standard values in the phase in the master recipe. The planned cost for the phase is calculated by valuating this activity with the activity prices in Cost Center Accounting, o> ‘The master recipe corresponds to the routing in order-related production, and the resource corresponds to the work center. See also: For more information, see the document PP-PI Production Planning — Process Industries. ‘June 1998 33Cost Object Controlling SAP AG Control Parameters in Cost Object Controlling ¢ Control Parameters in Cost Object Controlling The following is an overview of the key control parameters in Cost Object Controlling. This section provides an overview of the key control parameters in Cost Object Controlling, particularly the control parameters for Praduct Cost by Order and Product Cost by Period with make-to-stock production and sales-order-related production with a valuated sales order stock. ‘These parameters are defined in Customizing for Cost Object Controlling. * Preliminary Costing, Simultaneous Costing, and Final Costing in Period-End Closing To enable preliminary costing for an order and to be able to carry out final costing in the period- end closing activities, you must make settings for the following control parameters: © Valuation variant The valuation variant controls the valuation of material usage and activity consumption both in your planning data and in your actuals. The valuation variant also determines which transfer prices are used for the materials, internal activities, and external activities in the order. In process manufacturing, the valuation variant also determines the transfer prices for the ingredients and by-products. For example, the valuation variant contains information on whether a raw material is valuated with the moving average price or the planned price, and whether a particular internal activity is valuated with the plan activity price of the period or with the actual activity price of the previous period. The valuation variant is selected through the costing variant. The valuation variant also specifies the costing sheet, * Costing variant ‘The costing variant specifies the valuation variant and the costing type. These control whether the cost estimate is for your planning data or for your actuals. The costing variant is selected through the combination of order type and plant. + Costing sheet The costing sheet controls how overhead is allocated to direct costs. The costing sheet can contain an overhead key. + Overhead key In conjunction with the overhead group, the overhead key controls the allocation of overhead in dependency on the material being produced. ‘The overhead key is specified in the costing sheet, The overhead group is specified in the costing view of the material master record. The overhead group and the overhead key are assigned to each other In Customizing for Product Cost Planning, 34 June 1998WY SAP AG Cost Object Controlling Control Parameters for Costing Control Parameters for Costing Costing variant ‘Overhead key t * Calculation of Work in Process Results analysis key A results analysis key must be specified in the order so that the order is included when work in process is calculated at the end of the period, ‘The results analysis key is specified as a separate default value for each order type and plant. In addition to the results analysis key, you define further settings for WIP calculation in Customizing for Product Cost by Period or Product Cost by Order under Period-End Closing —> Work in Process. * Variance Calculation Variance key A results analysis key must be specified in an order so that the order is included when the variances are calculated during period-end closing, The variance key also controls whether scrap should be calculated in variance calculation and whether line items are written for the transaction variance calculation, Note that this may have adverse effects on performance. ‘The variance key is stored as a default value for each plant and transferred from there into the material master record of the plant materials. When you create an order for the material, the variance key is transferred into the order header as a default value, Variance variant ‘June 1998 36Cost Object Controlling SAP AG Control Parameters for Costing ‘The variance variant controls which variance categories are calculated in variance calculation You specify the variance variant in the target cost version. Target cost version The target cost version determines which variances the system calculates (total variance, production variance, or planning variance). This means that you specify in the target cost version which costs are used in variance calculation as target costs and which costs are used as control costs. You enter the target cost version when you calculate the variances. * Settlement Default rule ‘The default rule is the critical control parameter for costing products by lot or by period. The default rule is proposed through the order type and plant. The default rule specifies a settlement rule, Settlement rule The settlement rule contains a distribution rule and a seitlement type. Distribution rule ‘The distribution rule determines the following for the settlement sender: — The settlement receiver ‘The settlement receiver can be such things as: — The material — In sales-order-related production and with a nonvaluated sales order inventory, the sales order = Inengineer-to-order, a project, network, or asset = Aninternal order — With collective orders, the higher-level order A profitability segment In joint production, the order costs are settled to an order item before they are settled fo stock (material). = The settlement share The settlement share determines the percentage rate or the equivalence number with which the costs are apportioned to the individual settlement receivers. For the manufacture of co-products, you use this function to define which portion of the costs is settled to which receiver. If scrap has been incurred during the production of a material, you can specity that the costs for the yield (such as 80% of the costs) are settled to inventory and. the scrap costs (such as 20% of the costs) are settled to a cost center. 36 June 1998BY SAP AG Cost Object Controlling Control Parameters for Costing In make-to-stock production and sales-order-related production with a valuated sales order inventory, the distribution rule is usually 100% fo material. In sales-order-related production with a nonvaluated sales order inventory, the distribution rule is 100% to sales order. When you create an order, the system normally generates the first distribution rule automatically (normally 100% to material. The system generates a second distribution rule during the first settlement of an order. The second distribution rule with the receiver profitability segment is generated according to the settings in the PA transfer structure, + Settlement type ‘The settiement type is selected through the default rule and determines how settlement takes place: = Settlement type GES Here settlement is carried out in full. Settlement type GES is used in lot-based Cost Object Controlling, It can be used in conjunction with production orders and process orders. With settlement type GES the work in process is always valuated at actual costs. This means that the difference between the debit of an order through postings of actual values and credit of the order through goods receipt postings is interpreted as work in process as long as the order has the status REL (released). If the order has the status DLV (delivered) or TECO (technically completed), the system interprets the difference between the debit and credit as a variance. With settlement type GES an order can never have both work in process and variances at the same time. If the work in process for an order is valuated at actual costs, the variances are calculated for the order cumulatively. Settlement type GES is determined through default rule PP1 — Settlement type PER Here settlement is carried out by period. Settlement type PER is used in periodic Cost Object Controlling, It is always used in the Product Cost by Period component. With settlement type PER the work in process is always valuated at target costs, With settlement type PER the difference between the target costs and the actual costs less work in process and scrap is reported as a variance. Work in process, scrap, and variances can exist simultaneously on a cost object during a period. If the work inn process for an order is valuated at target costs, the variances are calculated for the order by period. Settlement type PER is determined through default rule PP2. ‘© Settlement profile The settlement profile determines which receivers are allowed for settlement (such as material or profitability segment), You also specify in the settlement profile whether the settlement variances to Profitability Analysis (CO-PA) is allowed. ‘June 1998 7Cost Object Controlling SAP AG Control Parameters for Costing If you are using CO-PA, you must set the indicator Variances in the settlement profile and define a PA transfer structure that assigns the variance categories to the value fields of an operating concer. The system settles the variances by variance category to. CO-PA, The settlement profile also specifies the PA transfer structure and the settlement structure. The settlement profile is proposed through the order type. © PAtransfer structure ‘The PA transfer structure assigns cost element groups and variance categories to value fields in CO-PA. This determines which value fields of CO-PA variances are settled to. + Settlement structure In the settlement structure you specify the cost elements (settlement cost elements cr source cost elements) under which you settle an object. * Special Requirements with Cost Object Hierarchies + Cost object profile The following control parameters for cost object hierarchies are proposed through the cost object profile: Variance key — Costing sheet — Overhead key Settlement profile You specify the cost object profile in the cost object category. + Cost object category The cost object category controls such things as which type of processing is allowed for a cost object of that cost object category and which single objects can be assigned to.a cost object node in a cost object hierarchy of that cost object category. * Special Requirements for Production Orders Without Quantity Structure For a production order without quantity structure, the costing variant for the order planning is not proposed through the default values for the order type and plant but through the planning profile in the order type. See also: Overhead [Seite 39} Basics of Variance Calculation [Seite 69] 38 June 1998WY SAP AG Cost Object Controlling Overhead ¢ Overhead « Use Overhead allocation enables you to assign costs to an object when you cannot attribute those costs directly to that object. You can allocate the overhead costs to the object (cost object) in the following ways: ‘+ With conventional overhead allocation, which calculates percentage or quantity-based overhead rates on calculation bases such as direct material costs and direct, production costs * With process cost allocation, which uses cost drivers to allocate process costs to the cost objects « Integration ‘Overhead is taken from Financial Accounting (Fl) and first assigned to the cost centers in Cost Center Accounting (CO-OM-CCA). If you are using Activity-Based Costing, the overhead costs are then passed from Cost Center Accounting to the business processes of Activity-Based Costing (CO-OM-ABC). From Cost Center Accounting or Activity-Based Costing, the overhead costs are then sent to Product Cost Controlling (CO-PC). From Cost Object Controlling you can pass the costs on to Financial Accounting—such as to valuate inventories of finished and unfinished products; to Profit Center Accounting (CO-PCA); and to Profitability Analysis (CO-PA). ‘Overhead costs that are not assigned to a cost object can also be passed directly from Cost Center Accounting or Activity-Based Costing to Profitability Analysis (such as the costs for sales and marketing). * Prerequisites Calculation of percentage or quantity-based overhead rates for each cost object that meets the following conditions: ‘© The cost object has a valid costing sheet. ‘+ Ifthe costing sheet specifies a overhead key, the overhead key has been entered in the order header and linked to the overhead group in the costing view of the material master record for the material being manufactured. ‘The overhead key assigns the overhead to the material being produced. It does this using the overhead group in the costing view of the material master record, If you want to allocate overhead to the cost abject using process cost allocation, create a process template « Features You can calculate both planned and actual overhead. Planned overhead costs are calculated at the following points + In Product Cost Planning ‘© Inpreliminary costing of orders, in cost estimates for production versions, and in sales order costing ‘June 1998 Er}Cost Object Controlling SAP AG Overhead Actual overhead is calculated during period-end closing on the basis of the actual costs incurred to date. Overhead costs are allocated to cost objects through: © Process cost allocation Here overhead costs are allocated to the cost objects on the basis of process costs and cost drivers. © Overhead calculation ‘The overhead is allocated to the cost objects on the basis of quantity-based or percentage overhead rates. See also: For detailed information on overhead allocation, see the following sections: Overhead Calculation [Seite 48] Control Parameters for Overhead Calculation [Seite 49} Process Cost Allocation [Seite 44] Control Parameters for Process Cost Allocation [Seite 46 Planning Process Costs [Seite 44 Planning Process Costs: Scenario [Seite 43} For detailed information on preliminary costing of cost object IDs, orders, and sales order items, and on overhead allocation in your actuals, see the following sections: Product Cost by Order [Seite 260) Product Cost by Period [Seite 111 Product Cost by Sales Order [Seite 428 Costs for Intangible Goods and Services [Seite 619] For detailed information on the Product Cost Planning component, see the documentation CO- PC Product Cost Planning. For detailed information on overhead costs, see the documentation CO Overhead Cost Controling 40 June 1998WY SAP AG Cost Object Controlling Planning Process Costs ¢ Planning Process Costs « Use Planning process costs enables you to + Include process costs in Product Cost Planning You can use the planned costs calculated in a standard cost estimate for a material as the standard price for the material ‘The standard price calculated in this way can be used in your actuals for valuation of finished materials (preliminary valuation). ‘+ Include process costs in the preliminary costing of cost objects « Integration For Product Cost Planning, you use the component Product Cost Controlling -> Product Cost Planning. * Prerequisites Before you begin planning your process costs, check the following: ‘+ Whether a distribution key should be created + The planner profiles and planning layout You can use the planner profiles and the plannit define your own. 1g layout in the standard system, or ‘+ Whether versions have been created for alternative planning If appropriate, create new versions. © Whether you want to allow versions to be copied If appropriate, allow copying in the source versions. ‘+ Whether planning changes should be documented « Features In Activity-Based Costing, the entire planning sequence is carried out on-screen in dialogs. This ‘means that the planning results are available in real time and can be analyzed in the information system at any time, In addition, interactive business process planning is supported by the following help functions: ‘Planning is based on predefined planning layouts that are stored in planner profiles. Planning layouts are entry masks for planning. You can also define your own planning layouts and planner profiles. ‘+ The planning process is not a one-time procedure but an iterative process which normally requires several cycles. This is reflected in how the planning data are stored. The system allows parallel storage of alternative versions. See also: ‘June 1998 “1Cost Object Controlling SAP AG Planning Process Costs For detailed information on process cost planning and its requirements, see the documentation and Implementation Guide for Activity-Based Costing. a2 June 1998WY SAP AG Cost Object Controlling Planning Process Costs: Scenario « Planning Process Costs: Scenario * Purpose You plan process costs to transfer the entire process cost to the cost objects. * Prerequisites Make the necessary settings in Customizing for Activity-Based Costing. Define a process template and the process template determination in Customizing for Product Cost Controlling. * Process Flow ‘There is no set sequence in business process planning. However, SAP recommends the following procedure: 1. Plan statistical key figures that can be used as a basis for process cost allocation for both your planned and actual data. 2. Plan your activity types. The planning of the business processes is based on the planning of cost centers with activity types and reference units. 3. Plan your primary costs. 4. Plan your secondary costs. 5. Carry out activity price calculation and process assessment 6. Create the cost estimates for the cost object. You carry out steps 1 to 4 in Overhead Cost Controlling, Soo also: For detailed information on the steps that you carry out before planning the cost objects, see the documentation CO Activity-Based Costing, For detailed information on Product Cost Planning, see the document Product Cost Planning. For detailed information on preliminary costing for cost objects, see the following sections: Costs for intangible Goods and Services [Seite 619] Product Cost by Order [Seite 260) Product Cost by Period [Seite 111] Product Cost by Sales Order [Seite 428 ‘June 1998 a3Cost Object Controlling SAP AG Process Cost Allocation ¢ Process Cost Allocation « Use Activity-Based Costing allows you to allocate overhead costs of cost centers first to the business processes and then to the cost objects. This enables you to analyze the overhead costs by cost center (such as by functional area or area of responsibilty) and by business process. Cost Center Accounting shows where the costs were incurred, while Activity-Based Costing shows Which activities (business transactions) incurred the costs. Activity-Based Costing is particularly recommended when you have very high levels of overhead and cannot easily allocate the overhead using conventional methods. * Integration ‘Overhead costs are taken from Financial Accounting (Fl) and assigned first to the cost centers in Cost Center Accounting (CO-OM-CCA). If you are using Activity-Based Costing, the overhead costs are then passed from Cost Center Accounting to the business processes of Activity-Based Costing (CO-OM-ABC). From Cost Center Accounting or Activity-Based Costing, the overhead costs are then passed to Product Cost Controlling (CO-PC). From Cost Object Controlling you can pass the costs on to Financial Accounting—such as to valuate inventories of finished and unfinished products; to Profit Center Accounting (CO-PCA); and to Profitability Analysis (CO-PA).. Overhead costs that are not assigned to any cost object can also be transferred directly from Cost Center Accounting or Activity-Based Costing to Profitability Analysis (such as the costs for sales and marketing). « Prerequisites Activity-Based Costing allocates the overhead costs to the reference objects (here: cost objects) on the basis of the parameters defined in a process template. You define process templates and process template determination in Customizing for Product Cost Controlling under Cost Object Controlling. « Features You can use Activity-Based Costing for all cost objects in the R/3 System: + Production orders + Process orders ‘+ Production cost collectors Cost object nodes in a cost object hierarchy + Sales document items + General cost objects * Internal orders You can use Activity-Based Costing both for your planning data and your actual data. While the cost center planning represents the starting point, your actual data consists of the current postings to cost centers, 4 June 1998WY SAP AG Cost Object Controlling Process Cost Allocation You can use Activity-Based Costing either in addition to or instead of the conventional methods of overhead calculation, Implementation of Activity-Based Costing normally entails a considerable number of organizational measures. Manual measurement of the resources used by processes (reference basis) and of the cost drivers involves a great deal of effort. However, the necessary dala is often already available as, statistics and can be taken from the LIS (Logistics Information System), You can also implement Activity-Based Costing as a parallel stati | cost accounting system. In this case there is no operational debit of the cost objects. See also: For detailed information on the process template and on control of process template determination, see the documentation CO Activity-Based Costing and in the Implementation Guide for Product Cost Controlling under Cost Object Controlling. For detailed information on transferring data from LIS, see the documentation CO Activity-Based Costing and in the Implementation Guide for Product Cost Controlling under Cost Object Controlling > Costs for Intangible Goods and Services -> Planning -» Periodic Planning. For more information on the LIS, see the document LO Logistics General. For information on internal orders, see the documentation CO Internal Orders, ‘June 1998 5Cost Object Controlling SAP AG Control Parameters for Process Cost Allocation ¢ Control Parameters for Process Cost Allocation * Process Template Process costs are allocated according to a process template. For planning data, the process template links Activity-Based Costing to costing; for actual data, you can use it to allocate process costs to cost objects by period. ‘The process template determines the quantity of processes consumed by the cost objects. You define the process template in Customizing for Product Cost Controlling under Cost Object Controlling. You do not have to create a separate process template for each cost object—you can use a process template for a group of cost objects. The system determines the relevant process template for the evaluation strategy on the basis of a determination strategy you define in Customizing for Product Cost Controlling, You define process template determination in Customizing for Product Cost Controlling under Cost Object Controlling. Carry out the following steps before you create a process template: 1, Define a standard hierarchy. A standard hierarchy is a hierarchical business process structure (business process group). Each standard hierarchy must be assigned to exactly one controlling area. When you define the company code, you can specify whether a balance sheet or profit and loss statement should be created for each business area. If a business process is assigned to such a company code, assignment to a business area in the business process master is required. 4. Create the business processes and assign them to a hierarchy node in the standard hierarchy. 5. Create activity types. Activity types serve as the quantity to be measured for determining costs in Cost Center Accounting, and serve as a reference basis for internal activity allocations, 6. Define statistical key figures as @ basis for intemal allocations. In addition to manually entering statistical key figures, you can also transfer key figures from the information systems of other applications of the R/3 System automatically. A special interface is provided in the maintenance of statistical key figures with which you can create the link between the statistical key figures of Controlling and those of the Logistics Information System (LIS), o> You start the transfer of the key figures from LIS separately for planned and actual data In Activity-Based Costing you can transfer the statistical key figures of the following objects into your planned and actual data: — Activity types (cost center/activity type) 6 June 1998WY SAP AG Cost Object Controlling Control Parameters for Proc Cost Allocation — Business processes = Cost objects 7. Plan your process costs. + Process Template Determination The system finds the appropriate process template through the combination of: ‘* The environment that you specified when you created the process template ‘+The overhead group in the material master record ‘+ The overhead key selected through the overhead group in the material master record. This overhead key is indicated in the costing sheet. See also: For more information on process templates and control parameters for process template determination, see the Implementation Guide for Product Cost Controlling under Cost Object Controlling and in the documentation CO Activity-Based Costing. For more information on the LIS, see the document LO Logistics General. ‘June 1998 aCost Object Controlling SAP AG Overhead Calculation ¢ Overhead Calculation « Use This function calculates quantity-based or percentage overhead rates to be applied to cost objects, « Integration Overhead costs are taken from Financial Accounting (Fl) and assigned first to the cost centers in Cost Center Accounting (CO-OM-CCA). From Cost Center Accounting, the overhead costs are then transferred to Product Cost Controlling (CO-PC). From Cost Object Controlling you can ass the costs on to Financial Accounting—such as to valuate inventories of finished and unfinished products; to Profit Center Accounting (CO-PCA); and to Profitability Analysis (CO-PA). Overhead costs that are not assigned to any cost object can also be transferred directly to from Cost Center Accounting to Profitability Analysis (such as the costs for sales and marketing) « Prerequisites Overhead calculation is controlled by a costing sheet and an overhead key. « Features You can calculate planned and actual overhead. You can also apply overhead to process costs. You can use overhead calculation for all cost objects provided in the RI3 System: + Production orders + Process orders + Run schedule headers + Cost object nodes in a cost object hierarchy + Sales document items + General cost objects See also: For detailed information on preliminary costing of cost object IDs, orders, and sales order items, including how the costing sheet is determined, see the following sections: Costs for Intangible Goods and Services [Seite 619] Product Cost by Order [Seite 260) Product Cost by Period [Seite 111 Product Cost by Sales Order [Seite 428 a June 1998WY SAP AG Cost Object Controlling Control Parameters for Overhead Calculation ¢ Control Parameters for Overhead Calculation You define the control parameters for overhead calculation in Customizing by means of a costing sheet. The costing sheet determines the following ‘© What direct costs overhead will be applied to (calculation base) + Under what conditions overhead will be calculated (dependency) ‘+ The overhead percentage, depending on these conditions, or the overhead amount for each unit of measure (overhead) ‘+ For actual postings, what object (cost center, order) is credited under what cost element (credit key) If you are using Activity-Based Costing (CO-ABC), the costing sheet also controls the process template, Costing sheet ‘A09001 Base Overhead Description Credit [calculation base Frm CElem To CElem B00 Material Material overhead eoti| Creat Material costs B00 Wages Validto | Cétem [Object Prod. overhead '30.06.1994) 621000] Cctr Cost of ads manu 31.12.1994] 622000] Order 400000 419000 [Calculation base Frm CElem To CElem| Credit E02 Validto | CFiem obiect 30.09.1994) 621001] Order 30.04.1998] 621002| cotr Overhead|Z010}* Condition SAG! Vai From [Vata unt Type Key Conction —__ BIGHT 01.01.1992 51.12.9889] Act.) sar ]25| 431000 432008 Table 14 Overhead type fey b1.01.1992p1.12.9999 Pian] sap |20 The conditions under which overhead is calculated are determined by condition tables. The standard condition tables point to a controlling area, an overhead type (i.e, planned or actual) and a further field of the object master record, such as an overhead key, plant, or business area. This means that the conditions can refer either to all cost objects within an organizational unit (such as the controlling area or company code) or an overhead key. If you assign an overhead key toa general cost object, you can define conditions in the costing sheet that refer to this, specific overhead key. * Selection of the Costing Sheet and the Overhead Key To calculate overhead costs for material-based orders (such as production orders, process orders, and run schedule headers), you first create a costing sheet and enter its key in the valuation variant. You then select a costing variant that points to this valuation variant. To define separate overhead conditions for particular reference objects, you must also enter an overhead group in the master record of the reference object (such as the material master record) ‘June 1998 9Cost Object Controlling SAP AG Control Parameters for Overhead Calculation and enter an overhead key in the costing sheet that is linked to this overhead group in Customizing for Product Cost Controlling, If you want to calculate overhead in cost estimates without quantity structure (unit costing), enter the key of the costing sheet in the master record of the reference object (such as a general cost object or production order). To define separate overhead conditions for particular reference objects, you must also enter an overhead key in the master record of the reference object and choose a costing sheet that is linked to that overhead key. o> An overhead key determines the overhead amount that a material on the output side receives (material being produced or material produced). In contrast, the calculation base in the costing sheet consists of cost elements or origin groups that enter the manufacturing process (input side) and to which overhead is to be allocated in the same way, * Calculation Base for Overhead The costing sheet contains a calculation base. The calculation base is a group of cost elements that are to be charged with overhead according to identical conditions. In each controlling area, you assign individual cost elements or ranges of cost elements to the calculation bases. You group the material costs and the production costs, for example, by assigning the relevant cost elements to two calculation bases. You can apply different overhead amounts to the total, fixed and variable cost portions under the same cost element. ‘The overhead amount can depend on the direct costs (such as the costs of the materials and activities used) and it can also depend on the material itself. You can define calculation bases specific to a material by entering origin groups in the material master records of the materials used and by specifying these origin groups in the calculation bases. o> Before you can calculate overhead, you must assign all the costing items to cost elements. The system ignores unassigned costing items when it calculates overhead « Percentage Overhead and Quantity-Based Overhead The definition of an overhead determines the following: ‘+ The conditions under which overhead is to be calculated ‘+The amount for the percentage overhead or the amount to be applied per unit of measure ‘© The time for which the overhead is valid ‘The R/S System differentiates between percentage overhead and quantity-based overhead. + Percentage overhead 50 June 1998WY SAP AG Cost Object Controlling Control Parameters for Overhead Calculation If you define a percentage overhead, the system applies the percentage of the base costs under specified conditions. For example, you could specify thal a percentage overhead of 10% is to be applied to all materials, Quantity-based overhead If you define a quantity-based overhead, the system applies a fixed amount to the base costs under specified conditions. For example, you could specify that USD 10 is. to be applied to ll the material costs for each unit of measure withdrawn from stock. * Credit and Update ‘The costing sheet contains a credit code. The credit code determines the following: The cost element to which the overhead is written The credit object (cost center or order) to be credited by the amount to be charged You can specify which portion of the overhead is to be displayed as fixed costs on the credit object. Example: 100% = all fixed — 0% =all variable If you want to continue to apportion the overhead according to the fixed and variable portions of the base cost elements, you must enter an asterisk in the %Fixed field * Calculation of Overhead Overhead is automatically calculated on the basis of the costing sheet and possibly the overhead key when the cost estimate is saved. You can start overhead calculation by choosing Functions Calculate overhead. The overhead is calculated and transferred to the cost estimate as category G items. They are updated under the cost elements defined in the costing sheet. A totals line of item category S displays the total over all costing items. o> For more information on overhead, refer to Overhead in the Implementation Guide for Product Cost Controlling under Define Overhead. ‘June 1998 54Cost Object Controlling SAP AG Example for the Use of Calculation Bases. . Example for the Use of Calculation Bases ‘Suppose you want to apply a different overhead amount to the fixed portion of the production costs than to the variable portion. To do this, you create two calculation bases with the secondary cost element under which the production costs are updated in costing. You set the Fixed indicator for one calculation base and the Variable indicator for the other calculation base. You then define different overhead rates that refer to these two calculation bases in the corresponding costing sheet. 52 June 1998WY SAP AG Cost Object Controlling Example for the Use of Origin Groups . Example for the Use of Origin Groups ‘Suppose you want to apply different overheads to the material costs for externally procured materials than for materials produced in-house, although the costs for both materials are updated under the same cost element. You define two origin groups in Customizing for Product Cost Controlling. For the externally procured materials, you enter the origin group EXTL in the costing view. For the materials Produced in-house, you enter the origin group INHS in the costing view. You define two calculation bases for the same cost element interval. In the first, you enter the crigin group EXTL. In the second, you enter the origin group INHS. You then define different overhead rates that refer to these {wo calculation bases in the corresponding costing sheet. ‘June 1998 53Cost Object Controlling SAP AG Posting and Allocation of Actual Data in Cost Object Controlling ¢ Posting and Allocation of Actual Data in Cost Object Controlling « Use Entry of actual postings and allocations in Cost Object Controlling is achieved by simultaneous costing, You can view the actual costs in the information system at any time and compare them with the planned costs. * Integration Cost objects are debited with primary costs from Financial Accounting (FI), Materials ‘Management (MM), and Human Resources (HR). Cost objects are debited with secondary costs from Overhead Cost Management (CO-OM). Cost objects can also be debited with costs by confirmations in Logistics (LO). « Features * How Are Actual Costs Incurred? Actual costs on cost objects are incurred through the following events: + GiL account postings in Fi © Goods movements in MM ‘© Repostings of primary costs ‘+ Repostings of line items © Internal a ity allocations ‘+ Repostings of internal activity allocations ‘Direct assignment of personnel costs to cost objects by means of time sheets + Process cost allocation + Allocation of overhead to cost objects ‘+ Revaluation of activities at actual activity prices Actual costs can also be entered by means of the following * Confirmations of orders in Logistics ‘The confirmation can directly debit the cost object with activities. When an operation is confirmed, the material can also be backflushed to debit the cost object with material costs. ‘© Statistical key figures 4 June 1998WY SAP AG Cost Object Controlling Posting and Allocation of Actual Data in Cost Object Controlling Product costing MATERIAL ISSUES Internal allocations Gost conter 471° Retivity PEP 15mir Betvity FER 10min Delivery Frevecocee The system assigns each posting to a cost element and to a cost object. This means you can compare the actual costs with the planned costs for any cost abject. + How Are Primary Costs Assigned? Primary costs are assigned to the cost objects by means of the following business transactions: + GiL account postings in Fi ‘+ Goods issues and invoice receipts in MM ‘© Direct assignment of personnel costs to cost objects by means of time sheets The costs are posted to G/L accounts in Financial Accounting that are linked with primary cost elements in cost accounting, B ‘A material withdrawal in the Materials Management module will generate the following postings: — In Financial Accounting, the posting stock change to stock is made = Incost accounting, the cost object is debited + How Are Secondary Costs Assigned? Secondary costs (such as production costs, material overhead costs, and production overhead. costs) are assigned to general cost objects by means of the following business transactions within cost accounting: ‘June 1998 5Cost Object Controlling SAP AG Posting and Allocation of Actual Data in Cost Object Controlling Repostings Direct intemal activity allocations Process cost allocations Revaluation of activities at actual activity prices Overhead ‘The costs are updated under secondary cost elements that have no correspondence in Financial Accounting, * What Data Is Updated in the Control 1g Component? Actual postings generate the following Totals records totals record shows all the costs posted to the cost object under a particular cost element. Line items Each business transaction results in a line item being written. The line item contains detailed information on the origin of the costs. You can go from the line item to other documents, such as the accounting document or material document. See also: Postings in Financial Accounting [Seite 57] Goods Movments in Materials Management [Seite 58] Postings of Actual Costs in Controlling [Seite 60 Control of Actual Postings in Controlling [Seite 63 56 June 1998WY SAP AG Cost Object Controlling GIL Account Postings i Financial Accounting ¢ G/L Account Postings in Financial Accounting « Use You can use G/L account postings in Financial Accounting (Fl) to assign primary costs directly to cost objects The costs are updated on the cost object as direct costs. DB In FI you enter a GIL account posting for an incoming invoice. You specify which cost object you want to debit with these costs. « Integration The data posted in Fl is updated to the corresponding cost object in Cost Object Controlling (CO- PC-OB4). « Features GIL account postings can be: + Entered manually in Fl * Created automatically on the basis of goods movements in Materials Management (MM) The following is generated on the basis of this posting: + An accounting document in FI © Aline item in CO See also: Goods Movments in Materials Management [Seite 58] ‘June 1998 a7Cost Object Controlling SAP AG Goods Movements in Materials Management « Goods Movements in Materials Management « Use Actual costs can be assigned to a cost object on the basis of the following goods movements: + Goods issues + Goods receipts for purchase orders + Invoice receipts for purchase orders « Integration Goods movements are posted in the Materials Management (MM) component. Goods movements result in postings in Financial Accounting (Fl) and Controlling (CO). « Features * Goods Issues A goods issue Is a goods movement in inventory management with which materials are withdrawn for a product or process. The cost object is immediately debited with the costs for the withdrawn materials. The following system events result from the goods issue: ‘+ The warehouse inventory is reduced by the quantity withdrawn, ‘* The value of the goods issue is determined from the quantity withdrawn and the price in the accounting view of the material master record, The price control indicator in the material master record determines whether the costs are updated at the standard price or at the moving average price. This posting results in the following events: + In Financial Accounting, the posting stock change to stock is made, The cost object is debited under a primary cost element. ‘A material document is generated in MM. + Anaccounting document is generated in FI Aline item is generated in CO. * Goods Receiptiinvoice Receipt for Purchase Order ‘A goods receipt is a goods movement in inventory management that confirms the receipt of goods by the company. If you are using the Purchasing application component in Materials Management, you can manually create a purchase requisition for a cost object (such as for a general cost object). The purchase requisition results in a purchase order being sent to a vendor. When the good is. delivered, the goods receipt is posted directly to the cost object for which the material was. requested, 58 June 1998WY SAP AG Cost Object Controlling Goods Movements in Materials Management For activities, you can also create a purchase requisition. The purchase requisition generates a purchase order. When the good is delivered, the goods receipt is posted to the cost object for Which the activity was performed. For nonstock materials and external activities, goods receipts can come before or after the invoice receipt: Goods receipt before invoice receipt Normally, the invoice is received after the goods. This means that the value of the goods is not known at the time they are received. The value of the goods receipt is calculated from the quantity delivered and the net order price. The cost object is debited with this amount. When the invoice is received, the difference between the order value and the invoice value is updated to the cost object. Goods receipt after invoice receipt ‘Sometimes the invoice for a purchase order is received before the goods are received. This means that the value of the delivery is known at the time of the goods receipt, The value of the goods receipt is calculated from the quantity delivered and the invoice price. The cost object is debited with this amount, ‘June 1998 59Cost Object Controlling SAP AG Postings of Actual Costs in Controlling ¢ Postings of Actual Costs in Controlling « Use Postings of actual costs in Controlling (CO) allow secondary costs to be transferred from Overhead Cost Management (CO-OM) (Cost Center Accounting (CO-OM-CCA) or Activity-Based Costing (CO-OM-ABC)) to Cost Object Controlling (CO-PC-OBJ). ‘The system updates these costs to the cost object as overhead costs. « Features Actual costs can be posted to a general cost object on the basis of the following postings in cost accounting: ‘= Direct internal activity allocations In activity allocation, internal activities are reallocated from the cost center that, generated the activity to the object that used the activity. ‘The quantity used is valuated with the planned price of the cost center, and the object, is debited under an allocation cost element. The transfer price of plan/actual version 000 is used. You can allocate internal activites from a cost center to the following receivers Orders (such as production orders and process orders) General cost objects = Sales document items (such as sales order items) — Production cost collectors for run schedule headers or materials/production versions To do this, you enter the following data: ‘The cost center that provided the activity The sales order item that used the activity The activity type in which the activity was measured The quantity of the activity performed Internal activity allocations from CO can’ = Serve as a supplement to the standard activities, which were posted for example for a goods receipt or reporting point backfiush Replace the standard activities if you have specified in the repetitive manufacturing profile that you do not want to post activities, ‘© Repostings of primary costs, line items, or internal activity allocations Repostings serve the purpose of correcting posting errors made in primary systems (uch as MM or SD) and in Overhead Cost Controlling 1} 60 June 1998