Product Cost Planning in SAP S/4 Hana

E-Learning S4F23e_EN_Col11

Product life cycle

Costing Sequence

The costing sequence has three different stages:

 Product LIfecycle Cockpit: In this solution, you manually enter the costingitems
in a spreadsheet or the cockpit to create a cost estimate.
  Material cost estimate w/o qty structure;
 Material cost estimate with qty structure;

Costing methods

Tangible and intangible goods

Product Cost Planning Basics
Modifiable Item Categories
Cost element sources
Special Item Categories

Formulas cannot be longer than 50 characters.

Costing variant

Valuation Variant and Costing Type

Each costing variant contains a valuation variant and a costing type.

The valuation variant determines the price at which materials, activity types, processes,
subcontracting, and external activities are valued by the system; for example, the latest
price or the average price calculated for the entire fiscal year.

The costing type determines the purpose of the costing, such as base object costing or
material costing. It also determines the price update permitted.

Costing Sheet and Overhead Key

Material Cost Estimate Without Quantity Structure

Price selection and overhead calculation are determined automatically and are based on
the valuation variant that is assigned to the costing variant.

You can use material costing without quantity structure in the following situations:

 When costing and updating prices for new materials

 When costing materials using non-SAP production planning data
Material Master

Material Master
The accounting, costing, and material requirements planning (MRP) views are relevant to
costing.

Fields Relevant to Costing

Default Values:
Prices

Explanation
Single-Level Cost Estimate
Cost Estimate Modification
Explanation facilities
The explanation facilities enable the cost planner to directly access data and information in the
costing environment while remaining in the cost estimate screen.

Multi-level Cost Estimate

Multilevel unit costing can be used in three scenarios:

  The first scenario is “New product”. This is used when you want to create new
material masters or cost estimates for new materials. As a rule, you create the
structure from top to bottom by making further refinements.
 The second scenario is “Similar product”. If you want to cost a new product that
is similar to an existing one, this scenario is used. You can copy the subordinate
costing structure to the new product and make changes to the new (copied)
structure.
 The third scenario is “Product changes”. This scenario is used when you want to
make changes to an existing product. You can copy the existing costing structure
and make changes to the copy.

Multi-level Material Cost Estimate Without Quantity Structure

Costing Results

The screen for multi-level unit costing is divided into the three areas. They are costing
structure, unit cost estimate or cost estimate header, and worklist or detail lists.
Cost Estimate Results: Itemization

Cost Estimate Results: Costed Multi-level BOM

Cost Component Split
Costing Structure
Costing Structure Status and Revaluation
Layouts of Multi level Unit Costing

You can adapt the layout to your requirements at any time during the work session. For
example, when you are making changes to the costing structure you might want to display the
worklist. When you have completed setting up the structure, you might switch off the worklist
and enable the detail list.

Global Functions
To use the global Cut, Copy, and Paste functions, you must perform four steps:

1. First, you navigate to the cost estimate whose items you want to transfer.
2. Next, you select the items and choose Cut or Copy.
3. After choosing copy or cut, you navigate in the costing structure to the cost
estimate in which you want to insert the items.
4. Finally, On the List screen of the cost estimate, go to the line where you want to
insert the items and choose Paste to insert the items from the clipboard.

Note: The quantities are transferred on a 1:1 basis. The system does not automatically
adjust the quantities based on lot size or other criteria. You have to manually correct the
quantities to match the quantity ratio based on the cost estimate lot size.

Global Filters
When a global filter has been set, it remains until it is deleted, even if you navigate to another
cost estimate in the costing structure.

Worklists
Product Cost Planning Configuration
Costing variant Overview

Purpose of the costing variant

Depending on the purpose of the cost estimate, you can create various results for the
same material by making multiple costing variants with various settings for costing
type, valuation variant, dates, and quantity structure determination.

To make technical changes to the quantity structure, you can create a modified, standard
cost estimate and compare it to the standard cost estimate. To value a technical change
with the current prices, you can create a current cost estimate.
Costing variant: costing type

The costing type controls several parameters of the costing variant. These parameters include
price updates, save with date key, basis for overhead calculation, and partner cost
component split.

Parameters

The costing type controls the following parameters of the costing variant:

 Price updates

You specify the prices that are updated in the material master with the results of
the cost estimate. For example, the standard price in the material master can only
be updated by a costing variant with the standard price update. You always use
legal valuation except when updating in multiple valuation.

 Save with date key

You specify whether the cost estimate should be saved with a date in its key.
You have the following options:

o Without date
o With date
o With start of period

For the standard cost estimate, you must update automatic costing with the, With
Start of Period indicator. This ensures that the results of the standard cost
estimate can be used as the standard price for that period.
 For the other costing types, you can update the costing results with the, With
Date indicator, for example. In this case the current date becomes part of the
key. This ensures that creating a cost estimate on a different date will not delete
previous cost estimates.

 Basis for overhead calculation

For this, you enter a cost component view. The cost component view indicates
which portion of the cost components are included in tax-based and commercial
inventory valuation. The system creates an itemization for each cost component
view. This itemization lists the individual items that were entered into the cost
estimate.

 Partner cost component split

Partner cost component splits are business units that are part of the value-added
chain. You can define a partner on a multi-dimensional basis from the
organizational units such as plant, company code, profit center, and business
area.

Valuation variant
The Methods

The valuation variant determines the prices that are used to value different components in the
following ways:

 To value purchased materials, assembly materials without a valid bill of material

(BOM) and routing, or when creating cost estimates without quantity structure, the
valuation variant selects the price from either the material master record or from the
purchasing data.
 To value activity types and processes, the valuation variant selects the price from
either Cost Center Accounting or from Activity-Based Costing. You enter whether a
planned or the actual version is used to determine the price in the valuation variant.
 To value an externally processed activity, the valuation variant selects the price from
either the purchasing information record or from the routing. The routing is available
only when costing is done with quantity structure.

Date control
In costing, date control can be used to create the quantity and value structures based on
various dates.

For material costing with quantity structure, the date control specifies the period of validity
of the cost estimate, the date on which the quantity structure is determined (quantity
structure date) and valued (valuation date). For material costing without quantity structure,
the date control specifies the period of validity of the cost estimate and the date on which
costing items are valued (valuation date).

Date Control: Other Benefits

The date control determines the dates that are proposed by the system for costing, and
whether these dates can be changed.

To calculate variances in Cost Object Controlling (COC) based on the cost estimate,
you ensure that the cost estimate is valid in the periods for which variances are to be
calculated. Similarly, to value scrap or work-in-process with the results of the standard
cost estimate, you ensure that the cost estimate is valid in the periods pertaining to the
variances or work-in-process calculation.

Further Settings
  Quantity structure

The quantity structure specifies whether the lot size is to be passed on to the cost
estimate. This specification is necessary only for cost estimates with a quantity
structure and in sales order costing.

 Additive costs

Additive costs specifies the material costs that you can manually enter in a unit
cost estimate and then add to an automatic cost estimate with quantity structure.

 Update

Update specifies whether saving is permitted for the costing variant. If saving is
permitted, the system always saves a cost component split. It is recommended
that you also save the itemization and the error log. Without the itemization, you
cannot display costed multi-level BOMs or itemization reports.

 Assignments

You can maintain the following settings and assignments of the costing variant:

o Cost component structure

o Costing version
o Cost component split in controlling area currency
o Cross company costing
 Error management

The costing variant determines whether a log is created during costing.

Entries in the error managenement field

Display a costing variant

Cost componente Split

Purpose of it
For each material, the cost component split provides information about the value
addition of the material (upper level) and the costs of the subordinate materials (lower
level).

A maximum of 40 cost fields can be rolled up in a cost component split. A cost

component can carry fixed and variable costs.

Views of material cost estimate results

What is COGM:
What is COGS

Cost componente Split by view

Customizing: cost componente structure
For each cost component, determine the following information:

 The various views of the cost estimate or reports of the information system in
which the costs appear.
 The cost component group to which the cost component is assigned.
 Whether the costs are rolled up, that is, whether they appear in higher-level
assemblies.
 Whether the costs are included in the standard price or inventory price of the
material.
 Whether the cost component is relevant to inventory and cost of goods
manufactured (COGM).
 Whether the cost component should contain a total amount or a fixed or variable
split.

A cost component structure is assigned to each costing variant.

You can also assign various cost component structures to each company code and plant.

For standard cost estimates (costing type 01), only one cost component structure is
permitted for each company code. A cost component structure must be used for
cross-company code cost estimates.

Cost components divide costing results in groups of material costs, machine costs,
personnel costs, production costs, overhead, and external activities.

Cost elements are assigned to cost components in the cost component structure.
Primary cost componente split

To create a primary cost component split, perform the following tasks:

 Assign a cost component structure in the controlling (CO) version in cost center
and process cost planning.
 Determine the prices through planned price iteration.
 Define a cost component structure for the primary cost component split of
Product Cost Planning.
 Define a transfer structure for the transfer of cost components in cost centers and
Activity-Based Costing to the cost components of the primary cost component
split in Product Cost Planning.

For example, there are three cost components in Cost Center Accounting (CCA) for
wage groups X, Y, and Z. In Product Cost Planning (PCP), only the cost component for
the wages is required. The transfer structure enables you to transfer cost components X,
Y, and Z to wages.
When you create a material cost estimate, you can decide whether the system creates a
cost component split only for the COGM, or the primary cost component split, or
whether both primary costs and COGM splits are created simultaneously. You make
this choice when you assign the costing variants and enter the cost component structures
for the main and auxiliary cost component splits.
Overhead costs
Costing sheet in detail
The basic components of the costing sheet are as follows:

 Calculation base

You can combine cost elements in base rows. You can also split cost elements
by origin such as raw materials with origin XYZ only. Also, you can divide the
calculation base as fixed and variable costs.

 Overhead

You calculate overhead on the calculation base. You can define the overhead
percentage so that it differentiates among planned costs, actual costs, and area of
validity based on specific fields. You can also allocate quantity-based overhead
such as USD 100 for every 30 pieces.

 Credit

You assign a credit key to each overhead line in the costing sheet. The amount
of the overhead is credited to a cost center, business process, or order under a
secondary cost element. The cost element is important in Product Cost Planning
(PCP) because it controls overhead costs. You can specify the percentage of the
overhead that is fixed costs.
Activity-based costing
This will help you decide whether activity-based costing and the origin-based allocation of
overhead blocks is the right method for your company to use.

Activities and aims

Cost parts

Material costing with quantity structure can allocate cost parts that are not contained in the
bill of material (BOM) or routing. The two main reasons that necessitate allocation of cost
parts not contained in the BOM or routing are identifying overhead blocks and their costs and
identifying causal origin-based relationships with products that use these overhead blocks.
Business process

A business process is a process or an activity within a company that uses resources and
activities from one or more cost centers. The business process is one of the master data
objects used in activity-based costing and it is a measurement for output.

Templates
As you know, a process template can control the application of process costs. In this
section, you will understand how to create templates. The process template can include
multiple processes or even multiple process templates to allocate as many indirect costs
as appropriate.

Templates are centrally maintained tabular frameworks.

The Object column can contain business processes, cost centers or activity types,
templates, or object formulas.

The Quantity column is subdivided into plan and actual quantities. This is because the
planned and actual quantities to be allocated have different sources. For example, the
planned quantity can be the lot size and the actual quantity can be the true quantity.

The Activation column is subdivided into plan and actual. For example, the work
scheduling business process should be allocated only if products are semi-finished or
finished. In this case, the activation formula is “Material type = HALB or FERT.” This
applies to both plan and actual quantities.
Formulas in the template

Assignment of templates
To assign the costing sheet and overhead key a template, you have to make the relevant
settings in customizing.

To assign the overhead key to the master data, you can navigate through Material
master → Overhead group → Overhead key or Base planning object → Master record
→ Overhead key.

You can use the overhead key to specify whether the system finds one or more
templates.

When you execute a material cost estimate, you can display the way the system
interpreted the templates for the material. If more than one template was used, you
can only analyze one in the cost estimate display mode. For further analysis, you use
the information system.
Material cost estimative with quantity structure

Bills of material (BOMs)

The BOM is a directory for an object and its constituent parts, containing information such as
the name, reference number, quantity, and unit of measure.

Assigning materials to costing levels ensures that the system performs costing in the correct
sequence; starting with the raw materials and purchased parts, followed by semi-finished
products, and finally, the finished products.
The following fields in the BOM header are relevant to costing:

 BOM usage

For example, BOMs in use exclusively for engineering or costing purposes.

 BOM status

You can use the BOM status to control what the BOM can be used for in various
other organizational areas (for example, engineering, costing, MRP).

 Alternative BOM

Alternative BOMs describe different product structures that create a product

with the same properties. For example, in BOM A, the product uses sheet metal
A, while in BOM B, the same product uses sheet metal B. The resulting product
is the same.
  Lot size range

A BOM can be defined as valid for only a limited range of lot sizes, for example
1 to 1,000 units. You can then create an alternative BOM for lot sizes exceeding
1,000 units.

The following fields are relevant for the BOM items:

 Item category

This categorization allows you to process data that is relevant to the individual
items in a BOM. The item category is used to control field selection, default
values for BOM maintenance, triggering of specific system activities, and so on.
Some examples of item categories are as follows:

o Category L indicates a stock item. Valuation in accordance with material

valuation strategy or separate cost estimate.
o Category N is a non-stock item.
o Category R is a variable-size item. Valuation in accordance with material
valuation strategy or separate cost estimate.

 Fixed quantity indicator

Setting this indicator shows that the component quantity is always the same
regardless of lot size. It applies mainly to unavoidable material loss at the start
of the production process.

Fixed quantity is not allowed for the following items:

o Alternative items
o Co-products
  Planned scrap

Planned scrap is used in material requirements planning (MRP) to determine the

quantities of materials required. When exploding the bill of material (BOM), the
system increases the required quantities of the components by the calculated
scrap quantity. For example, if you set a planned scrap value of 4% and the
BOM requires 100 pieces of a component, the system will calculate that 104
pieces will be required for the assembly.

 Relevancy to costing indicator

If you do not select this indicator, the system ignores the BOM item in the
material cost estimate. For standard cost estimates, modified standard cost
estimates, and current cost estimates, you only need to decide whether or not the
item will be costed.

For inventory costing, you can link relevancy to costing indicators to factors for
the fixed and variable costs so that the item values can be adjusted by the system
depending on the valuation variant used in costing. You do this in Customizing
for Product Cost Controlling. For example, a BOM item or operation has the
indicator for relevancy to costing A which you have linked in Customizing for
Product Cost Controlling to a fixed factor of 0.8 and a variable factor of 0.7. The
BOM item or operation will be costed in inventory costing at 80% of the fixed
costs and 70% of the variable costs.

The settings in the BOM usage and BOM item categories enable you to specify
whether this field has a default value and whether you can change this value
when you maintain the BOM.

 Bulk material

You usually post bulk material, as consumption at production cost centers, as

soon as it is procured. Because it is usually posted, the cost estimate in the
standard system does not include the bulk material. A user exit is available if
you need to cost bulk materials.

Non-Stock Materials
Routing

A routing consists of one or more operations.

Each operation contains information about the work center, production resources and
tools, material assignments, operation texts, and standard values (how long, how much).

You can use rate routings and recipes for repetitive manufacturing and process
manufacturing.

Header
The routing header has the following settings that are different to those of the BOM
header:

 Assignment of materials

A routing can contain multiple materials that utilize the same production
process.

 Usage

You use task list usage to assign routings to various work areas. This way, you
can create several routings to produce one plant material. These routings are
differentiated in your task list usage.

 Routing status

You use this status to indicate the processing stage of a plan. For example, you
can indicate whether a plan is still at the creation stage or whether you have
already released it.
Operations

The control key indicates if an operation is relevant to costing. If the control key
assigned indicates that the operation is relevant to costing, you can use the relevancy to
costing indicator to override the control key.

You can overwrite the standard values of the work center in the routing. By deselecting
the reference indicator in the work center, you can assign activity types or business
process. You link the standard times with the activity types using the formulas in the
work center.
Master recipe

The process industry uses a master recipe instead of a routing.

The production version in the material master defines a fixed and unique link between
an alternative of the recipe group and an alternative of a multiple BOM.

You can include the master recipe in customizing for the quantity structure control in
order to access the recipe in the cost estimate. However, this can be overridden for
materials in the material master or for costing in the costing request screen.

Work center

A work center is a physical location to carry out an operation.

You define work centers with reference to a plant. You assign work centers to cost centers.
Use of work center and routing

Work center: Fields

Work Center Category: The work center category determines which data you can
maintain in the work center and which values are proposed.

Standard Value Key: The standard value key determines maximum of six default
values can be maintained. It assigns a meaning (such as setup time, machine time, or
labor time) and a dimension (such as minutes) to the standard values. Standard values
are used in formulas to calculate the execution time, the capacity requirements, and the
production costs.

Efficiency Rate: The performance efficiency rate is the relationship between the
predefined target time and the actual time. You can use the efficiency rate key in costing
to correct the default values.
Cost Centers and Activity Types

Relationship between cost center and activity

Routing, work center and cost center integration
You can create production costs by combining data from production planning with Cost
Center Accounting and Activity-Based Costing.

You assign the routing to a work center. The routing describes the quantity of an
activity and the location of the operations. The work center describes where you
perform an operation.

The work center is linked to a cost center to charge the activity costs. You can calculate
the planned activity prices for the work center through the link to a cost center and the
activity type planning for the cost center.

Formulas in work centers

You use formulas in the work center to calculate the data in costing, scheduling, and
capacity planning. The data includes costs, execution times for production orders,
internal processing times for networks and maintenance orders, and capacity
requirements.

Specifically for costs, in production orders, you can assign an activity type and a
formula to each of up to six standard values in a work center. This enables you to
calculate costs of the operations conducted in the work center.

In the SAP system, you can use predefined SAP formulas and define your own
formulas. You can create formulas in customizing for work centers under define
formulas for work centers.

Costing result

The system calculates the costs by multiplying the quantity by the price.

Production versions
In this section, you will understand production versions. A production version
determines which alternative BOM is used together with which task list or master recipe
to produce a material or create a master production schedule. For one material, you can
have several production versions for various validity periods and lot-size ranges.

You maintain production versions in the MRP view 4 and costing view 1 in the material
master.

Bill of material (BOM) Determination

Quantity structure control is a process by which the system searches for alternatives if
multiple BOMs or routings exist for a material.

You enter the quantity structure control ID in the costing variant. This ID describes a
list of priorities for the BOM and routing through the BOM application and routing
selection keys.

The BOM application determines by means of a selection ID, which BOM usage it
selects first. It lets you define an alternative of a multi-level BOM from a certain date
and specifies whether the BOM status indicator is relevant for the BOM selection.

The standard criteria for BOM determination are as follows:

 Period of validity: The BOM must be valid on the quantity structure date.
 Lot-size range: The costing lot size must fall within the lot-size range.
 Status: The status must allow costing.

To check the BOM that was costed in the cost estimate, use the Info icon to go to the
BOM and double-click the material number to go to the quantity structure.
Routing determination

The selection ID for the routing determines which routing the system selects first. The
parameters for selection are the task list type, task list usage, and plan status.

The standard criteria for routing determination are as follows:

 Period of validity: The routing must be valid on the quantity structure date.
 Lot-size range: The costing lot size must fall within the lot-size range.
 Status: The status must allow costing.

To check the routing that was costed in the cost estimate, use the Info icon to go to the
routing and double-click the routing group to go to the quantity structure.
Material cost estimate with quantity structure

The prerequisite for creating a cost estimate with a quantity structure is a material
master with costing view and accounting view. When you create a cost estimate with a
quantity structure, you enter the costing variant, material, and plant.
The dates are proposed from the costing variant and determine the following
parameters:

 The validity period of the cost estimate, that is, the from and to costing date
 The determination of the quantity structure, that is, the quantity structure date
 The valuation date for materials and activities, that is, the valuation date

The system determines and values the quantity structure automatically. The cost
estimate is not updated in the database until it is saved.

Material cost estimate screen

Material cost estimate screen displays the costing result, itemization, cost component
report, and costed BOM.

Analysis of material cost estimate with quantity structure

You can analyze the costing results with standard reports and display variants.

When analyzing the cost estimate, bear in mind that you can use the following
functions:

 Define your own display variants and initial variant.

 Use the navigational options to access reports.
 Navigate through the multi-level BOM (costing structure) to the reports and
error logs.

Explanation facilities
The explanation facilities enable the cost planner to directly access data in the costing
environment from the cost estimate screen.
Material master prices

The material master prices are as follows:

  Planned prices 1, 2, and 3

Planned prices 1, 2, and 3 are used for raw materials and purchased parts, and to
valuate the materials in the cost estimate.

 Tax-based and commercial prices

Tax-based and commercial prices are entered for purchased parts in inventory
costing to determine values such as lowest value. An inventory cost estimate can
use these prices for valuation, and then update the costing results for finished
and semi-finished products in the material master.

 Price control

Price control is an indicator that controls which price is used to valuate the
inventory of a material. The available options are standard price and moving
average price.

These prices are used to valuate goods movements within the SAP S/4HANA
application and to valuate inventories.

A standard cost estimate can be used to update the standard price. You can branch from
the accounting and costing views to the results of standard cost estimates. These results
update the standard price.

Update of prices in the material master

You can update price fields in the material master with these results:
  The result of the standard cost estimate as the standard price.
 The result of the modified standard cost estimate or the current cost estimate as
planned prices 1, 2, and 3.
 The result of the inventory cost estimate as commercial prices 1, 2, and 3 or tax-
based prices.

In the valuation strategy, you can refer to different prices in the material master. This
enables you to use these prices in other cost estimates.

You update the standard price in the material master by first marking and then releasing
a standard cost estimate.

Standard price and standard cost estimate

Price control plays a crucial role in material valuation. When the price control indicator
is set to S, the system valuates the material inventory at standard price. In addition, you
can valuate goods movements directly in the SAP S/4HANA application using a price,
selected in accordance with the price control indicator.

In Cost Object Controlling, you use standard price updated by a standard cost estimate
for costing. The system can use the itemization of standard cost estimates to determine
the target costs for manufacturing orders. You can analyze the difference between target
cost and actual cost at the level of variance categories, such as quantity or price
variances.

Update of standard price

You can only release cost estimates once. The release date cannot be earlier than the
valid from date of the cost estimate.

The valuation class and its account determination in the material master control how the
system finds the balance sheet accounts and profit and loss accounts.
Changing the standard price

The standard system does not allow this type of price change if a released standard cost
estimate exists. You may grant authorization through user-defined error management in
customizing for the material ledger to allow this.

Changing the material standard price creates a material document and generates
accounting documents.
Distinguishing between material cost estimates

If you create more than one cost estimate for the same material, the following
parameters need to be checked:

 Proportion of costs attributable to technical and organizational improvements

 Influence of changed raw material prices and potential wage increases
 Breakdown of current costs
 “What If” scenarios

For example, maintaining and valuating make-or-buy decisions, prices,

quantities, and structures under a separate version.

How to delete the cost estimate

CKR1
Select “cálculos de custos plan. Atuais”

Costing run

Costing run process flow

After a costing run and its processing steps are successfully completed, the costing run
can be deleted.

The administrative data in the costing run is also deleted, but the material cost estimates
that a costing run generates remain and can be reorganized or archived.

Process flow
After each processing activity, you can study the activity in the message log. If required,
repeat the activity until costing is free of errors.

Flexible material selection

  After the initial material list is created, you can edit the selection list by adding
or deleting materials from the selection list.

You can use a selection list to select materials for a costing run by assigning the
selection list to the selection step.

Creation and use of selection list

Materials can be selected using the following material master fields from the accounting
and costing views:

 Profit center
 Valuation class
 Special procurement type

Materials can also be selected based on the following characteristics of previous cost
estimates:

 Costing variant
 Costing dates
 Costing status

The materials selected can be manually edited using the transaction. The selection list
can be used in future costing runs, if required.

Costing run creation

A costing run is identified by its name and the date.

It is possible to have multiple costing runs with the same name, but with different run
dates.

The Create with reference option allows you to transfer all the parameters (such as the
general data and process flow parameters) of an existing costing run.

As a rule, you should execute costing runs for the same plants on a monthly, quarterly,
or yearly basis.

You have to make the following important entries in the General Data section before
executing a costing run:

 Costing variant and version

The costing variant specifies the explosion and valuation strategies.

 Company code and controlling area

You need to enter only the company code if the costing run is limited to one
company code, and cross-company costing has not been enabled in customizing.

 Server group

You need to enter a server group only if you use parallel processing. This is
required only for extremely large quantities of data.
You must save the general data before you can initiate the costing run.

Costing run execution

Costing results
The Analysis option is used to compare new standard cost estimates with the standard
price. You can use it to check if any cost estimates are undergoing major changes.
When there are large amounts of data, you can quickly display the analysis reports that
were created in the background.

Costing run analysis

The following information is included in the analysis report:

 Results of costing run

  Price versus cost estimate
 Variances between costing runs

To get an overview of all report options, use the All selections option.

You can go from the object list to detailed reports such as display cost estimate, multi-
level bill of material (BOM), itemization, and cost component split.

Information system: Analyzing the costing run

The Analysis option in the costing run enables only one mass report for a single costing
run. When analysis is performed again, the old result is overwritten.

The Analyze Costing Run report in the information system does not have this
restriction. The most important feature of the Analyze Costing Run report is the
interplay between selection variants, display variants, and extracts.

To execute the Analyze Costing Run report, take the following steps:

1. Define and use appropriate display variants (including totals, sorting, and
filters).
2. Define and use appropriate selection variants that are assigned to the display
variants.
3. Specify the extracts in which the content should be saved.
4. Start background processing with the defined selection variants.
5. To call the report, specify the extract to be read. In the displayed extract, you can
use the sorting, filtering, and totalling functions and go to the detailed reports.
Error handling in the costing run

Managing logs
Additional costing functions

Transfer Control

Transfer control is the strategy for the transfer of existing material of cost estimates.
You can specify the cost estimates that can be used in customizing for transfer control.
Transfer control uses saved information, speeds up costing process and avoids the
creation of unnecessary material cost estimates.
Material cost estimate with quantity structure
In customizing, you can define a specific cost estimate for transfer control. The key for
transfer control is assigned to the costing variant. You must use the same cost
component structure.

Material cost estimate without quantity structure

In material costing without a quantity structure, the transfer strategies in the costing
variant specify two sequences for material items. The first one is the system searches for
a material cost estimate in accordance with transfer control. It then proceeds according
to the material valuation strategy. It applies to manual entry of a material item and when
entries are made using cut, copy, and paste. This does not apply to multi-level unit
costing when you are transferring cost estimates using drag and drop. In such cases, you
can only transfer the cost estimate as the original or as a copy.
Costing run

You want to ensure that all the materials in your plant have a standard cost estimate.
You need to define a transfer control ID that finds a current standard cost estimate.
After selection (and structure explosion), all the materials that do not have a current
standard cost estimate are displayed.

In the General Data section of the costing run, the costing variant proposes the transfer
control ID. When you select materials, the system also checks whether a material cost
estimate already exists for the material in accordance with transfer control. If it does, the
material is not included in the selection.

Cross-plant costing

You may find differences between the production plant and the sales plant. The cost
estimate in the sales plant should match the material cost estimate in the production
plant.

Cross-company costing

When you cost across company codes, an important factor is to analyze whether cross-
company costing has been allowed in customizing.

Reference variant
You want to create a modified standard cost estimate based on the quantity structure of
the standard cost estimate.

The actual prices of the previous month are reflected in the product range.

A reference variant allows you to create new material cost estimates or costing runs
from the existing material cost estimates with itemizations.
Group costing

Cost component split by partner

When you cost a resource, the system automatically determines the partner that supplied
the resource, such as the company, plant, profit center, and business area.

Group costing can be used only if all the companies are assigned to the same controlling
area.
Additive costs
Additive costs update
Additional valuation methods

Mixed costing

You use the quantity structure type to manage mixing ratios.

Mixing ratios can be maintained per fiscal year, per period, and without reference to a
period.

Procurement alternatives
A material can be manufactured using various processes and can be procured from
various supply sources. The supply source or production process effects the price of a
material. Consequently, any valuation or costing of a material must take these factors
into account. To do this, you create one or more procurement alternatives for each
process category.

Procurement alternatives: processing

Depending on the process category, you can make various entries for the procurement
alternative data.

Mixing of ratios

Mixed cost estimates

Mixed cost estimate results
The quantities are displayed as a proportion of the costed mixing ratio.
Special procurement types

This is defined in the special procurement key, which enables you to define a material
for the type of procurement selected.

You can enter the special procurement key in the material master record in the MRP
view and in the costing view. The entry in the costing view has a higher priority in the
cost estimate. If there is no entry in the costing view, the setting in the MRP view is
used. If not, the system proceeds as usual.
Types of special procurement

If no special procurement is planned for a material and there is no valid BOM, the
system creates a raw material for the cost estimate. It uses the material price according
to the valuation variant and includes it in the cost component split.
You must ensure that the routing data is included by selecting the special procurement
key (In-house production) for the material.

If you use a product with the special procurement cost type, you must ignore the
quantity structure. Valuation is performed according to the material valuation strategy,
and not according to the valid BOM and routing.

Phantom assembly

Phantom assemblies are not assembled in their header material. They are exploded in
requirements planning and installed directly in the higher-level assembly. They are
logical groups of components that facilitate planning and maintenance of BOMs.

You can maintain phantom assemblies by entering the relevant special procurement key
in the MRP screen of the assembly.
Subcontracting and external processing
Subcontracting

The subcontractor is responsible for in-house production and for external procurement.
This type of processing is defined by a special procurement key in the material master
of the assembly.

You generate a purchase requisition in the order for the finished product. The
purchasing team uses the purchase requisition to create a subcontract order for the
vendor. The purchase order specifies which components of the assembly need to be sent
to the vendor.

Then, you enter a goods receipt for the vendor product.

The costs for the assembly are calculated in the material cost estimate using the price
agreed with the subcontractor and the material costs of the components delivered to the
subcontractor.
External processing

When an operation is processed externally, data relevant to costing is maintained

directly in the operation. You can use purchasing info records to maintain the data.

You use the valuation variant in Customizing to specify whether costing uses the price
in the operation or whether one of the prices is associated with the purchasing info
record.
Raw material cost estimates

Purchasing info records are used to record purchasing information about materials and
vendors (either manually or automatically).
You can access various data for material costing purposes. These include prices from
the info record, prices from the last purchase order entered in the info record, conditions
from the info record and from the last purchase order entered in the info record.

You can distinguish between the net price and the effective price. The net price is
nothing but gross price minus the discount plus purchasing overhead. The effective
price is nothing but net price minus the cash discount plus delivery costs.

Costing variant

You can use a maximum of three options in the strategy for purchasing info records to
specify how the system should search for a price.

Prices in the purchasing info record

Let us see what are those three options. Purchasing info record strategy includes
conditions, effective price for purchase order and net quotation price. Hence, you can
find quotation prices or quotation conditions directly in the purchasing info record.

Differences between procurement costs

Access to detailed data in the conditions contained in the info records provides the cost
planner with a more precise analysis of the material costs. In Customizing for the
costing variant, you can assign a separate overhead costing sheet for the raw material
cost estimate. The conditions in the purchasing info record contain procurement
information that you can use in material costing.
Conditions of material costing
The two levels of assignment are assigning condition type to origin group and assigning
origin group to cost component.

Two-level assignment enables you to differentiate only between the itemization. The

system creates an itemization row under the same cost element for each assigned origin
group. When you assign the cost component structure, you can transfer these origin
groups to the separate cost components.

Vendor determination
You can have more than one vendor for a subcontracted assembly, a raw material, or a
purchased material.

They are quota arrangement for material, source list for material, purchasing info
records, and prices of vendors.
Scrap categories
Component scrap is used in Material Requirements Planning (MRP) to determine the
input quantities of components. When the BOM is exploded, the system increases the
input quantities of components by the scrap quantity calculated. For example, if the
input quantity is 200 units and component scrap is 10%, the scrap quantity will be 20
units. Therefore, the input quantity required will be 220 units.

Based on the assembly scrap, the system increases the quantity to be produced by the
scrap quantity calculated. For example, assume that the quantity to be produced is 200
units. If you specify assembly scrap as 10%, the scrap quantity will be 20 units. This
means that the actual quantity produced will be 220 units. The system will accordingly
increase the lot size and the quantity of input materials.

If the component scrap is entered in the BOM, the specified value applies. If not, the
value in the material master record applies.

Operation scrap is the percentage of scrap that occurs in the operation. The reduction in
quantity is taken into account during scheduling and in the cost estimate.
Scrap calculation

Differences between planned assembly and operational scrap

Assembly scrap update

There is only one field in the material master for assembly scrap. You choose a routing
through which you will update the value in the assembly scrap field.

Planned scrap in the itemization

Scrap in detail

Itemization without scrap

Itemization with component scrap
Assembly and operation scrap in the routing

Itemization with assembly and operation scrap

Assembly and operation scrap in the routing and BOM

Itemization with assembly and operation scrap in the routing and BOM
The net scrap indicator
Variant configuration
A product with many variants often has dependencies between its characteristic values.
The complexity of a product is reflected in the configuration tasks that have to be
carried out for it in sales and production. Companies that sell or produce products with
variants must perform these configuration tasks as efficiently and quickly as possible.

Variant configuration: concepts

Products with multiple variants are represented by configurable materials. A configured
material is assigned to one or more classes for which the SAP classification system is
used. A class contains characteristics, which may have a range of characteristic values.
You can describe the attributes of a configurable product using user-specific
characteristics and characteristic values. The material is configured from the selection of
characteristics and values.
Costing of configured materials
Co-Products

Co-products and by-products

Definition of co-product
A co-product is a valuated product that is produced simultaneously with one or more
products. If a material is a co-product, you can specify the Material Requirements
Planning (MRP) or costing view in the material master. Choose the co-product indicator
for this.

You can specify in the material view that the product is a fixed-price co-product. If this
indicator is selected, the product is included using the net realizable-value method rather
than the apportionment structure.

Leading co-product
A material cost estimate with a quantity structure determines the quantity structure
using the master data of the leading co-product. By-products are entered with a negative
quantity in the Bill of Material (BOM) of the leading co-product. The remaining (non-
leading) co-products also have negative quantities, but they are indicated in the BOM
item data by the Joint production indicator. The non-leading co-products can be linked
to the leading co-product in the production version.

By-products

The costs for the by-products are calculated using the net realizable-value method. The
cost of the manufactured goods (or primary product) is calculated by subtracting the
costs of by-products from the total cost of the production process. The costs of by-
products reduce the cost of the primary product or process.

Co-product cost estimates

These are different valuation methods:

 Apportionment structure

You can use an apportionment structure to calculate the cost of goods

manufactured for each primary product. The structure apportions the total costs
of the manufacturing process by distributing the total costs to co-products. The
total costs of the process are allocated to co-products for each cost component
using the equivalence numbers.

 Net realizable-value method

The cost of goods manufactured for the co-product is calculated by subtracting

the costs of by-products from the total costs for the production process. This is
known as the net realizable-value method. The costs of by-products represent a
reduction in the costs of the co-product or process.

 Net realizable-value method with fixed price

The system uses a price from the material master. The cost of goods
manufactured for by-products is calculated by multiplying the output quantity by
the price. It appears as a negative figure in the itemization of the cost estimate. If
you do not want to include the costs for by-products, deselect the Relevant to
costing indicator in the material list item.

 Net realizable-value method with cost component split

A by-product (or fixed-price co-product) can be produced through an alternative

production structure. A corresponding cost estimate already exists for the by-
 product. The cost component split of the by-product is subtracted by the cost
component. The cost of goods manufactured for by-products is calculated by
multiplying the output quantity by the costing result of the alternative cost
estimate.

Appor tionment structure

It assigns the equivalence numbers to co-products.

The costs of the primary product or the process material are apportioned to co-products
using the equivalence numbers. You can also enter the source assignment of a source
structure in the apportionment structure. The source structure enables you to apportion
various cost element groups. This structure is defined in Customizing.

If there are production versions that contain various co-products or alternative output
relationships between co-products, you can assign specific apportionment structures to
the production versions.
Note: One apportionment without a source structure is adequate because a proportional
cost apportionment by equivalence number takes care of all the costs.

Costing result with apportionment structure

Apportionment structure features

Itemization for Co-Products

They are co-products that are designated with item category A and have negative
quantities; and, by-products that have item category M with negative quantities.

Cost each co-product so that its costing results can be saved. In the costing run, ensure
that all co-products have been selected.

There is only one production alternative for both co-products. The cost estimates of
products A and B are the same. To ensure that product A can be the leading co-product.
Product B can specify that product A is the header material, which contains the quantity
structure data.

The apportionment structure, the costing lot size, and the costing parameters are derived
from the leading co-product.

There are multiple production alternatives for a co-product.

The system checks whether the co-product has its own quantity structure data and uses
it to cost the co-product. If not, the system checks whether the co-product is produced in
another process. It uses the quantity structure data of this process to cost the co-product.

Flexible itemization for Co-Products

Flexible itemization supports two types of analysis. They are the product view and the
process view. The product view shows the costs of the co-product. The process view
shows the total costs of the production process and the costs of the co-products.

Net realizable-value method

The cost of goods manufactured for the co-product is obtained by subtracting the costs
of by-products from the total cost of the production process, using the net realizable-
value method. The costs of by-products thus reduce the costs of the co-product or
process.

With fixed prices, the system uses a price from the material master. The cost of goods
manufactured for the by-products is obtained by multiplying the output quantity by the
price. This appears in the itemization of the cost estimate with a negative sign. If you do
not want to include the costs for by-products, you must deselect the Relevant to costing
indicator in the material list item.

Example of recursive structures

The system automatically recognizes recursive structures in costing runs or material
cost estimates with a quantity structure. You do not need to take any action in the
system. The conditions displayed in the figure are checked first. Materials are then
calculated iteratively until a result is obtained.

There are no restrictions on joint production, mixed costing, or the recursiveness of

multilevel structures.

The Recursiveness allowed indicator should be set for the BOM item in the BOM.
Material valuation

Valuation strategies without the material ledger

Standard price

Characteristics of standand price control

Moving average price

Characteristics of moving average price control

Standard cost accounting variances
Material Valuation

The material ledger collects data for materials for which master data is stored in the
material master. It uses this data to calculate prices for valuating materials. It is the basis
of actual costing and enables inventory to be valuated in up to three currencies and
valuations.

As a subsidiary ledger for materials, the material ledger is the prerequisite for multiple
valuation of the material inventories. Without the material ledger, the inventory values
of materials managed on a value basis are updated in only one currency called company
code currency. With the material ledger, inventory values can be carried in two
additional currencies in SAP S/4HANA application. This is indicated by the fact that all
the goods movements are updated up to three currencies or valuations in the material
ledger. At the time of posting, values are translated to foreign currency amounts at
historical exchange rates. Therefore, the material ledger can provide businesses located
in high-inflation countries. It provides additional information about inventories in a hard
currency, which reveals the effect of inflation on inventories.

The actual costing function picks the periodic values collected. It automatically
calculates the new inventory values and the valuation prices, independent of each other,
in the various currencies and valuations.

Multilevel material price determination

Process description
Actual procurement costs analysis

Using actual costing with the material ledger, you can analyze the actual procurement
cost through a multilevel structure.

The material ledger records the periodic variances that occurred for a product. During
period-end closing procedures, a periodic unit price is calculated and these variances are
distributed to the multilevel structure and the ending inventory.
Strategic enterprise control

The views of the company

Multiple valuation approaches: group view
Focus product costing use cases

Case study

Case study business scenario

Recommendations

Post-assessment
Material master