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    Production Order Costing

    Uploaded by

    Amit Sharma
    When a production order is created, the system automatically calculates the planned costs, which include raw material costs, production costs, and overhead costs. During production, actual costs may differ from planned costs due to variances in raw material usage or labor hours. At the end of the period, the overhead costs are calculated, variances are determined, work-in-process is valued, and an actual cost settlement is done to account for any differences between the planned and actual costs. Various costing configurations must be set up, including costing types, variants, and sheets, to define how costs are calculated and settled in SAP.

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    Production Order Costing

    Uploaded by

    Amit Sharma
    72 views6 pages
    When a production order is created, the system automatically calculates the planned costs, which include raw material costs, production costs, and overhead costs. During production, actual costs may differ from planned costs due to variances in raw material usage or labor hours. At the end of the period, the overhead costs are calculated, variances are determined, work-in-process is valued, and an actual cost settlement is done to account for any differences between the planned and actual costs. Various costing configurations must be set up, including costing types, variants, and sheets, to define how costs are calculated and settled in SAP.

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    When a production order is created, the system automatically calculates the planned costs, which include raw material costs, production costs, and overhead costs. During production, actual costs may differ from planned costs due to variances in raw material usage or labor hours. At the end of the period, the overhead costs are calculated, variances are determined, work-in-process is valued, and an actual cost settlement is done to account for any differences between the planned and actual costs. Various costing configurations must be set up, including costing types, variants, and sheets, to define how costs are calculated and settled in SAP.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    72 views6 pages

    Production Order Costing

    Uploaded by

    Amit Sharma
    When a production order is created, the system automatically calculates the planned costs, which include raw material costs, production costs, and overhead costs. During production, actual costs may differ from planned costs due to variances in raw material usage or labor hours. At the end of the period, the overhead costs are calculated, variances are determined, work-in-process is valued, and an actual cost settlement is done to account for any differences between the planned and actual costs. Various costing configurations must be set up, including costing types, variants, and sheets, to define how costs are calculated and settled in SAP.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 6

    Cost of externally proc material- MAP for the raw material

    Product Cost/Standard Cost Estimate –


    Every cost estimate we create is based on the costing variant.
    In the costing variant we define the control parameters and settings for costing
    Settings contains info such as prices that will be used to cost the materials and activities
    Control parameters are used for the automatic determination of of qty str ie Bom and Routing
    Every costing variant contains a valuation variant and a costing type, date control, qty str control.

    i.e.-
    A-
    We define the standard values thru standard value key.
    Standard values are linked to activity type in work center costing tab page.
    Activity types are linked to cost centers in work center costing tab page.
    To calculate the cost of the material produced we need to define the formulas in costing tab page
    of work center.

    B-
    Create cost center in KL01.
    Assign the activity type to cost center in kp26.

    C-
    Production Order Cost –
    When a production order is created the planned costs will be calculated automatically by the
    system.
    This planned cost includes Raw material costs, production costs, overhead costs.

    During production some scrap would have occurred so that our raw mat cost will increase
    against the standards.
    During production against the standard time mentioned to produce the material we would have
    taken some more extra time to finish the product. This brings extra production costs.
    So against the standard actuals may differ. This difference need to be settled called as variance.

    Costing Variant –
    Costing variants are of type planned and actual. Every costing variant contains a valuation
    variant and a costing type , date control , qty str contro

    VALUATION VARIANT:
    Valuation variant defines the price with which the material and activities are valuated
    It determines -
    1. Which price is taken from material master record to calculate the material cost?
    2. Which price is taken from cost center accounting to calculate the costs for internal activities.
    3. Which price is taken from purchasing info rec to calculate the costs for external
    activities/subcontracting?
    4. Which costing sheet is used to calculate the overhead costs?

    Actual cost -which incurred for the order after production.

    Planed cost - planned cost for the order before actual production starts. variable cost is the cost
    which varies with the production usually the raw material cost.

    Target costs- are calculated using the planned costs for the cost center and the planned costs
    for the activity to be performed. The target costs are then compared with the actual costs for the
    period. Target cost is the planned cost * qty as per the BOM ratio.

    Plan Cost = Planned Quantity X Planned Price

    Actual Cost = Actual Quantity X Actual Price

    Target Cost = Actual Quantity X Planned Price

    argeet qty is ac alculated qty = BOM ratio * actual


    > production qty
    > i.e. A product X is the componet
    > A production plan 10 4000
    > Actual prodution = 12 4000
    >
    > Component qty plan = 1 1278
    > component actual qty = 2 1275
    >
    > cost of compnent = 1$
    >
    > target qty = 12*1/10= 1.2
    4000*81.1

    Variance: Difference between target cost and control cost that is analysed in cost accounting.
    Target costs can be calculated on the basis of various costs such as standard costs or planned
    costs. Control costs can be the actual costs.

    COSTING TYPE:
    Costing type defines the valuation view to be costed and defines the purpose of costing.

    DATE CONTROL:
    Controls the validity of the cost estimate, qty str date.

    VALUATION CLASS:
    For material costing the valuation class controls the cost element to which the planned cost of
    the material are assigned and the cost element under which the actual costs are updated when
    the material produced is delivered to stock

    VALUATION CATEGORY:
    Valuation Category specifies the criteria according to which partial stocks are distinguished from
    one another.

    PRICE CONTROL INDICATOR:


    The price control indicator specifies whether the stock of the material is valuated with standard
    price or moving avg price

    COSTING SHEET:
    The costing sheet links all the functions for overhead calculation.
    In the costing sheet we determine the following
    1. The direct costs to which the overhead is applied
    2. The condition under which the overhead is applied
    3. Whether the overhead is applied as a percentage basis or on a qty basis
    4. The amount of overhead percentage
    5. The validity period of the over head
    6. Which object is credited (order, cost center) and which cost element in the case of actual
    posting
    We enter the costing sheet in the valuation variant in customising.
    Production Order Costing:

    Perform the following activities at the end of the period –


    1. Overhead calculation- Overhead costing is one of the methods to allocate indirect costs to cost
    estimates. Overhead cost should be calculated manually after all the goods movement and
    confirmation has been done 
    2. Variance- Variance Calculation determines differences between the actual costs incurred on a
    production order and the standard costs of the material produced.
    3. WIP calculation - WIP calculation function valuates the unfinished products (work in process).It
    is valuated at actual cost. WIP is the difference between the debit and credit of an order that has
    not been fully delivered. If the order has the status REL (released), the system can calculate
    work in process.
    4. Actual Settlement - Production order is basically a Cost Collecting object in SAP, so based on
    the Goods movements and activity confirmations the order is credited or debited and accordingly
    the corresponding GL account is also hit. Generally there would be variances in order which
    arises due to over consumption of goods or activities or due to the change in MVP of the
    component. This variance has to be settled to the relevant account through settlement process.

    Transaction wise-
    After Final Confirmation of Order (Status: CNF) and GR for order Now Production Order Status
    will be DLV.
    Technically close the order by -Technically Complete. It is a sign to Finance team that this order
    has finish from technical point of view now you can start settlement process and close the order.

    Now-
    Overhead calculation KGI2 or CO43
    WIP calculation - KKAX or KKAO
    Variance calculations - KKS2 or KKS1
    Actual Settlement - KO88 or CO88
    If the balance is zero means order is settled.

    Configuration –

    Majorly in production order type (Standard Production Order) -

    Cstg variant planned- PPP1 Production Order: Planned

    Cstg variant actual- PPP2 Production Order: Actual

    Results Analysis Key - This is for WIP calculation- 000002 WIP Calculation at Actual Costs –

    1. Results Analysis (Int. Orders/Projects)


    2. WIP Calculation at Actual Costs
    3. WIP Calculation at Target Costs
    4. Results Analysis (for Sales Orders)

    Planned Cost Calculated – options

    Do not determine planned cost when saving

    Determine planned cost when saving, if released

    Determine planned cost when saving

    Key that specifies which costing variant is used to determine the planned costs.

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