Product Cost Controlling
A component for planning the cost of
products before an order to commence
manufacturing is placed.
Product Cost Planning
Product Cost Planning includes tools for
planning costs and setting prices
for materials (cost estimate with
quantity structure, cost estimate
without quantity structure) and
for other objects of cost
accounting (reference and
simulation costing)
Overhead Cost Elements
To allocate overhead to cost centers
(including activity types), business
processes, orders, projects or products,
you need to define overhead cost
elements. The SAP system then posts the
overheads within these overhead cost
elements
Cost Element
A cost element classifies the
organization's valuated consumption of
production factors within a controlling
area. A cost element corresponds to a
cost-relevant item in the chart of
accounts.
Overhead Rates
The rate at which overhead is allocated to
direct costs to charge cost objects with the
proportion of the overhead costs
attributable to them. This can be a lump
sum, percentage, or quantity-based rate.
An example of the use of overhead rates is
to allocate overhead from material cost
centers to orders by debiting the orders in
proportion to the material withdrawals and
crediting the material cost centers with
the same amounts. This is also used to
allocate sales and administration
overhead. The rate applied to the direct
costs to allocate the indirect costs.
Overhead rates are used to pass on costs
to cost centers that do not directly
reference the activity used.
Direct Costs
A cost that is directly and fully identifiable
with a reference object according to the
costs-by-cause principle.
Origin group
The origin group defined in this step can
be assigned to certain materials on the
costing-1-view of the material master
record. This provides for calculating
overhead rates for this material
separately, even if the costs for the
material are updated on the order under
the same cost element as for other
materials.
Calculation bases
Calculation bases are used in the costing
sheet. They define which cost elements a
percentage rate refers to.
The calculation base determines to which
cost elements overhead is applied
together.
We will define two bases on which
overheads will be calculated:-
1) Materials
2) Wages
Overhead key
The overhead key defined in this step will
be assigned to an overhead group which
will be entered into the costing-1-view of
the material master record of the finished
products used in the meat production
processes. This allows to apply certain
overhead rates only to those materials
who have the appropriate overhead key
Specifies which overhead is applied to a
reference object (such as a material), thus
forming the link between overhead
conditions and the following:
A particular material master record
A particular cost object node of a
cost object hierarchy
A particular general cost object
A particular sales order item
Origin groups are created to subdivide the
material costs further. Materials assigned
to the same cost element by automatic
account determination can be separated
into origin groups.
If an origin group is entered in the costing
view of the material master record, the
combination of origin group and cost
element is updated in the Controlling
module.
If the Material origin indicator in the
costing view of the material master record
is specified in addition to the origin group,
the costs are updated under the
combination of material number and cost
element in the Controlling component.
Valuation Variant
Valuation variant containing the
parameters required for valuation of a cost
estimate. It is a a key, in Product Cost
Planning, that determines the prices that
the SAP System selects to valuate the
quantity structure of a material cost
estimate or order, or to valuate the
costing items of a unit cost estimate.
Overhead group
The overhead group defined in this step
will be entered into the costing-1-view of
the material master record of the finished
products used in the meat production
processes. This allows to apply certain
overhead rates only to those materials
Percentage overheads
Percentage overheads are used in the
costing sheet. The percentage value
specifies the amount of overhead costs
that is added to the costs covered by the
respective calculation base. For the meat
production processes, two extra
percentages are needed: one for the
surcharge regarding quality inspection of
raw materials, which is dependent on the
plant and one for the surcharge regarding
quality inspection of finished goods, which
is dependent on the overhead key.
Credits
Credits are used in the costing sheet to
determine the credited sender and the
cost element for the overhead posting.
Costing sheet
The costing sheet calculates overhead
surcharges in standard cost estimates and
production orders. The costing sheet
combines all parts of the overhead
calculation and determines the rules for
calculating the values to be posted. A
definition of how values posted in the SAP
System are calculated. The costing sheet
integrates all elements of overhead
costing defined
such as calculation base (Material,
Wages), overhead rates (Material
overhead, production overhead) and
the credit key
Cost component structure
The cost components breaks down the
results of the standard cost estimate into
factors such as raw materials, packing
material, material overhead, salaries and
wages, production overheads, depreciation
and other costs. Or
The cost components breaks down the
results of the standard cost estimate into
factors such as raw materials, packing
material, material overhead, salaries and
wages, production overheads, depreciation
and other costs.
Quantity structure category
The quantity structure category controls
how mixed costing is applied and how it is
executed. It determines which
procurement alternatives are to be costed
with which mixing ratios for the materials
in the cost estimate.
Costing versions
Costing versions enable you to create
multiple cost estimates for the same
material and analyze the different results
in the information system.
When you cost materials, the costing
variant you specify defines various control
parameters for costing. Because the
costing variant contains all parameters for
costing, it can be time consuming to
create new costing variants every time
you want to make minor changes in the
control parameters. The costing version
enables you to simulate such changes
without having to create new costing
variants
Settlement profile
The settlement profile controls various
parameters related to settlement. The
settlement profile set up in this section
does not support settlement to CO-PA.
A settlement profile that does so can be
configured in the following step. Later,
when setting up the order type for the
meat production processes, you will have
the possibility to choose whether you want
to assign the settlement profile with or
without CO-PA, depending on whether
Profitability Analysis has been installed or
not.
If you use the Profitability Analysis and
want to settle production variances to CO-
PA, it is not necessary to create the
settlement profile described in this step.
Maintain Overhead Percentages
In this section, percentage values for the
overhead rates YGM0 and YGM1 are
maintained.
The entries cannot be taken into a change
request and therefore cannot be created
by a BC Set. Percentage overheads are
used in the costing sheet. The percentage
value specifies the amount of costs that is
added as overhead costs to the costs
covered by the respective calculation
base. For the meat production processes,
two extra percentages are needed, one for
the surcharge regarding quality inspection
of raw materials, which is dependent on
the plant, and one for the surcharge
regarding quality inspection of finished
goods, which is dependent on the
overhead key.
Activity types
Activity types define the type of activity
that can be provided by a cost center
(work
activity, machine hours, and so on).
Activity outputs supplied by one cost
center (the sending cost center) to other
cost centers, orders, product cost
collectors, or processes, represent the
utilization of resources for this sending
cost center.
You valuate activities using a price
calculated on the basis of certain business
or management information.
Bill of Materials- BOM
A list of all of the items that make up a
product or assembly.
The list has a formal structure and states
the name, quantity, and unit of measure
for each component.
A comprehensive product life-cycle
management solution should offer support
for the following categories of BOM:
feature and requirements structures,
material BOM, document structures,
equipment BOM, functional location BOM,
sales order BOM, and work breakdown
structure BOM.
Percentage Overhead Rates
An overhead rate specifies the
conditions under which overhead is
applied to an object.
To fulfill this requirement we need to select
the dependency overhead type/ plant.
Thus the system will only calculate
overhead rate for the configuring plant
In the Std. SAP system there are quite a
number of dependencies available such as
plant, order type, overhead type,
overhead key, company code etc.
Here we can calculate Plan and actual
overhead. Plan overhead rate is required
for the purpose of planning the cost of the
product (standard cost estimate).
Actual overhead rate is required for the
purpose of charging it to the production
order.
In this step we will create the overhead
rate, attach the dependency and define
the overhead rate. Further we will also
define whether it is plan or actual.
Cost Center
A cost center is an organizational unit
responsible for budgetary monitoring and
reporting that collects revenues and costs.
Organizational divisions can be based on
functional requirements, physical location
and/or responsibility for costs. The cost
center number indicates a university
division or health system entity,
department or functional unit and/ or sub-
department or other sub-organization
level. Every cost center in Controlling (CO)
corresponds to a funds center in the FM
module.
Cost centers
Cost centers represent an organizational
structure used to report where costs are
incurred. Cost centers will represent the
lowest organizational level where costs are
collected and reported. Cost centers will
be designed on a one to one basis with
funds centers. Since cost centers are
master data, they will be centrally
maintained to ensure data integrity.
Cost Collector
A cost collector is a generic term used to
describe a Cost Center, an Internal Order
or a Work Breakdown Structure (WBS)
element.
Cost Element
A cost element in CO corresponds to a
revenue or expense general ledger
account in the chart of accounts. There are
Primary and Secondary Cost Elements.
Primary Cost Elements - correlate
one for one to general ledger
expense or revenue accounts.
Secondary Cost Elements are used
for revenue and cost allocations
across the Client / Enterprise within
the Controlling Module.
A cost element corresponds to a revenue
and expense account in the chart of
accounts. Postings to Controlling are
limited to revenues and expenses Balance
sheet accounts are not posted in the
Controlling module.
There is a 1 to 1 relationship between
expense and revenue accounts in the
Chart of Accounts and Cost Elements in
the Controlling module (primary cost
elements). Besides these cost elements,
Controlling can post to cost elements that
are not linked to a General Ledger account
that are used in the CO module to allocate
revenues and expenses (secondary cost
elements).
Primary Cost Elements
A primary cost or revenue element is the
same revenue or expense general ledger
(G/L) account that exists in Financial
Accounting (FI).
A primary cost or revenue element in
Controlling can only be created if it has
already been defined as a G/L account in
the chart of accounts and created as an
account in FI, since the SAP system checks
whether a corresponding account exists in
FI or not.
When creating a journal entry in Financial
Accounting, the system creates one
document in the General Ledger and an
additional document in the Controlling
module, utilizing the cost elements.
Secondary Cost Elements
Secondary cost elements can only be
created and administered in Controlling
(CO). They are used for internal activities,
such as activity allocations and overhead
calculations.
Transactions that use secondary cost
elements only affect Controlling balances
and postings.
In integrated scenarios using SAP Public
Sector, these transactions are also posted
to Funds Management and Grants
Management.
The CO ledger is then periodically
synchronized with the General Ledger for
all CO transactions that allocated costs or
revenues across Business Area, Fund or
Grant.
Cost element groups
Cost element groups are used to group
together revenues and expenses with
similar characteristics. Examples of similar
characteristics: Salaries and wages, fringe
benefits, travel, student aid, interest,
depreciation, etc.
Cost center groups
A combination of multiple cost centers into
groups according to various criteria.
Cost center groups permit evaluations for
each decision-making, responsibility, or
control area, and support the processes
during planning and internal allocations.
Transfer Control
The purpose of partial costing is to prevent
the system from creating a new cost
estimate for a material when costing data
already exists. Instead, the existing
costing data is simply transferred into the
new cost estimate. This improves
performance.
Partial costing is particularly useful in the
following situations:
You want to cost a new product. The
BOM for this product contains
materials that have already been
costed, and you do not want to cost
these materials again.
You want to cost all new products
during the fiscal year. You define a
costing run that includes all
materials, and use transfer control
so that only new products are
selected
Reference variants
Reference variants allow you to create
material cost estimates or costing runs
based on the same quantity structure for
the purpose of improving performance or
making reliable comparisons.
The quantity structure is the basis for
costing. It contains all network data
needed for the calculation. The system
values the quantity structure using a
costing variant. The costing variant
contains the criteria for costing and
comprises a costing type and valuation
variants for materials, internal services,
and external services. It also includes a
costing sheet for the overheads, and an
overhead key.
The overhead is calculated
automatically as a part of costing.
Depending on the network type in
question, the planned costs are recorded
in the network header or activity
Costing Type
In the costing type, we define which field
in the material master record the costing
results can be transferred to:
Standard cost estimate as the
standard price or the field
commercial price.
You can also specify that no update
take place in the material master.
Further you define here which
valuation view is costed. Legal,
Group or profit center (in case
material ledger is activated)
A function for planning costs and setting
prices for materials without using the data
from Production Planning and Control.
Product cost collector
A cost object in the Product Cost by Period
component that collects the actual costs
incurred in each period for the
manufacture of a material. Products cost
collectors place the focus on the product
as the cost object.
Allocation Structure
Allocation Structure allocates the costs
incurred on a sender by cost element or
cost element group. The allocation
structure is used for settlement and for
assessment.
An assignment assigns a cost element or
cost element group to an settlement or
assessment cost element. Each allocation
structure contains a number of such
assignments.
The allocation structure must meet the
following criteria:
Completeness
For a settlement or assessment to be
executed correctly, the allocation
structure must represent all cost
elements under which costs are
incurred.
Un ambiguity
A given cost element may only exist
once in an allocation structure.
Value Fields
Value Fields are only required in costing-
based Profitability Analysis. These are the
fields that contain the currency amounts
and quantities that you want to analyze in
CO-PA. They represent the structure of
your costs and revenues.
Primary cost component split
The primary cost component split is an
alternative way of showing the cost of
goods manufactured of a product. This
cost component split assigns the primary
cost elements for the cost center or the
process to the cost components, in so
doing sending information necessary for
setting the activity price for the activity
type or the costs for the process.
The primary costs from Overhead Cost
Controlling can either be transferred
directly into the primary cost component
split of the product, or assigned to other
cost components. In this way, you can
explode the costs for specific internal
activities partly by their primary costs, and
combine them partly as secondary costs.
We can transfer the primary cost
component split of the internal activities
directly into the cost estimate, or assign it
to other cost components. It is also
possible to break down certain activities
only partially into their primary costs, or
report them as secondary costs.
Results analysis
Results analysis means a periodic
valuation of long-term orders.
Results analysis valuates the ratio
between costs and a base for the order's
progress towards completion, such as
revenue or quantity produced.
Results Analysis Key
The key determines how the work in
process is calculated.
Key specifying that the object is to be
selected during results analysis or when
work in process is calculated. A number of
valuation control parameters are linked to
this key.
The results-analysis key is a technical term
used to control how the objects are
valuated during results analysis.
The assignment of a results-analysis key
to an object determines amongst other
things
Whether results analysis is revenue-
based, quantity-based or manual
On which basis (planned or actual
data) results analysis is carried out
How profits are realized
Whether the inventory, reserves
and cost of sales are to be split
Results Analysis category
A results analysis category allows you to
define parameters such as whether a
group of costs can be capitalized or not.
Valuation variant
The aim of this activity is to define
strategy sequences for valuating material
components and services within a product
cost estimate. These valuation strategies
are assigned to a costing variant and
provide the basis for carrying out product
cost estimates/inventory costing.
Costing Variant
The aim of this activity is to define a
costing variant for balance sheet valuation
according to local legislation. Costing
variants include the following components:
costing type, valuation variant, date
control, quantity structure control, and
transfer control.
Costing Versions
Method of distinguishing two or more cost
estimates for the same material. Costing
versions enable you to:
Create and save multiple cost
estimates for a given material
without the cost estimates
overwriting each other
In this case you use the costing version
without making further Customizing
settings.
Utilize other control parameters for
costing (such as transfer prices,
exchange rate types for converting
currencies, or quantity structure
types for mixed costing) without
having to use a new costing variant
In this case you specify these control
parameters in the costing version in
Customizing.
Cost Base
Quantity on which the displayed costs are
based.
Cost Breakdown
Contains the data for creating a detailed
overview of the cost origins of a cost
estimate. Here, the individual documents
are managed, along with their costs for
the materials used
Production cost centers
Activity standard rates stored
External activities
Overhead rates
Cost Center
Organizational unit within a controlling
area that represents a defined location of
cost incurrence. The definition can be
based on:
Functional requirements
Allocation criteria
Physical location
Cost center category
Responsibility for costs
Attribute that determines the type of cost
center.
Example: F = Production cost center , H
= Service cost center
Cost center group
Hierarchical group of cost centers defined
and organized according to selected
criteria.
Cost component group
Group of cost components in a multilevel
BOM, presenting a condensed view of cost
components in the information system.
This cost component group is not the
same as the cost component group used
in Report Writer reports
The cost component group is a copy of the
cost component structure. It can contain
up to 40 cost components. This cost
component group is not the same as the
cost component group in the information
system.
Cost Element category
Classification of cost elements according
to their usage or origin.
Examples of cost element categories:
Material cost elements
Settlement cost elements for orders
Cost elements for allocating internal
activities
Cost element Itemization
Splits the individual costing items
according to cost element (such as
material costs or personnel costs).
If an origin group has been entered in the
material master, the costs for each
material cost element can also be split by
origin group.
Cost Element Layout
Report layout that determines the line
layout of a report according to cost
element.
Cost Estimate with Quantity Structure
Function for planning costs and setting
prices for materials using the data from
Production Planning.
This data (the quantity structure) is
determined by the system automatically.
The quantity structure can be any of the
following:
BOM and routing (production by lot
size)
BOM and rate routing (repetitive
manufacturing)
Master recipe (process
manufacturing)
Cost Estimate without Quantity
Structure
Function for planning costs and setting
prices for materials without using the data
from Production Planning and Control.
We have to manually enter the items to be
costed, such as ,(materials and activities)
into a unit cost estimate.
Cost object category
Specifies how a particular cost object ID is
used.
Examples:
In the Product Cost by Period
component, the cost object
category can indicate that the cost
object ID is being used as a cost
 object node in a cost object
hierarchy
In the Costs for Intangible Goods
and Services component, the cost
object category can indicate that
the cost object ID is being used as a
general cost object
In the Product Cost Controlling
Information System, the cost object
category can indicate that the cost
object ID is being used as a CO
product group
Cost Object Id
Object in cost accounting to which costs
can be assigned to reflect how they are
incurred.
Examples
In Activity-Based Costing (CO-OM-
ABC), cost object IDs are used to
represent cost objects to which
process costs can be allocated.
In the Costs for Intangible Goods
and Services component, cost
object IDs are used to represent
intangible goods and services. In
this component they are called
general cost objects.
In the Product Cost by Period
component, cost object IDs are used
to create cost object hierarchies. In
cost object hierarchies, cost object
IDs are called cost object nodes.
In the Information System for the
Product Cost by Period component
and the Product Cost by Order
component, you can use cost object
IDs to create CO product groups.
You can create CO product groups
for reporting purposes in the
information system. CO product
groups can use cost object IDs for
reporting purposes.
If the Activity-Based Costing
component (CO-OM-ABC) is used for
statistical purposes, cost object IDs
are used to represent cost objects
to which the process costs are
allocated.
Cost Object Profile
Contains default values for product
costing.
For example, entries made in the cost
object profile for the following will appear
as default values in the master record of
the cost object ID:
Costing sheet
Overhead key
Settlement profile
Cost rollup
Process in material costing in which a
material is assigned the costs of the
materials located below it in a multilevel
BOM..
Costing Run
Provides the opportunity to cost multiple
materials at the same time.
In Product Cost Planning, costing runs are
used to cost materials based on planning
data. This type of costing run is based on
a user-defined name and a date.
In Actual Costing/Material Ledger, costing
runs are used to cost materials with actual
data. This type of costing run is based on
a costing run profile and a period.
Product cost collector
Product cost collector is a cost object
where the total costs for the manufacture
of a product is collected during the period.
The costing for this particular object
requires a costing variant similar to the
costing variant which we created for
product cost planning. The costs collected
on this object are settled at the month end
to the material.
Allocation structure An allocation
structure allocates the costs incurred on a
sender by cost element or cost element
group, and it is used for settlement and
assessment. An assignment maps a cost
element or cost element group to a
settlement or assessment cost element.
Each allocation structure contains a
number of such assignments.