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Understanding Results Analysis for WIP

Introduction and Configuration Guide

Work in process (WIP) inventory forms a part of the working capital or current assets of a firm appearing
in their balance sheet. Work in process or progress are partially completed goods, parts, or
subassemblies that are no longer part of the raw materials inventory and not yet part of the finished
products inventory. Fundamental Principle of International Accounting Standard 2 states that Inventories
are required to be stated at the lower of cost and net realizable value (NRV).

The guidance on measurement of cost of inventories is that, cost should include all:

a) Costs of purchase (including taxes, transport, and handling) net of trade discounts received
b) costs of conversion (including fixed and variable manufacturing overheads) and
c) other costs incurred in bringing the inventories to their present location and condition

With SAP, the raw materials gets transferred to finished goods via production orders or process order. In
this process, typically, the production order is created to which raw materials are issued, all activities
performed in the process are charged along with any overheads that is appropriate the production
order. Production is ongoing, and it is quite natural that at month end, we end up with some open
production orders. SAP in its product costing functionality, provides the feature to calculate the value
of WIP. This will be derived based on the careful definition of Line IDs in line with the cost components.
The WIP shall be the total debits cost in the order as reduced by the credits for goods receipt.

Key elements of WIP Results Analysis Configuration.

Step 1 Define Results Analysis Key OKG1.

Here you just give a name, four letter key with its description.
Step 2 Create cost elements of type 31 the following minimum

Cost Element Name Valid To Valid From CElem Created on


category

931000 RA TECHNICAL 12/31/9999 1/1/2010 31 5/25/2015


CE
931110 RA MLK WIP 12/31/9999 1/1/2010 31 5/25/2015
931120 RA MLK RESERV 12/31/9999 1/1/2010 31 5/25/2015
931130 RA DCP WIP 12/31/9999 1/1/2010 31 5/25/2015
931140 RA DCP RESERV 12/31/9999 1/1/2010 31 5/25/2015
931150 RA ACP WIP 12/31/9999 1/1/2010 31 5/25/2015
931160 RA ACP RESERV 12/31/9999 1/1/2010 31 5/25/2015

Step 3 Define RA version, OKG9, Enable Transfer to Financial Accounting (checkbox)

Under extended control, you may enable checkboxes relating to


 Generate line items
 Assignment/RA key
 Update/RA key Enter the cutoff period for actual RA/WIP, the effective date before which any
WIP data if existed, will not be altered.
Technical Results Analysis Cost Element
Cost element created for the following internal purposes:

 For calculating work in process ( WIP calculation)

 For results analysis

Use
Work in Process

When work in process is calculated, the following data is updated under this cost element:

 Valuated actual costs

 Calculated costs

Cost Element for Valuated Actual Costs

 Definition: Specifies the cost element under which the system writes the valuated actual costs.
The valuated actual costs are the costs that are written under category K.
 Both WIP calculation and results analysis are based on the costs of category K.
Cost Element for Calculated Costs

Definition: For WIP calculation, this indicates the cost element under which costs of category "A" are
written. In WIP calculation, cost elements of category "A" correspond to the cost elements for goods receipts -
that is, the cost elements under which credits for the order are written. These actual credits are not taken into
account when the work in process is calculated.

 In results analysis, the calculated costs are normally the cost of sales.

Step 4 In OKGC, define the valuation method for WIP.

Here, you specify that WIP calculation mode is one when the order has the status REL.

The calculated WIP shall be cancelled when the order status changes to DLV or TECO. You maintain this
data for CO area, RA version and RA key combination.

Step 5 SPRO>Controlling>Product Cost Controlling>Cost Object Controlling>Product cost by


order>Period End Closing>Work in process>Define Line IDs.

The line IDs are similar to cost component, that you create during cost estimates like a) 010 for
Material b) 020 for Labor and c) 030 for Overhead to say the least.

Besides these, create one more line ID say 999 for the Settled Cost, which appear as credit when you
make a goods receipt.
Step 6 Now you assign the source cost elements OKGB that are expected in the production
order to various line ID as created above.
You maintain this data for CO area, RA version and RA key combination. You use masking when you
mention which cost element to be assigned to various IDs. You can also direct various cost element, if it
comes with a combination of particular cost center and activity type to a particular Line ID. If you need
to keep it simple, just enter +++++++ for cost centers, activity types and Business processes. Cost
elements can be masked as follows; for eg. All cost primary cost elements for materials, if they start
from 210001 to 219999, then you can mask them like 00021+++++. Give the line ID in the column
Required to Capitalize.

520110 -PROCESS ORDER - SETTLEMENT VARIANCE


520100 -PROCESS ORDER - SETTLEMENT STANDARD
520105 -PROCESS ORDER - SETTLEMENT STANDARD SEMI FINISH

520100 is appearing as Milk and STL Account which is incorrect and Masking of 5++++ is incorrect as it
includes both consumption and Settlement cost elements
Modified
Cost Component Structure

CC.Str Cost COA GL GL To


CC From
Z1 101 1000 510000 510000
Z1 101 1000 510001 510001
Z1 101 1000 510008 510060
Z1 101 1000 510090 510090
Z1 101 1000 510170 510170
Z1 101 1000 510900 510900
Z1 101 1000 520020 520020
Z1 101 1000 520076 520076
Z1 101 1000 520100 520100
Z1 101 1000 520105 520105
Z1 102 1000 510910 510910
Z1 102 1000 900008 900008
Z1 103 1000 510004 510004
Z1 103 1000 510005 510006
Z1 103 1000 510007 510007
Z1 103 1000 510100 510100
Z1 103 1000 510110 510110
Z1 103 1000 510120 510120
Z1 103 1000 900002 900002
Z1 104 1000 520200 520200
Z1 104 1000 811000 811000
Z1 104 1000 833000 833000
Z1 104 1000 900003 900006
Z1 104 1000 900010 900011
Z1 104 1000 900012 900012
Z1 104 1000 900020 900020
Z1 104 1000 900021 900022

Step 7 Define the update. OKGA You maintain this data for CO area, RA version and RA key
combination.

Here you specify which line IDs are to be grouped under which cost elements and their reserve account.
You connect the cost elements created in step 5 to the line IDs. The category for the line IDs for material,
labor and overhead shall be K, which stand for cost. The line ID 999 settled cost shall be maintained as
category A (settled cost). When you assign A, you won't have to maintain any cost elements for WIP and
reserve creation.
Step 8 Define posting rules for WIP calculation OKG8

You do this for Controlling area, company code, RA version. Maintain this for RA category WIPR (WIP cost,
required to be capitalized) and RUCR (Reserve for unrealized cost). You maintain the P& L account
(changes to stock) and the balance sheet (WIP) account. These G/L accounts are posted in Financial
Accounting.

Step 9 Ensure number range assignment for the WIP transactions under appropriate head
OKG6:

KABG Automat. WIP/results analysis


KABM Manual WIP/results analysis
KSWP Prim. Target Cost Calc. (WIP)
KSWS Sec. Target Cost Calc. (WIP)

OKG3 – Simplified Maintenance of Valuation Methods


OKZ3 - Default Values Cost Obj Controlling

Period end WIP calculation Process


The process of running WIP is the t-code KKAX for individual order processing and KKAO for collective
order processing. The system debits the WIP account and credits Inventory Change account. This entire
WIP is reversed and a new entry is passed the following month. When the order is fully delivered no
additional WIP entries are passed.
Note: The RA Key shall be entered in the production order, under the control tab. This can be
defaulted through order type.

Settlement Cost Elements (STL)


Chart of Transaction Valuation Acct Valuation G/L Account G/L Account
Accounts Grouping modification Class
Code
1000 GBB AUF 3040 811000 811000
1000 GBB 0001 AUF 3040 811000 811000
1000 GBB 0002 AUF 3040 811000 811000
1000 GBB AUF 7900 520105 520105
1000 GBB AUF 7905 520105 520105
1000 GBB AUF 7910 520105 520105
1000 GBB AUF 7911 520105 520105
1000 GBB 0001 AUF 7900 520105 520105
1000 GBB 0001 AUF 7905 520105 520105
1000 GBB 0001 AUF 7910 520105 520105
1000 GBB 0001 AUF 7911 520105 520105
1000 GBB 0002 AUF 7900 520105 520105
1000 GBB 0002 AUF 7905 520105 520105
1000 GBB 0002 AUF 7910 520105 520105
1000 GBB 0002 AUF 7911 520105 520105
1000 GBB AUF 3000 520100 520100
1000 GBB AUF 3001 520100 520100
1000 GBB AUF 7915 520100 520100
1000 GBB AUF 7920 520100 520100
1000 GBB AUF 7930 520100 520100
Chart of Transaction Valuation Acct Valuation G/L Account G/L Account
Accounts Grouping modification Class
Code
1000 GBB AUF 7940 520100 520100
1000 GBB AUF 7950 520100 520100
1000 GBB AUF 7970 520100 520100
1000 GBB 0001 AUF 3000 520100 520100
1000 GBB 0001 AUF 3001 520100 520100
1000 GBB 0001 AUF 7915 520100 520100
1000 GBB 0001 AUF 7920 520100 520100
1000 GBB 0001 AUF 7930 520100 520100
1000 GBB 0001 AUF 7940 520100 520100
1000 GBB 0001 AUF 7950 520100 520100
1000 GBB 0001 AUF 7970 520100 520100
1000 GBB 0002 AUF 3000 520100 520100
1000 GBB 0002 AUF 3001 520100 520100
1000 GBB 0002 AUF 7915 520100 520100
1000 GBB 0002 AUF 7920 520100 520100
1000 GBB 0002 AUF 7930 520100 520100
1000 GBB 0002 AUF 7940 520100 520100
1000 GBB 0002 AUF 7950 520100 520100
1000 GBB 0002 AUF 7970 520100 520100
1000 GBB AUF 3041 140060 140060
1000 GBB 0001 AUF 3041 140060 140060
1000 GBB 0002 AUF 3041 140060 140060

1497118 - Helpdesk for WIP inconsistencies