SAP CO Product Costing

Product costing

This is used for valuation of inventories like work in process & finished goods.

-          Data is flow from MM, PP, FI&CO modules

-          Product costing made easy- sap labs

-          When we will take production – It will be standard cost

-          In the month ending we will knows the actual cost

-          The differences will be settle variances of accounts

Data flow in product costing:

Example:Product AMLFG1

Cost sheet                   AML finished goods

Raw material                           XXX    (Qty from BOM * Rate from material master

Raw material overheads          XXX     (10% of raw material)

Production cost                       XXX     (hours required * machine hour rate)

                                              ---------

Cost of goods manufacturing XXX

       (COGM)

Admn& selling& dist exp       XXX

                                                ------

Cost of goods sold                  XXX

Sales budget à Production budget

Sales budget: Make to order

                        Make to stock

Production budget: Material requirement plan

                                  Overheads planning

MM

            Material master

            Accounting view

            Raw material (AMLRM1) – Moving average price – 75/-

                                   (AMLRM2) – Moving average price – 100/-

PP:Bill of material (BOM) required for production

                        AMLRM1 – 1kg

                        AMLRM2 – 1kg

Dept A            Dept B                        Dept C            Dept D àWork centre in PP

  à                      X                    à                   à(Finished goods (AMLFG)

Finished product (AMLFG) process flow A àC àD (Routing)

            Salaries – 200000

            Wages -   500000

            Rent -         20000

                            -----------

                            720000

Machines – 100 Machines

Machine hours = 100 * 24 hours * 30 days = 72000 machine hours

Machine hour rate = 720000/72000 = 10/- per hour

To produce finished product AMLFG say 5 machine has = 5 * 10 = 50 

Creation of secondary cost elements:

1.      Overhead cost element

2.      Activity cost element

Use the transaction code: KA06

Use the cost element: 1100000

Valid from: 01.04.2006 to 31.12.9999

Enter

Give the name: RM overhead rate

Description: RM overhead rate

Cost element category: select 41 (Overhead rate)

Save

One more cost element: 1200000

Valid from: 01.04.2006 to 31.12.9999

Enter

Give the name: Activity cost element

Description: Activity cost element

Cost element category: select 43 (Internal activity allocation)

Save

Creation o f activity type: (Called machine hour)

Accounting à controlling àcost centre accounting à master data à activity type àindividual processing à create (KL01)

Activity type: AML

Valid from: 01.04.2006 to 31.12.9999

Enter

Name: Machine hour

Description: Machine hour

Activity unit: Select H (Hour)

Cost centre categories: Select * (All cost centre categories)

Enter

Activity type category: select 1 (Manual entry, manual allocation)

Allocation cost element: select 1200000

Save

Creation of 2 cost centers: (KS01)

Give the cost centre: Dept G

Valid from: 01.04.2006 to 31.12.9999

Reference cost centre: Dept A

Controlling area: AML

Enter

Change the name to dept G

Description: Cost centre dept G

Other fields are common

Save (or) (ctrl + s)

One more cost centre: Dept H

Valid from: 01.04.2006 to 31.12.9999

Reference cost centre: Dept A

Controlling area: AML

Enter

Change the name to dept H

Cost centre: Dept H

Cost centre category: Select 9 (Allocation cost centre)

Save

Creation of cost centre group: (KSH1)

Give the cost centre group: AML Prod

Enter

Give the cost centre group: AML prod

Select insert cost centre button

Give the cost centre: Dept G

Select save button (or) (ctrl + s)

Define overhead keys:

SPRO à Controlling àproduct cost controlling à basic settings for material costing àoverhead àdefine overhead keys

Select new entries button

Overhead key name: AML

Description: AML Overhead key

Save

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Define overhead group:

Same path

Select new entries button

Valuation area: AMLP

Overhead group: AML

Overhead key: AML

Name of overhead group: Overhead group for AML

Save

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Define calculation bases:

SPRO à controlling àproduct cost controlling à product cost planning à basic settings for material costing àoverhead àcosting sheet components à define calculation bases

Select new entries button

Base: A1

Name: Raw materials

Save, Save in your request

Select: A1

Double click on details folder

Give the controlling area: AML

Enter

Select new entries button

From cost element: 400000 to 400099

Save

Select back arrow 3 times

Select: New entries button

Base: A2

Name: Production cost,

Save

Select: A2

Double click on details folder

Give the controlling area: AML

Enter

Select new entries button

From cost element: 400100 to 400299

                              : 400500

                              : 1200000

Save (or) (Ctrl + s)

Define percentage overhead rates:

Path:same path

Select: new entries button

Overhead rate: A3

Name: Raw material overhead rate

Dependency: Select DO10 (Overhead type/H key)

Save

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Select: A3

Double click on details folder

Ignore the message, press enter

Select new entries button

Valid from: 01.04.2006 to 31.03.2007

Controlling area: AML

Overhead type: Select 2 (Planned overhead rate)

Overhead key: AML

Percentage: 15%

One more:

Valid from: 01.04.2006 to 31.03.2007

Controlling area: AML

Overhead type: Select 1 (Actual overhead rate)

Overhead key: AML

Percentage: 10%

Save

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Define credits:

Same path

Select new entries button

Give the credit key: A4

Name: Raw Material credit key

Save

Save in your request

Select: A4

Double click on details folder

Give the controlling area: AML

Enter

Select new entries button

Valid to: 31.03.2007

Cost element: 1100000 (Raw material overhead rate)

Fixed percentage: 100%

Cost centre: Dept H

Save

Example:

RM1– Handling charges   Dr              - Dept H – 3000

                        To Bank                                      3000

 RM2 – Handling charges   Dr – Dept H – 7000

                        To Bank                                      7000

                                    Dept H                       

            Handling 10000  |              3000

            Charges               |              7000

            (7000 + 3000)     |             -------

                                                     10000

Production 1                                      production2

RM cost    30000                                RM Cost     70000

10% of cost 3000                                10% of cost   7000

Define costing sheet:

SPRO à Controlling àproduct cost controlling à basic settings for material costing àoverhead àdefine costing sheets

Select new entries button

Costing sheet: AML

Description: AML costing sheet

Select: AML

Double click on costing sheet rows folder

Select new entries button

Give Row: 10, Basic: A1 (Raw materials)

         Row: 20, overhead rate: A3 (Raw material overhead rate)

                          From: 10 to Row 10: Credit: A4

         Row: 30, Base: A2 (Production cost)

         Row: 40, Description: Cost of goods manufacture

                           From Row 10 to Row 30

Save (or) (Ctrl + s)

Assign costing sheet to costing variant:

SPRO à controlling àProduct cost controlling à product cost planning à material cost estimate with quantity structure à define costing variants

Transaction code: OKKN

Select costing variant: PPL1 (Standard cost estimate (Material))

Select details button

Select valuation variant button

Select create button (Beside valuation variant/plant)

Select new entries button

Give the plant: AMLP

Save, Save in your request

Select back arrow

Select valuation variant: 001 with plant: AMLP

Select details button

Select overhead tab

Give the costing sheet: AML – costing sheet

         The costing sheet: AML – costing sheet

Save

Define cost component structure:

SPRO à controlling àproduct cost controlling à product cost planning à basic settings for material costing àdefine cost component structure

Select structure: 01

Double click on: Cost components with attributes folder

Select: cost component 10 (Raw materials)

Double click on assignment cost components – cost element interval folder

Select new entries button

Cost component structure: 01

Chart of accounts: AML

From cost element: 400000 to 400099

Cost element: 010 (Raw materials)

Save, ignore the warning message, and enter  

Save in your request

Double click on cost components with attributes folder

Select component: 80 (Material overhead)

Double click on assignment cost component – cost element interval

Select: new entries button

Cost component structure: 01

Chart of accounts: AML

From cost element: 1100000 (Overhead rate)

Cost component: 080 (Material overhead)

Save

Double click on cost elements with attributes folder

Select cost component: 50 (Production machine)

Double click on assignment cost component – cost element interval folder

Select new entries button

Cost component structure: 01

Chart of accounts: AML

From cost element: 400100 to 400299

Cost element structure: 050

One more

Cost component structure: 01

Chart of accounts: AML

From cost element: 400500

Cost element structure: 050

Cost component structure: 01
Chart of accounts: AML

From cost element: 1200000

Cost element structure: 050

 Save

Double click on cost element structure folder

For ‘0’ select activate check box

Save (or) (ctrl + s)

Determine person responsible for work centre:

Path:SPRO àproduction àBasic data àwork centre àgeneral data àdetermine person responsible

Select new entries button

Give the plant: AMLP

Person responsible: A

Give the responsible: Mr. A

Save

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Define MRP controller: (MRP: Material requirement planning)

SPRO à production àmaterial requirements planning à master data à define MRP controllers

Select new entries button

Give the plant name: AMLP

MRP controller: B

Description: Mr. B

Save

Save in your request

Define floats (Scheduling margin key) (Floats: Cushion period)

Path:SPRO àproduction àmaterials requirement planning à planning à scheduling & capacity parameters à define floats (Schedule margin key)

Select new entries button

Give the plant name: AMLP

Schedule margin key: AML

Opening period: 2 days

Float before production: 2 days

Float after production: 2 days

Release period: 2 days

Save

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