RM Goods receipt

RM consumption

RM issued to PO
MB1A
261

15 AXRM1 1125 75 Rs
15 AXRM2 2250 150 Rs
 3375

WIP caclulation for the period 10

KKAX

Settlement of WIP to show that this month we have this much WIP in balance sheet as an assrt

KO88
 Cost analysis of the PO

CO03

after productio order confirmation

CO11N
we give the
amount of activity
Types used

after production is completed we generate the production recipt

MB31
101

But the problem is that here we generate production receipt according to the planned values a
Now we have to post the difference amount in the production and reverse the WIP
 Calculation of variance , No document generated

KKS2

Cost analysis after calculation of var

CO03
 after settlement of the WIP accounts

KO88

WIP
settlement entry
WIP in balance sheet as an assrt
ccording to the planned values also we have already posted WIP in balance sheet
and reverse the WIP
 Fixed Vs Variable Cost

Fixed Cost Fixed costs are independent of changes in production output/ revenues
Associated with operating and overhead ocsts
Rent, wages etc
whether we create 10 materials or 1000, these costs are fixed

Variable cost Cost related to material or direct labour

like activity performed by a cost center
There costs vary with amount of production orders
n production output/ revenues

these costs are fixed

 Product cost planning

Why do we do planning?

Genrally we need to know the cost of the product before it is manufactured.

We do planning to know how we are gonna make a particular product
Planning includes BOM, Routing and activities.
This is a normal procedure in production companies.
Later we compare the planned cost with the acual cost and see the variance.
This variance is the main motive of the company to reduce the variance as much as possible.
if varaince is from Raw materils, company will look for other vendors( Because we do planning accord
if variance is from the activites( we need to make some changes in the management related to produ

Now the main question is how do we do it?

Prequisites for Prduction Planning

1) Material master for Finished goods( Planning)

and Raw materials used in making it.
FG
RM1 & RM2

2) Creation of secondary cost elements for activites

eg 9500000 CE Category ( 43 Internal activity allocation

3) Creation of activity type

eg Machine

Activity unit Hr
Activity type 1 ( Manual entry Manual allocation)
Allocation CE 95000000
CCtr Category * (all)
Price indicatior 3(Determined Manually)

CS01 4) Creation of BOM

Important paramenters
Material ( FG)
BOM Usage 1( Production)

eg
RM1 10
RM2 5

CR01 5) Creation of Work centers

 Machine work center
Standard value key( SAP1)
Usage 9
Cost center Production Cost center

Activity type Act Unit

Setup Hr
Machine Hr
Labour Hr

CA01 6) Creation of Routings

Here we will define how much Hours of different activites will be cons
Work centers

WC Plant Setup Machine

b) Production cost planning

1) Planning cost center wise KP06

Plannin Version 0
From period to period
Fiscal year
Cost center
Here we can do plannig cost element wise
eg CC G 400100

2) Planning activity type KP26

Here we can plan an activity in a particular cost center

eg CC G MACH1

3) Now we can calculate machine hour rate which will be used in Routing

720000/7200 10

Now we have planned for the activity types, for Estimation of Finished goods we must know
So Purchasing department must update the price for Raw materials.

How we estimate the cost of a finished good

 SAP picks the quanity of RM form the BOM
it then valuates the quantity with the various price maintained in the material m
in accordance to the strategies we assign in the valuation variant.
Similarly SAP pick the routing data
and system will determine the price of the activity type according to the strategi
Lastly, system will calculate the overheads with the help of Costing sheet

Following the are basic settings

A) Overhead calculation
in order to calculate the overhead we need to maintian the costing sheet
Suppose the company decided to charge 10 percent overhead on the materials

Configuration needs to maintain a costing sheet

1) Overhead cost element

2) Define calculation bases
3) Define percentage overhead rate
4) Define credits

1) Overhead cost element

eg 9200000 CE Cat
The cost center will be credited with this CE and the production order

2) Define calculation bases

It determines to which cost elements the Overhead is appli

eg Material
From CE
Here we will give the number range of the Cost elements in
because we want to give overhead on materials

3) Define percentage overhead Rate

Overhead Rate will be assigned to Overhead key

Overhead key will be assigned to Overhead group
Overhead group will be asssigned to Materal masters

Suppose we want to give:-

10 percent
12 percent
 Important field Dependency
Overhead rate/ Plant
Overhead rate/Overhead key

4) Define credits

By defining credits we are crediting the cost center and deb

Crediting in the cost center happens with the help of overh

Credit Material OH
Overhead Cost element

Costing sheet

OKTZ B) Cost Component Structure

The cost component structure break down the standard cost estimate
RM
Packaging material
Material overhead
Production overhead
etc

Various settings for Cost component structure

1) Define cost componenet structure

CCS Active

2) Define cost component groups

 eg Raw Material
RM Overhad etc

While defining Cost component groups we have different s

Cost Share Whether cost component is relevent for Va

Rollup cost Semi finished product cost will be displayed
Filter criteria Cost of goods manufactured/ Sales and adm
Inventory val Whether the cost component is relevent fo

3) Assignement Cost components

we assign different cost elements for different groups

4) Assignment organizaion unit

CoCd Plant

b) Material cost estimate with quantity structure

OKKN Material cost is estimated with the help of costing Variant

A costing Variant requires the following configuration

1) Costing Type
2) Valuation variant
3) Date Control
4) Quantity structure control
5) Tranfer strategy

1) Costing Type

Price Update In the costing type we define which field in

eg Standard price, Commercial price

Also we define for which valuation view it is

Date control Whether the cost estimate will be saved wi

Without date
with start of a period
with date

2) Valuation variant

Tabs in Valuation variant

a) Material Valuation
b) Activity type/processes
 c) Sub contracting
d) Ext processing
e) Overhead

Material Valuation in this configuration we define the sequenc

of the material master .
we can also configure for the purchasing pr

Planned price is maintained in costing veiw

System searches for the planned price if giv
In case there is no planned price, then syst
First for the moving avg price and then the
last strategy is the standard price

Activity type/processes
Here system will search for the activities typ
we can also specify the Plan/ actual version
eg Plan price as average of all fiscal year pe

Subcontracting if the materials are being manufacture from

we maintain quota arrangements in purcch
Here we define the sequence system will se
eg Net quotation price

External processing If material needs external processing

Here we define the system search for seque
or routing info for valuation of external acti
eg Price from quoatation
Net quotation price

Overheads Here we define the costing sheet for Mater

we also define overhead for the subcontrac

Note If we want differenct valuation stratigeis/ different overhead rates. We can creat

Misc Price factor This conrol is relevent to costing

it controls the extent to which BOM , opera
>>>

3) Date Control It controls the date on which the quantity s

It controls the following parameters

1) The validity period of the cost es

2) The date on which the quantity s
 3) The date on which the quantity s

4) Qyantity structure control

It is used in Cost estimates with quantity structure to speci

alternative Routings to create a quantity structure for Multi

BOM Application Costing

Routing Selection ID

Selection Ids
5) Define Trasfer strategy

Single Plant Tranfer

Cross Plant

It is used to determine how sytem will tranfer the existing cost to the
Suppose we have a new materail which contains some previously use
In that case we have an option to use the previous cost or we can esti

Here we have different strategies .

1) Future standard cost estimate
2) Current standard cost estimate
3) Previous standard cost estimate

6) Define Reference Variant

This is an optional setting

Now we can define a Costing Variant Using ( Costing Type, Valuation Variant, Dat
Using Transaction code OKKN

Costing Variant is a link b/w application and customizing, since all cost estimates
It contains all the parameters for Costing.

We can copy a standard costing Variant PPC1, but we wont be able to change Co

Tabs Control Qty Struc Add Cost Update

1) Contol

Here we give all the variable we have defined

Costing Type
Valuation Variant
Date control
Quantity structure control
Transfer control
Reference Variant
2) Qty Structure

Pass on Lot Size Options

No

Only with individual requirement

Always

3) Additive cost

wheter we transfer the cost components that were entered

its optional

4) Update

we define the parameters which should be updated when e

eg Log.

5) Assignments
 6) Misc
For error management

Running and Saving Standard Cost estimate:-

CK11N CK40N ( For collective)

We have to give all the paramenters to see the estimated cost here

Material Number
Plant

Costing Data Dates

Costing Variant Costing Date from

Costing Version Costing Date to
Quantity structure Date
Valuation Date

After that we run the cost estimate

 we get the estimated cost with finished goods and break up cost with BOM and
we can also switch it to Cost component structuress

we need to save this cost after checking the values.

Marking and releasing the standard cost CK24

Once the standard cost estimate is released , the standard price will appear in Ac
This is done once in the beginning of the period

we need to give paramenters :-

Posting period/ Fiscal year

CoCd
plant
Material

After that we need to click on Marking allowances

we will get the sceen of cocd and valuation view ( legal valuation)
Click on the company code and give the paramenters( Costing Variant

After that execute the test run

Check and mark , and save it and release it
ance as much as possible.
s( Because we do planning according to standard market price)
he management related to production)

ory ( 43 Internal activity allocation)

al entry Manual allocation)

ined Manually)
 All task type
Production Cost center

Formula
SAP001
SAP002
SAP003

rs of different activites will be consumed by the material in different

Labour

720000 Rs

72000 Hours

h will be used in Routing KSPI

on of Finished goods we must know the price of the Raw materials

 Note
CK11N
price maintained in the material master
e valuation variant. Paramenters
Dtaes
vity type according to the strategies. Plant Costing date from
h the help of Costing sheet Material Costing Date To

Costing variant Quantity struc Date

Costing Verson Valuation Date

maintian the costing sheet

ercent overhead on the materials

Overhead Key Overhead Group

41( Overhead rates)

h this CE and the production order will be debited

ost elements the Overhead is applied

Prodcution
To CE From CE To CE
mber range of the Cost elements in which the RM is consumed
overhead on materials

signed to Overhead key

gned to Overhead group
sssigned to Materal masters

Planning
Actual
 Dependency
Overhead rate/ Plant
Overhead rate/Overhead key

e crediting the cost center and debiting the production order

er happens with the help of overhead cost elements

Overhead Cost element Cost center

k down the standard cost estimate in to different factors

Primary cost component split Name

ponent groups we have different settings

cost component is relevent for Variable cost or Fixed and Variable

hed product cost will be displayed in higher level
oods manufactured/ Sales and administration cost
the cost component is relevent for inv valuation

lements for different groups

Costing Variant Cost Component structure

help of costing Variant

wing configuration

sting type we define which field in the material master the costing result is going to transfer
ard price, Commercial price

efine for which valuation view it is costed ( Legal valuation)

the cost estimate will be saved with a date:-

of a period

ype/processes
nfiguration we define the sequence in which the system seraches for the price in accounting / costing view
aterial master .
so configure for the purchasing price

price is maintained in costing veiw

earches for the planned price if given in config
ere is no planned price, then system will search for the price according to the planned price
he moving avg price and then the standard price
egy is the standard price

em will search for the activities type

so specify the Plan/ actual version here
rice as average of all fiscal year periods

terials are being manufacture from the external vendors

ain quota arrangements in purcchasing info
define the sequence system will search in purchasing info
Net quotation price

al needs external processing

define the system search for sequence in purchasing info record
g info for valuation of external activities
Price from quoatation
Net quotation price

define the costing sheet for Material overheads

efine overhead for the subcontracted materials

rent overhead rates. We can create plant specific valuation variant

ol is relevent to costing
s the extent to which BOM , operation, suboperation is used in costing

s the date on which the quantity structure and the value structure is created.
s the following parameters

The validity period of the cost estimate

The date on which the quantity structure is determined
 The date on which the quantity structure is valuated

es with quantity structure to specify how the system searches for valid alternative BOMs and
eate a quantity structure for Multilevel BOMs

Selection ID
will tranfer the existing cost to the new cost estimates
hich contains some previously used material components
se the previous cost or we can estimate the new cost

Fiscal Year Periods

osting Type, Valuation Variant, Date Cotrol, Quantity structure Control, Transfer Control, Reference Variant)

stomizing, since all cost estimates are carried out and saved with respect to Costing Variant

but we wont be able to change Costing Type and Valaution variant

Assignment Misc
 The materials are costed with lot size of the material master record
The semi finished goods cost are coverted to the lot size of the material master

individual requirement Lot size of the higher level material

use lot size of the highest material.

ost components that were entered in the form of an additive cost estimate

s which should be updated when estimating the cost.

CK40N ( For collective)

While running the cost estimation CK11N

we give the material number , Plant , Costing Variant etc

Costing Date from

Costing Date to
Quantity structure Date
Valuation Date
 and break up cost with BOM and Routing

he standard price will appear in Accountign1 and costing 2 view

aluation view ( legal valuation)

the paramenters( Costing Variant and Costing Version)
 CK40N

Qty Struct
Costing date from BOM
Costing Date To Routing Data

Quantity struc Date

Valuation Date
First we create a PO
After creation we estimate the Planned cost of the order. It is created automatically based on the BOM an

CO01 Creation of a production order

Parameters:-
Material PO
Production Plant
Planning Plant
Order type (PP01)

Now to check the cost, we can go to Cost ----Analysis

MB1A
Now to create a Production order, we need materials
For that, we need issue Raw materials to Production order, MB1A ( 261)

FI Entry
RM Consumption 1
RM Consumption 2
To Inventory RM 1
To Inventory RM 2

Now we can calculate actual Overhead

KGI2
Parameters
PO
Period
Fiscal year

After that suppose we are unable to manufacture the PO within month, but to show the balance sheet ac
Because of that WIP is calculated at every month, and when the order is completed , this entry is reversed
KKAX
Parameters
PO
WIP period
Fiscal year

Now after that we can confirm the PO

Here we give the amount of activity it consumed and Amount of Operation
After the confirmation, we will get the actual price of the PO

CO11N

PO
Operation/Activity
Yeild to confirm
Activity to confirm

Now after that we can generate a production receipt bec we know the actual cost after confirmation

MB31

Doc Date
Posting Date
Movement type 101
PO

FI entry

Inventory FG
To Inc Dec in Stock

Now we can make the order TECO, CO02

Functions ----Restrict processing---Technically completed
We are now in postion of calculating variances

KKS2

PO
we can see the variances on the screen

Now again we can check the WIP using KKAX and after that we need to do actual settlement

KO88

PO
Settlement period
Fiscal year

It will reverse the previous generated WIP entry

Prod Order Diff

To Inc /Dec in stocks

Inc/Dec in stocks Reversed entry

To WIP
omatically based on the BOM and Routing( In which Price data is fetched from Standard price of a material Master)

MB1C
Note: we can take the opening stock using MB1C
Movement type would be 561

After taking the stoc the FI entry would be

Inventory RM A/c
To Stock taking GBB(BSA)

but to show the balance sheet accurately we must show WIP as an asset,
completed , this entry is reversed.
 Settlement of WIP

K088

Same parameters
FI entry

WIP A/c
to Inc/dec in stock.

tual cost after confirmation

o actual settlement