Variances with a Valuated Sales Order Stock
Use
If you are using a valuated sales order stock, you can use the functions for variance calculation and the
calculation of scrap variances in sales-order-related production.
You can do this in the following situations:
In mass production on the basis of sales orders with a valuated sales order stock
You do not flag the sales document item as carrying costs and revenues.
In this case the functions of Cost Object Controlling are performed at the product level using
manufacturing orders (production orders or process orders) or in repetitive manufacturing using
a product cost collector for the material manufactured for the sales order.
You can also use a cost object hierarchy.
Complex make-to-order production
Here your costs are managed on a sales document item that carries costs and revenue. That is,
you use the Product Cost by Sales Order functionality.
You can calculate variances and unplanned scrap (scrap variances) at the level of the orders
(manufacturing orders or product cost collectors) assigned to the sales document item. It is not
possible to calculate variances at the level of the sales document item.
Prerequisites
If you want to see the variance categories rather than just remaining variances, the cost estimate on
which the calculation of target costs is based must have an itemization.
See also: Standard Price with Valuated Sales Order Stock
This section contains detailed information on the strategy sequence for the selection of the cost
estimate relevant to inventory valuation with a valuated sales order stock.
Inventory Valuation on Basis of Sales Order Cost Estimate/Order BOM Cost
Estimate
If you want to calculate variances using the standard price for the material manufactured for the sales
order that was calculated in a sales order cost estimate or order BOM cost estimate, make sure that:
The sales order cost estimate / order BOM cost estimate has the status VO (marked)
You specify that the status VO (marked) is set automatically in Customizing for Product
Cost Controlling under Cost Object Controlling Product Cost by Sales
Order Control of Sales-Order-Related Production Check Requirements Classes by
entering B in the Costing ID indicator. This is particularly recommended in mass
production environments on the basis of sales orders, because it would involve too much
effort to set the status manually.
To be able to calculate scrap variances using a sales order cost estimate, the following
requirements must be met:
This sales order cost estimate / order BOM cost estimate must have been performed
with the costing method product costing.
An itemization must have been updated for this cost estimate.
Inventory Valuation on Basis of Standard Cost Estimate for Collective
Requirements Material
If you want the scrap variances to be calculated using a standard price for the material for the
sales order which was calculated in a standard cost estimate for the material because you also
carry the same material in collective requirements, variance calculation can be performed if the
standard cost estimate is marked and released and is valid at the time of variance calculation.
You can calculate variances on the basis of the standard price in the material master even if the standard
price was calculated in a cost estimate without quantity structure. A cost estimate without quantity
structure is created with the costing method unit costing. The variances are shown broken down into
variance categories.
You can only calculate scrap variances if the standard cost estimate for the material is a cost estimate
with quantity structure (costing method product costing) and it has an itemization.
The system requires an itemization with operation information in order to valuate work in
process at target costs and scrap variances.
To calculate the total variance, the system only requires a standard price that was
calculated in a cost estimate with itemization. If no itemization exists, variance calculation
will report all variances as remaining variances. This will be the case for example if the
sales order cost estimate is a product cost estimate without an itemization.
Features
If you are using a valuated sales order stock, you can calculate the variances the same way as
in make-to-stock production:
For manufacturing orders
For product cost collectors (see also: Product Cost Collectors in Sales-Order-Related Production)
For cost object hierarchies
If you are using a valuated sales order stock, variance calculation calculates the total variances
(standard system: target cost version 0) on the basis of the cost estimate that is used to valuate
the materials in the sales order stock. This can be the following:
The standard cost estimate for the material
A cost estimate selected according to a predefined strategy sequence In the case of the
strategy sequence, the system accesses the following cost estimates in the defined
sequence.
In variance calculation, the system assumes that the goods receipt is valuated with the standard
price. Differences that are due to a different valuation are shown as output price variances.
Output price variances are also reported in cases such as the following:
You create a sales order cost estimate for a sales order item and mark it. The
material is manufactured and placed into finished goods inventory. The standard
price is updated.
You then reverse the goods receipt. You create a new sales order cost estimate
and mark it. However, you overlooked the fact that once the standard price for
the sales order stock is updated, it can no longer be changed automatically. The
material is again placed into finished goods inventory. The inventory is valuated
with the standard price that was updated with the first goods receipt.
In the period-end closing process of Cost Object Controlling, you calculate the
variances. The difference between the standard price and the second sales order
cost estimate is reported as an output price variance.
Manual changes to the price of a make-to-order material have the following effects:
We continue with the above example:
Suppose you would like to prevent the output price variance from being reported.
You manually adjust the standard price of the make-to-order material to the value
of the second sales order cost estimate.
Assume that the sales order cost estimate has a total value of EUR 50. The fixed
costs are EUR 10 and the variable costs are EUR 40.
When it calculates the variances, the system reports a variance of zero for the
variance category output price variance. However, it does report a variance of
EUR 10 for the fixed costs and the same amount for the variable costs; these
amounts cancel each other out.
Constraints
If you are using product cost collectors in sales-order-related production, you can only calculate
variances with target cost version 0 if you have created a standard cost estimate for the
configurable material.
You cannot calculate variances for the sales order item.
Note the following:
If the sales order item carries costs and revenues, the price differences for
externally procured individual requirements materials are posted to the sales
order item (and not directly to CO-PA). If you now want to see the total actual
cost on the sales order item, you must also settle the total variances on the
manufacturing orders or product cost collector (the value that is posted to the
price difference account) to the sales order item. In this case, make sure you do
not settle the total variances to CO-PA because the variances would then get
transferred into CO-PA twice.
For more information, read the following section: Settlement in Product Cost by Order or
Period
See also:
Product Cost by Period
Product Cost by Order
