Product Costing by Consultancy

RGL Consultancy dec.
2010
Product Costing v0
www.rglconsultancy.nl
Product Costing
CONTENTS:
1) Introduction
2) Master data
A) Material
B) BOM
C) Routing
D) Work Center
E) Activity output/prices
F) Business process & prices
3) Customizing settings
A) Costing variant
B) Costing type
C) Valuation variant
D) Costing Sheet
E) Date Control
F) Qty. Struct. Control
G) Costing variant continuation
H) Cost Component Structure 01
I) Template
J) Check Costing Variant
4) Process demonstration
A) Create Costing Run
B) Analysis of the Cost Estimate
1. Material 102-110
2. Material 102-120
3. Material 102-130
4. Material 102-100
5. Material P-102
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RGL Consultancy dec. 2010
Product Costing v0
1) Introduction
Product costing is an essential part within Production Planning(PP). Understanding how the system
calculates the cost price of a product is important to know in order to control this process. In this document I
will show the master data and customizing settings which the system uses in product costing and manually
re-calculate some of the prices in order to obtain a good understanding of what the system did.
2) Master data
The product which will be cost estimated as an example is material no. P-102. In Paragraph 4 a costing run
will be created for this purpose and used to calculate the costs of the product. Then using an analysis report
the costing results will be analyzed. In this paragraph all the master data which will play a roll in the cost
estimate process will be listed in detail.
A) Material
Display costing 1 material view of material P-102 in plant 1000:
Call up the transaction as follows:
Logistics Production Master Data Material Display Display
Menu Path
Current
Transaction code MM03
Click on button
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Product Costing v0
Select version 0001 and then click on button
In this window you see the group no.(50000004) and group counter (1) of the routing which the
system will use and the alternative BOM no. (3) and BOM usage(1).
Go back by clicking on button
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(2x) , then display costing 2view :
Product Costing v0
Costs are assigned to a cost element. In case of raw materials generally the standard price of the material is
used as the cost and the valuation class of the material is used to retrieve the cost element.
If for example P-102 was a raw material with valuation class 7920, the cost element is found in
customizing by first retrieving the account modification key.
Call up the customizing transaction as follows:

IMG Materials Management Valuation and Account Assignment
Menu Path
Account Determination Account Determination Without Wizard Define
Tr. code / Table
Account Grouping for Movement Types

OMWN / -

IMG Materials Management Valuation and Account Assignment
Menu Path
Account Determination Account Determination Without Wizard
Tr. code / Table
Configure Automatic Postings

OBYC / -
But P-102 is an assembled product which could be taken in stock after production.
Than the cost element is determined as follows:
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Product Costing v0
B) BOM
Display the Bill Of Material(BOM) of material P-102 in plant 1000:
Logistics Production Master Data Bill of Material Material BOM
Menu Path
Display
Transaction code CS03
Enter selection criteria then click on button
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Product Costing v0
Note here the status of the BOM which is 1(active).

In the Admin. Data tab we check its validity:
Click on button
P-102 is a multi-level BOM as items 10,20,30,40 and 50 are marked as assembly items(BOM themselves).
To get a complete overview of this BOM with all its materials, quit this tx. and execute the following.
Logistics Production Master Data Bill of Material Reporting
Menu Path
BOM Explosion Material BOM Multilevel BOM
Transaction code CS12
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Product Costing v0
Note column level no. at the left., showing the different BOM levels.
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Product Costing v0
C) Routing
Display the Routing of material P-102 in plant 1000:
Logistics Production Master Data Routings Routings Standard
Menu Path
Routings Display
Transaction code CA03
Enter material and plant no. and then click on button
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Product Costing v0
Click on button
D) Work Center
Display work center 1310 in plant 1000.
Logistics Production Master Data Work Centers Work Center
Menu Path
Display
Transaction code CA03
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Click on button
tab Costing:
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Product Costing v0
Product Costing v0
E) Activity output/prices
Display activity output/prices of cost center 4220 & 4230 in controlling area 1000.
Accounting Controlling Cost Center Accounting Planning Activity
Menu Path
Output/Prices Display
Transaction code KP27
Enter selection criteria and then click on button

Above selection criteria are based on the valuation settings in paragraph 3C tab ActivityTypes/Processes.
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Product Costing v0
F) Business process & prices

In the customizing as will be seen later use will be made of business processes 300900 and 400900.
To display a business process.
Accounting Controlling Activity-Based Costing Master Data
Menu Path
Business Process Individual Processing Display
Transaction code CP03
Click on button
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Tab: Allocation
Tab: Template
Click on button
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Product Costing v0
Product Costing v0
Display cost price for business process 300900 & 400900.

Accounting Controlling Activity-Based Costing Planning Process
Menu Path
Quantities/Prices Display
Transaction code CP27
Enter selection criteria and then click on button

Above selection criteria are based on the valuation settings in paragraph 3C tab ActivityTypes/Processes.
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Product Costing v0
Product Costing v0
3) Customizing settings
The central customizing object in product costing is the costing variant.
I will explore in this paragraph the settings of costing variant PPC1 and its sub-objects.
This costing variant is namely generally used to create a cost estimate.
A) Costing variant
IMG Controlling Product Cost Controlling Product Cost Planning
Menu Path
Basic Settings for Material Costing Material Cost Estimate with Quantity
Structure Define Costing Variants
Tr. code / Table
OKKN / -
Select the line with costing variant PPC1 and then click on button
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B) Costing type
Tab: Save Parameters
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Product Costing v0

Tab: Misc
Click on button
C) Valuation Variant
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Product Costing v0
Product Costing v0
Tab: ActivityTpes/processes
Note the strategy for ActivityTypes/Processes which is Plan price average of all fiscal year
periods. Based on this, the selection criteria for prices was chosen.
Tab: Overhead
D) Costing Sheet
Select line COGS and then double click on Costing sheets rows in folder Dialog structure:
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Product Costing v0
Select row 10 and then double click on line Base in folder Dialog Structure =>
Click on button
Select row 20 and then double click on line Overhead rate in folder Dialog Structure =>
Click on button
Select row 20 again and then double click on line Credit in folder Dialog Structure =>
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Product Costing v0
Click on button
Following same procedure for the other conditions in the costing sheet =>
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Tab: Misc.
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Product Costing v0
Product Costing v0
Back to Costing variant PPC1 ,tab: Control
E) Date Control
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F) Qty. Struct. Control
Tab: Routing
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Product Costing v0
G) Costing variant continuation

Tab: Additive Costs
Tab: Update
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Product Costing v0

Tab: Assignments
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Product Costing v0
Product Costing v0
H) Cost Component Structure 01
Next we check the customizing settings of cost component structure 01.

Menu Path
Basic Settings for Material Costing Define Cost Component Structure
Tr. code / Table
OKTZ / -
Select cost comp. str. 01 and then double click on line Cost Components with Attributes =>
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Product Costing v0
Select line with cost component 10 and then click on button
to view its details =>
From this screen double click on line Assignment: Cost Component - Cost Element Interval =>
Double click on line Update of Additive costs =>
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Product Costing v0
Double click on line Cost Component Views =>
Double click on line Assignment: Organiz. Units - Cost Component Struct =>
Double click on line Cost Component Groups =>
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Product Costing v0
I) Template
Template for overhead cost distribution from Activity-based costing.

Menu Path
Basic Settings for Material Costing Templates Assign Templates
Tr. code / Table
KTPF / -
Relevant template here is COPC-10-1 Order Processing COGS, which will be retrieved using
OH key = SAP10 and environment=001.
Check its settings.
Menu Path
Basic Settings for Material Costing Templates Maintain Templates Display
Tr. code / Table
Template
CPT3 / -
<ENTER>
Double click on object COPC-10.

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Product Costing v0
J) Check Costing Variant
At last we run a check on the costing variant and get a list of all the settings for this variant.
Click on button
Menu Path
Tr. code / Table
or call up the customizing transaction as follows:

Basic Settings for Material Costing Check Settings
CKC1 / -
Click on button
This gives a list of all the customizing setting of this costing variant.
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Product Costing v0
4) Process demonstration
A) Create Costing Run
A costing run will be setup and processed up to and including costing, than I will switch to a report to
analyze the results of the costing .
Create costing run.
Logistics Production Product Cost Planning Material Costing
Menu Path
Costing Run Edit Costing Run
Transaction code CSK40N
Click on button
Click on button
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Click on button
Product Costing v0
or first check the Valuation tab.
Tab: Valuation
Note the valuation variant which is 001 and the costing sheet which is COGS.
Click on button
.
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In row Selection click on button
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Product Costing v0
Product Costing v0
Enter matl no., plant no. and removed Background Processing flag.
Next click on button
and then click on button
Click now on button

the screen.
. After the system reported that run has been saved click on button
In row Struct. Explosion click on button
Remove flag Background Processing , then click on button

After system reported that run has been saved, click on button
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to update
Product Costing v0
Click on button
2x.
Click on button
in row Struct. Explosion .
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Continue with clicking on button
Product Costing v0
in row Costing.
Flag Log by Costing Level and remove flag at Background Processing.

Check costing levels by clicking on button
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Product Costing v0
At this point you could unselected one or more levels.

Click on
to continue.
Click on button
in row Costing.
Each matl which is being costed is shown at the bottom of the screen during this process.
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Click on button
Product Costing v0
in row Analysis.
Select variant name SAP&11 and then click on button
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At this point we can click on button
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Product Costing v0
to view the cost estimate.
Product Costing v0
Tab: Material Overview
Click on button
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in row Analysis of Costing Run.
Product Costing v0
We can see the costs above on an itemized level.

Click on button
Click on button
to leave this transaction.
B) Analysis of Cost Estimate

The costs estimate of material P-102 will be analyzed. Not all cost items will be analyzed but only of
different item categories. The analysis is to show where the cost price and the cost element of an item comes
from. An overview of the cost estimate can be retrieved with the following report.
Logistics Production Product Cost Planning Information System
Menu Path
Summarized Analysis Analyze Costing Run Results of Costing Run
Transaction code S_ALR_87099930
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Product Costing v0
Enter the costing run no. and date, then click on button
Position the cursor on material P-102 at the bottom of the list and then go to the menu :
Goto Display Cost Estimate
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Product Costing v0
Above you can see a breakdown of the costs of material P-102 according its BOM explosion.
Cost are build up starting with the materials at the lowest level of the BOM and are rolled up to the
next higher level material.
I will therefore start the analysis with materials 102-110,102-120 and 102-130 of BOM 102-100,
followed by an analysis of the cost estimate of material 102-100 and will finish with an analysis of
the cost estimate of material P-102. Cost estimates of materials 102-200, 102-300, 102-400 and
102-500 are assumed to be similar to that of material 102-100.
Go back to Analyze/Compare material cost estimates overview screen of the report.
1. Material 102-110:
Position the cursor on material 102-110 and then go to the menu: Goto Itemization =>
We see item cat. I (delivery) and cost element is 400000.

It look likes the price comes from a purchasing info record, but actually the price comes from the
standard price in the material master as can be seen from the next screenshot:
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Product Costing v0
The valuation class is 3000 so I lookup in customizing what the cost element should be using the
logic and paths showed in paragraph 2A =>
As the origin of the cost price and the cost element has been determined, this completes the
analysis for material 102-110.
Position cursor on material 102-120 then go to the menu: Goto Itemization =>
The accounting view 1 of the material master in next screenshot explains the price and the cost
element =>
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Product Costing v0
This completes the analysis for material 102-120.

Position cursor on material 102-130 then go to the menu: Goto Itemization =>
The accounting view 1 of the material master explains the price and the cost element =>
This completes the analysis for material 102-130.

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Product Costing v0
This is a material which is assembled from the 3 materials we just saw.
Which means that the costs of this material consist of the costs of these 3 materials plus the costs to
assemble it , plus possible overhead costs.
Position the cursor on material 102-100 and then go to the menu: Goto Itemization =>
Itemized overview of material 102-100:
The costs of the 3 components can be found as item no.s 4,5 and 6 all marked with item cat.
M(Material).
Item cat. E refers to costs due to production activities.
I will analyze item no.s 1,2 and 3 .
Than I will analyze item no. 16 with item cat. X, followed by item no. 18 with item cat. G.
This is a list with item categories with their description =>
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Product Costing v0
Material 102-100 has its own routing(see par. 2C regarding Routing) which is =>
Double click on work center 1112, then go to tab Costing =>
I will now go thru the items 1,2,3,16 and 18.

Item no. 1(setup costs):
Formula SAP005:
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Product Costing v0
Setup time = 10 MIN * 1 = 1/6 H = 0.167 H

Item detail(select the item and then click on button
):
The cost prices are in accordance with the master price data of cost center=4220 and activity
type=1422 in paragraph 2E, as shown here again:
This means that the cost price for item 1 is: (3.357,74 / 10 ) * 0.167 = 56,07 euro
Cost element matches with the master data.
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Product Costing v0
Item no. 2(machine costs):
Formula SAP006:
Machine time = 30 MIN * 10 / 1 = 5 H

Item details(select the item and then click on button
):
The fixed and variable prices are in accordance with the master price data of cost center=4220 and
activity type=1420 =>
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Product Costing v0
This means that the cost price for item 2 is:

Fixed: (6.253,88 / 100 ) * 5 = 312,69 euro
Variable: (576,38 / 100 ) * 5 =
28,82 euro
--------Total:
341,51 euro
Also the cost element matches.
Item no. 3(labor costs):
Formula SAP007:
Labor time = 30 MIN * 10 / 1 = 5 H

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):
Product Costing v0
The fixed and variable prices are in accordance with the master price data of cost center=4220 and
activity type=1421 =>
This means that the cost price for item 3 is:

Fixed: (4.861,03 / 100 ) * 5 = 243,05 euro
Variable: (449,62 / 100 ) * 5 =
22,48 euro
--------Total:
265,53 euro
Cost element matches.
Item no. 16(Business process):
):
The fixed and variable prices are in accordance with the master price data of business process
300900 in paragraph 2F =>
Also the cost element matches.
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Product Costing v0
Item no. 18(overhead):
):
See Costing sheet in paragraph 3D.

Raw material costs(condition B100): 20,50 + 230,00 + 0,80 = 251,30 euro
Overhead (condition C010/D010): 10% of 251,30 = 25,13 euro
Fixed value (condition E00): 50% of overhead = 50% of 25,13 = 12,57 euro
Cost element 655100 from E00:
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Product Costing v0
5. Material P-102:
This is the final assembled material.
Position cursor on material P-102 and then go to the menu: Goto Itemization =>
We see 8 line items with item cat. M, of which 5 are assembly items and 3 are stock items judging
from the cost element assigned to them. Item no. 9 is familiar from previous matl 102-100, so I
will analyse only items 10 - 13.
Item no. 10(Business process):
The fixed price is in accordance with the master price data of business process 400900 in
paragraph 2F =>
Also cost element 629000 matches.

Item no. 11,12 & 13(overhead):
See Costing sheet in paragraph 3D for all the details.

Raw Material(condition B100=> cost element=400000): 511,00+16,38+0,80 = 528,18 euro
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Product Costing v0
Item 11:
Total value = Material OH(condition C010/D010): 10% of 528,18 = 52,82 euro
Fixed value (condition E00): 50% of material OH= 50% of 52,82 = 26,41 euro
Cost element 655100 comes from E00:
Item 12:
Production costs(condition B200=>where cost element=619000/620000/623000/625000) = 0
Manuf. Cost level (total) = 528,18 + 52,82(from item 11) = 581,00 euro
Manuf. Cost level (fixed portion) = 26,41 euro (from item 11)
Administration OH(condition A300/D000): Total value = 20% of 581,00 = 116,20 euro
Fixed value = 20% of 26,41 = 5,28 euro
Item 13:
Total costs(condition B110=> cost element=890000) =
1283,00 + 459,56 + 2789,57 + 505,08 + 114,33 = 5151,54 euro
Fixed costs(condition B110=>cost element=890000) =
925,80 + 408,28 + 2346,18 + 240,18 + 6,53 = 3927,36 euro
Semi Finished goods(total) = 52,82(item 11) + 581,00(item 12) + 5151,54 = 5732,54 euro
Semi Finished goods(fixed portion) = 3927,36 + 26,41 ( item 11) = 3953,77 euro
Sales OH(condition A310/D000): Total value = 15% of 5732,54 = 859,88 euro
Fixed value= 15% of 3953,77= 593,07 euro
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RGL Consultancy dec.

RGL Consultancy dec. 2010

RGL Consultancy dec. 2010

Select version 0001 and then click on button

(2x) , then display costing 2view :

RGL Consultancy dec. 2010

Call up the customizing transaction as follows:

Account Grouping for Movement Types

Call up the customizing transaction as follows:

Configure Automatic Postings

RGL Consultancy dec. 2010

Enter selection criteria then click on button

RGL Consultancy dec. 2010

Note here the status of the BOM which is 1(active).

RGL Consultancy dec. 2010

RGL Consultancy dec. 2010

Enter material and plant no. and then click on button

RGL Consultancy dec. 2010

RGL Consultancy dec. 2010

RGL Consultancy dec. 2010

Enter selection criteria and then click on button

RGL Consultancy dec. 2010

F) Business process & prices

RGL Consultancy dec. 2010

RGL Consultancy dec. 2010

Display cost price for business process 300900 & 400900.

Enter selection criteria and then click on button

RGL Consultancy dec. 2010

RGL Consultancy dec. 2010

RGL Consultancy dec. 2010

Tab: Save Parameters

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RGL Consultancy dec. 2010

RGL Consultancy dec. 2010

RGL Consultancy dec. 2010

RGL Consultancy dec. 2010

RGL Consultancy dec. 2010

Back to Costing variant PPC1 ,tab: Control

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RGL Consultancy dec. 2010

G) Costing variant continuation

RGL Consultancy dec. 2010

RGL Consultancy dec. 2010

H) Cost Component Structure 01

Next we check the customizing settings of cost component structure 01.

RGL Consultancy dec. 2010

Select line with cost component 10 and then click on button

Double click on line Update of Additive costs =>

RGL Consultancy dec. 2010

Double click on line Cost Component Views =>

Double click on line Cost Component Groups =>

RGL Consultancy dec. 2010

Template for overhead cost distribution from Activity-based costing.

Double click on object COPC-10.

RGL Consultancy dec. 2010

J) Check Costing Variant

or call up the customizing transaction as follows:

RGL Consultancy dec. 2010

RGL Consultancy dec. 2010

or first check the Valuation tab.

RGL Consultancy dec. 2010

In row Selection click on button

RGL Consultancy dec. 2010

and then click on button