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Product Cost Planning - is an area within Product Cost Controlling (CO-PC) where you can plan costs for
materials without reference to orders, and set prices for materials and other cost accounting objects.
To determine cost estimate of the product. (Standard price) We can use this price for valuation of Inventory.
Configuration
1. Cost component Structure (OKTZ) It gives the breakup of cost of the product.
2. Costing Sheet (KZS2) Calculate Indirect Overhead.
3. Costing Variant for standard cost estimate. (OKKN)
Control parameters:
1. Costing type
2. Valuation Variant.
3. Date control.
4. Quantity structure Control.
5. Transfer control.
6. Reference variant.
Bill of material:
The priority is defined based on the usage of the Bill of material. Usage: Specifies the application areas for
which the BOM is used. When creating the BOM, we will specify the usage.
If we have multiple BOM’S in the same application area or with same usage number, then system picks the
first BOM.
In case you want to pick a specific BOM, then you need to specify that BOM in the alternative selection of
Multiple BOM’S.
Routing:
The priority is defined with the combination of Task list type, Usage and status. Task list type: It specifies the
type of Routing.
Status: Released etc.
Date Control:
It specifies
a) Validity of the cost estimate. ie. The cost estimate is valid from which date to which date.
b) Which date BOM and Routing to be used in the cost estimate of the product.
c) Which date price to be used in the cost estimate of the product.
Costing date from: It could be either 1. Past Date, 2. Future Date, 3. Current Date.
a) Past date: If it is past date, we can generate the cost estimate but not possible to save the cost
estimate. It is not possible to mark and release the cost estimate.
b) Future date: It is possible to generate, save and mark the cost estimate. It updates material master
costing 2 tab future price. It is not possible to release the cost estimate. It is possible to release the
estimate once it reached to the future date.
c) Current date: It is possible to Generate, save, mark and release the cost estimate.
Quantity structure Date: It specifies which date BOM and Routing to be used.
Valuation Date: It specifies which date price to be used.
Determines the validity of the cost estimate and for costing date to, minimum date should be until the end of
the fiscal year and max is unlimited. This is because system requires for the calculation of the variance.
Note:
1. Quantity structure date should be always to be dependent on Costing Date from date.
2. Valuation date should be always to be dependent on Costing Date from date.
3. If you select manual entry, you can overwrite the date control values in frontend CK11N while
executing the cost estimate.
Marking Standard Cost Estimates
To transfer the results of a standard cost estimate as the standard price in the material master, you must
mark and release the standard cost estimate.
You can mark the following:
One or more standard cost estimates
More than one standard cost estimate within one costing run
When you mark a standard cost estimate, the costing results are written to the costing view of the material
master as the future planned price.
Prerequisites:
Marking the standard cost estimate has been allowed. The marking allowance specifies the company
code and period in which you can mark a standard cost estimate with a given valuation variant and
costing version. You cannot mark cost estimates/costing versions with different valuation variants in
this period.
You mark the cost estimate and transfer the costing results into the material master as the future
standard price.
You can mark the cost estimate more than once at any time (until you release it).
You can cancel the allowance for marking and thus the marking of standard cost estimates
If you want to work with multiple valuation views, you can mark all of the views (legal valuation,
group and profit center).
It specifies which costing variant and costing version cost estimate allowed to be permitted for the specific
period to the specific company code.
Note: It is not possible to use multiple costing variants and versions to allow to use in same period and
company code to mark and release the estimate.
VALUATION VARIANT
Valuation variant is a Key that controls which prices the system selects to valuate the quantity
structure of a material cost estimate or order, or to valuate the costing items of a unit cost estimate.
The valuation variant controls how the materials and activities in the cost estimate are valuated. The
valuation variant specifies the following parameters:
Which price in the material master (such as the standard price) or in the purchasing info record (such
as the net order price) is used to cost a material in the BOM
Which planned or actual price is used to valuate the internal activities
Which version in Cost Center Accounting is used to valuate internal activities
Which costing sheet is used to calculate overhead
Whether and to what extent a BOM item or an operation in the routing is relevant to costing
The different valuation strategies for materials, internal activities, external activities, and
subcontracting are stored as strategy sequences.
A global valuation variant is valid for all plants. A local valuation variant is valid only for a specific
plant. You define valuation variants in Customizing for Product Cost Controlling.
Cost Object Controlling:
In Cost Object Controlling there is a valuation variant that can be used for the valuation of work in
process at target costs and for the valuation of scrap variances.
In this valuation variant, you specify which cost estimate is used to calculate the target costs.
Valuation variant contains the strategy i.e. which priority of sequence of source of price to be used while
valuating materials, Activities ,Sub contracting, External processing, and also it specifies which costing sheet
to be used to calculate the indirect overheads.
We can maintain different valuation strategies for the same valuation variant depends on the plant
wise. System follows the first priority plant dependent then it follows the global definitions.
Valuation Strategies:
Material valuation
Here you define the sequence in which the system searches for prices from the accounting view or costing
view of the material master record to valuate materials. You can also access prices from purchasing info
records and condition types.
For material cost estimates, you also specify whether additive costs can be added to the selected price.
Note:
Sub strategy will appear only if you have selected the price from purchase info record in main strategy.
Additive Costs: Any costs you want to add manually as a part of Indirect Overhead.eg.Storage.
Raw mat X–.100 RS +20% Additive cost.
Include additive costs means the valuation variant specifies whether to consider or not to consider the
additive cost in the cost estimate of the product. If not activated, additive cost is not considered.
Purchasing: Assignment of Conditions to Cost Comps:
Purpose: To get the delivery and freight charges separately in the cost estimate of the products & also to
display the delivery and freight charges separately in the cost estimate of the product. We need to assign the
origin group the MM condition type’s .Then, we need to assign the origin group to the cost component in
cost component structure.
Activity Types / Processes
Here you define the sequence in which the system searches for prices in activity type planning or
actual activity price calculation in Cost Center Accounting or Activity-Based Costing to valuate the
utilized activity types and business processes.
Plan/actual version
It specifies which version price to be applied in the cost estimate of the product.
You also specify which plan/actual version is used.
Subcontracting
Here you define the sequence in which the system searches for prices in the purchasing info record.
In purchasing, the quota arrangementsare used to create a mixed price for materials that are
manufactured with external vendors with parts provided by the customer.
You can specify whether the quota of the individual vendors that are entered in the list for the
material to be processed should be determined through the planned quota arrangement or the
actual quota arrangement.
External processing
Here you define the sequence in which the system searches for prices in the purchasing info record or routing
operation for valuation of the external activities.
External processing is also another form of sub-contracting type. It is nothing but outsourcing of a
particular activity eg.cleaning, painting Activity etc.
The val. Variant ext. processing strategy tab specifies which pricing strategy to be used to valuate the
out sourcing activity.
GROSS PRICE: price before deducting Rebate and Discount.
NET PRICE: Gross price – Rebate- Discount.
Condition Table: we can assess or read the price from the pricing condition records.eg.freight and insurance.
Overhead costs
You can link the valuation variant for definition of overhead to a costing sheet. You can also enter a
costing sheet for the allocation of overhead to raw materials, if you want to use specific overhead
conditions for raw materials.
If you want to differentiate overhead application according to material groups, you must
have groups and made the necessary settings for the costing sheet in the step Define costing sheet.
You can also specify whether overhead is calculated for subcontracted materials in material costing
Price Factors
It specifies whether to consider the total price or part of the price to be considered in the cost estimate of
the product.
Standard Settings
The standard system provides a number of predefined price strategies.
For material valuation, you can choose up to five (5) strategies for each valuation variant.
For activity types/processes, you can choose up to three (3) activity prices for each valuation variant.
For subcontracting, you can choose up to three (3) strategies for each valuation variant.
For external processing, you can choose up to three (3) strategies for each valuation variant.
You can modify these valuation variants to suit your requirements by changing the standard strategy
sequences as necessary.
Activities
1. Enter an alphanumerical key and a name for the new valuation variant.
2. Define a strategy sequence for the valuation of material components.
3. a) To do so, select a price from the material master.
If you access prices from purchasing info records and condition types, you can enter up to three sub-
strategies. If you take prices from condition types, you must assign these condition types to origin groups in
Customizing. (See Raw)
1. b) For each material valuation strategy, you can specify whether additive costs are to be included in
the valuation of the material component.
2. Define a valuation strategy for activity types and processes and assign a plan/actual version from
cost center planning.
3. Define a strategy sequence for subcontracting and choose a quota arrangement for subcontracting.
4. Define a valuation strategy for external processing.
5. Assign a costing sheet under Overhead applied to semi-finished finished materials to the valuation
variant.
6. Specify whether overhead rates should be calculated for subcontracted materials.
You can enter a costing sheet for the application of overhead to raw materials under Overhead on material
components.
If overhead should be calculated for subcontracted materials, you can specify this here.
8. Save your entries.
9. Assign the valuation variant to a Costing variant.
Note
If you want to use different valuation strategies or different overhead rates in plants that belong to the same
company code, you can define plant-specific valuation variants by assigning a valuation variant to a plant.
Choose the push button Valuation variant/plant. If you don’t do this, the valuation variants apply to all your
plants.
Note
Materials valuated separately with the material ledger
The standard price is not included in the material ledger data, but rather the current planned price
which, as a rule, does not vary from the standard price. In the valuation variant, specify that the
system should also look for the current planned price for the valuation of materials. This ascertains
that, even in the case of separate valuation, a price is found for the valuation of materials.
COSTING VARIANT:
It contains the control parameters or it groups the costing parameters like costing type, valuation
variant, Date control, Quantity structure control, and transfer control. These parameters are
required to generate the cost estimate.
Costing variants form the link between the application and Customizing, since all cost estimates are
carried out and saved with reference to a costing variant.
We can define multiple costing variants for std. cost estimate purpose but we can use maximum one
costing variant per company code for the specified period.
Control Parameters in the Costing Variant
The costing variant contains all the control parameters for costing.
The costing variant for a material cost estimate contains the following control parameters:
Costing type
Valuation variant
Date control
Quantity structure control
(only relevant for cost estimates with quantity structure)
Transfer control (optional)
Reference variant (optional)
NOte
Although it is technically possible to have two costing variants with the same costing type and
valuation variant, this should be avoided to prevent data from being overwritten.
The reason for this is that the key structure for the costing results in the database uses the costing
type and the valuation variant, rather than the costing variant.
Note
Since this costing variant can be used for cost estimates both with and without quantity structure,
you must also make the settings that are only relevant for cost estimates with quantity structure
even if you are only executing a cost estimate without quantity structure.
In Quantity structure you determine the following:
How the costing lot size is handled
Whether cost estimates without quantity structure are included Whether transfer control can be
changed when calling the cost estimate Whether an active standard cost estimate can be transferred
if the cost estimate for a material contains errors
Pass on lot size:
This field determines whether costing lot size of all the components is based on the higher level material or
costing lot size of the components to be considered in the cost estimate of higher level products. There are 3
options:
1. No
2. Only with individual requirement.
3. Always.
Pass on lot size: No:
In this case, the components are costed according to the component lot size which is specified in the costing
1 view of the material master.e.g. A finished product’s costing lot size is 10 pc. Where the component Sfg.X
having lot size 100 pc.In this case, the cost estimates creates for the SFGx based on the lot size of the 100
pc.Then the cost estimate for the finished goods will be created on the costing lot size of 10 pc.That means, it
takes component cost estimate price based on the costing lot size of 100 pc. In the cost estimate of finished
goods.
e.g.
For 10pc of Fin. Goods X, 10 pc of Sfg, x is req.
Fin. Good X lot size is 10 pc.
Sfg x lot size is 100 pc.
For SFG X., 100 PC
Raw mat. -100kg*100 =10000
Cleaning -10hrs *2000 = 20000
Machine hrs. -100hrs *300=30000
TOTAL: 60000
Per unit cost; 60000/100= 600
Sfg x price 600
Pass on Lot Size: Only with individual requirements:
In this case, the cost estimate generates the cost estimate of the component based on the lot size of higher
level material and it ignores the costing lot size of the components.
TOTAL: 24000
Value of SFGX WILL BE 24000
The transfer control specifies or controls how the existing cost estimate is to be used in the cost
estimate of the other product.
Business case (purpose):
Usually we will perform the cost estimate yearly once for all the existing products. During the year, if any new
products created, we will run the cost estimate for the new products.
Eg1: The new product contains all the new components .In this case, we will run the cost estimate for all the
components which are new products.
Eg2: The new product contains few components as old and some new components. In this case, how the
system should reuse the cost estimate of the existing product in the cost estimate of other products.
If we regenerate the new cost estimate for existing products, then stem generates the variant for all the
existing products which is using the existing component.
Note:
Through the transfer control, we can specify to use the existing cost estimate or not in the cost estimate of
the other products.
Transfer only with collective requirements material (field):
This indicator specifies how the existing cost estimate to be used in the sales order cost estimate. If
this indicator is activated, then system ignores the existing cost estimate and rerun new cost
estimate of the existing product in the sales order cost estimate.
If this indicator is not activated, then system considers the existing cost estimate for both individual
requirements as well as the collective requirement(The existing cost estimate can be reused in the
sales order cost estimate)
Fiscal Year:
This indicator refers the current year.
Period:
In the period, if you keep blank, then it refers only the current period.i.e. System searches for
existing cost estimate in the current period only.
In current and previous cost estimate, the period refers the number of periods in the past. I.e. before
the date of the cost estimate.
In case of future cost estimate, the period refers the number of periods in the future i.e. after the
start date of the cost estimate. And in the past (before the start date)
You define transfer control in Customizing for Product Cost Controlling. You use transfer control to
specify how the system is to search for available cost estimates in order to transfer existing costing
data into another cost estimate.
You define a reference variant in Customizing for Product Cost Planning and enter it in the costing
variant. The reference variant contains a transfer control ID, which finds the cost estimate to be
copied.
Costing type
It is a Parameter that establishes the technical attributes of a cost estimate. It specifies the purpose and
usage of the cost estimate. It specifies whether allowed to update the estimate to the material master or not
and also it specifies which price field to be updated in the material master. It also specifies which valuation
views to be costed.
Each costing type allows only one valuation view.
For a material cost estimate, the costing type controls the following:
How the cost estimate is used, and which field in the material master is updated with the cost
calculated in the cost estimate (such as the standard price, commercial price, or tax valuation price)
Which costs are used as the basis for allocating overhead
Which valuation view (legal, group, or profit center) is costed
For a base planning object, the costing type determines which valuation view is costed.
In the following image, we can see the three tabs available under Costing Type.This bifurcation in
Costing Type is done by SAP to provide further flexibility at the most granular level possible.
Price Update
Under this tab we define where the price calculated during the cost estimate should be updated by the
system. In the above image, we can see that the standard Costing Type updates Standard price. This in other
words mean, when a material cost estimate is released, it will update standard price in material master.
Following options are made available by SAP for updating the results
Standard Price
Tax-Based Price
Commercial Price
Prices other than standard price
No Update
Note: We also need to keep in our mind that standard system contains costing types that write to the
material (standard price), and hence the system does not allow to create our own costing types to do this i.e.
updating standard price.
Save Parameters.
This tab contains configuration related to updating dates when the cost estimate is saved and is divided into
following two parts:
Cost Estimate with Quantity Structure
Here we have to select whether the date will be saved in standard cost estimate and following options are
available for us to opt from:
Without Date
In this, the standard cost estimate cannot be saved and hence cannot be used for future analysis purpose. It
is not possible to generate the std. cost estimate.
With date
The with date option can be used in the plan cost and also in the preliminary cost estimate and we cannot
use in the std. cost estimate.
With Start of Period
Always the std. cost estimate, it saves with the start of period (from the beginning date of the period). E.g.
we are running cost estimate on 6th august and system will always saves the cost estimate in the back end
from the beginning of august i.e. 1st august.
This part becomes very important in case of product cost collect and hence, SAP has provided
separate Costing Type for Product Cost Collector which contains relevant configuration to be opted
for. Hence, it also becomes very important to identify the requirement and try to find if any standard
costing type or costing variant is provided by SAP for the scenario (in most of the cases you will find
the answer as YES) and if yes, go for it. If you do not find appropriate standard configuration, take a
cautious approach while customizing.
Note: For the standard cost estimate, you must update automatic costing with the with start of
period indicator. This ensures that the results of the standard cost estimate can be used as the standard price
for that period. For the other costing types, you can update the costing results with the with date indicator,
for example. In this case the current date becomes part of the key.
Additive Cost Estimatesthe purpose is to allow to enter the additive cost with effect from which date,
either with date or without date or with start of the period. It will always considers the start of
period in case of standard cost estimate.
Misc. Tab:
This tab contains following two parts
Cost Portion for Overhead Application
This part works as a calculation base for calculating the overheads. Here we have to select the cost
component view that will be used for calculating overheads (Costing Sheet).The cost component
view can be used as a calculation base in the OH calculation for the semi-finished goods in the cost
estimate of the finished goods. This option is used as a calculation base on the COGM component
field to calculate the OH for the semi-finished goods during the cost estimate of the final component.
Partner Cost Component Splits
COSTING SHEET
Overhead: THE COST WHICH IS OTHER THAN MATERIAL COST.
Overhead is of two types:
1. Direct OH : Expenditure of dept. which are directly involved in the production.
Basis of Allocation:
Activity types are used as a base to allocate DOH.Activity types are specified in Routing. When you
do the activity confirmation (CO11N), OH is allocated to the production order.
2. Indirect OH: Service dept. cost.
Basis of Allocation:
4. OH Type:
It differentiates the plan and actual OH type.1-Actual and 2-Plan OH. We can maintain different OH rate for
Actual and Plan OH by using OH type.
5. Credit Key:
It species which cost center to be credited during the actual OH calculation and also it specifies
which OH cost element to be used to credit in the cost center and to debit in the order.
One credit key represents one cost center.
Case example:
Dependency key is the plant in both the cases.
One OH rate key (c100) is required for mat OH of 10% and 11% & another OH key (C101) is required
for activity OH for 15% and 20%.
One credit key (C3) is required for procurement department and one (C4) for admin. Department.
Define credits:
Click on new entries and enter following and save :
Select C3 and click on details:
Click on new entries AND ENTER following.
If you specify value in the Fix % field, then in that case, the specified fixed %is applied on the OH
amount as a Fixed OH and remaining balance becomes the variable OH.
e.g.:
Fix% 70%
Base total 1000
The OH rate is 15%.
Therefore the OH amount will be 150.
On OH amount 150.
Fixed OH (70%) 105
Variable OH (REMAINING) 45
And SAVE.
Select the costing sheet and click on costing sheet rows.
Click on new entries.