Cost components: In what order they are evaluated

The SAP cost component structure determines which costs to include in a cost estimate, whether to include the variable or total costs, and how to group costs in cost components.

You can create cost components for categories like raw materials, packaging, overhead, labor, and setup. 

SAP ECC allows you to create up to 40 cost components, or 20 if you include both fixed and variable costs.

SAP S/4HANA allows you to create up to 120 cost components, or 60 if you include fixed and variable costs.

You configure the cost component structure with Transaction OKTZ or via IMG menu path

Controlling • Product Cost Controlling • Product Cost Planning • Basic Settings For Material Costing • Define Cost Component Structure

The screen shown in Figure 1 is displayed.

Figure 1 Cost Component Structure Overview

Available cost component structures are listed on the right of the Overview screen.

You can use existing cost component structures or copy one and create your own. Let’s choose a cost component structure shown in Figure 1 and examine the components with the following steps:
1. Select cost component structure YP (shown as selected).
2. Double-click on Cost Components with Attributes.
The screen shown in Figure 2 is displayed.

Figure 2 Cost Components with Attributes Overview

Available cost components are listed on the right of the overview screen. You can use existing cost components or copy one and create your own.

To set up your SAP Cost Components correctly our ERPCorp SAP experts are available to assist you.

Assign Cost Elements

Let’s choose Cost Component 101 and examine the components via the following steps:
1. Select Cost Component 101 (shown as selected).
2. Double-click on Assignment: Cost Component—Cost Element Interval.
The screen shown in Figure 3 is displayed.

Figure 3 Cost Element Assignment Overview

Individual cost elements or cost element ranges are assigned to cost components in the From cost el. (From cost element) and To cost elem. (To cost element) columns.

In addition to standard cost components like raw materials, packaging, labor, overhead, and setup, you may want to see separate cost components for critical or high cost components. You can also create separate cost components for royalties and intercompany markup so these costs are easily identifiable.

You can configure cost components in any order, and the system evaluates them at the same time during a costing run. There is no need to indicate an order in which they are calculated. However, in a costing run, SAP does sequence material costs using costing levels.

SAP starts with the lowest level raw materials and costs up through semi-finished goods, and then finally finished goods. This sequencing is automatic based on the BOM structure. Additional sequencing of costing runs may be required if you have semi-finished goods produced in one plant/company code that are inputs to finished goods in another plant/company code.