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SAP Mixed Costing

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SAP Mixed Costing

by Ross Christoph

Ross Christoph 2017

 

SAP mixed costing allows you to cost materials with multiple alternatives when you manufacture a material with different production versions and master recipes.

A cost estimate calculates the cost for each production version, then an average unit cost with weighting factors. A cost estimate displays the total cost with details of each procurement alternative.

Creating a mixed-cost estimate allows you to value your inventory at a mixed price.

You create two master data items:

  • Procurement alternatives with transaction CK91 define how a material is procured

    • For example, production versions for internally produced alternatives


  • Internally or externally with transaction CK94 specifies weighting factors

    • For example, production volumes to be produced for the year using production versions

Actual costs for a process order are based on a production version.

Target costs for a process order are based on a cost estimate for the production version.
The production credit is based on the weighted average standard cost. The difference between the two multiplied by the production quantity is the mixed price variance.

When the cost of the production version is higher than the standard cost, unfavorable, mixed price variance is calculated. When it is lower, favorable mixed price variance is calculated.

John Jordan and Janet Salmon discuss SAP Mixed Costing in detail in Chapter 2 (Cost Estimates) of their new SAP book: Production Variance Analysis in SAP S/4HANA. Pick up a copy of their latest book Click here

 

Glossary

ABC Indicator

Indicator that classifies a material as an A, B, or C part according to its consumption value. This classification process is known as the ABC analysis.

The three indicators have the following meanings:

  • A - important part, high consumption value

  • B - less important part, medium consumption value

  • C - relatively unimportant part, low consumption value

Tis indicator is used to determine the frequency for Cycle Counting.

 

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Activity Type 

An activity type identifies activities provided by a cost center to manufacturing orders. The secondary cost element associated with an activity type identifies the activity costs on cost center and detailed production order reports.

Additive Cost Estimate 

This is a material cost estimate in which you can enter costs manually in the form of a unit cost estimate (spreadsheet formant) so that manual costs can be added to an automatic cost estimate with quantity structure.

Allocation Structure 

An allocation structure allocates the costs incurred on a sender by cost element or cost element group, and it is used for settlement and assessment. An assignment maps a cost element or cost element group to a settlement or assessment cost element. Each allocation structure contains a number of such assignments.

Bill of Material 

A bill of material (BOM) is a structured hierarchy of components necessary to build an assembly. BOMs together with purchasing info records allow cost estimates to calculate material costs of assemblies.

Control Tab

The Control tab lists the six costing variant control parameters that we discussed in detail in Chapter 7

Cost Component 

A cost component identifies costs of similar types, such as material, labor, and overhead costs, by grouping together cost elements in the cost component structure.

Costing Run 

A costing run is a collective processing of cost estimates, which you maintain with Transaction CK40N.

Costing Sheet 

A costing sheet summarizes the rules for allocating overhead from cost centers for cost estimates, product cost collectors, and manufacturing orders. The components of a costing sheet include the calculation base (group of cost elements), overhead rate (percentage rate applied to base), and credit key (cost center receiving credit).

Costing Type 

The costing type determines if the cost estimate is able to update the standard price. The costing ype is a costing variant component.

Costing Variant 

The costing variant contains information on how a cost estimate calculates the standard price. For example, it determines if the purchasing info record price is used for purchased materials, or an estimated price manually entered in the Planned price 1 field of the Costing 2 view.

Currency Type 

The currency type identifies the role of the currency such as local or global.

Date Control

Date control determines the proposed dates when you create a cost estimate and whether the user can change the dates.

Dependency

Dependency allows the same overhead rate to be applied to all materials within a plant or company code. Other dependencies are available, allowing different rates to be applied per order type or overhead key. Overhead keys can be entered per individual manufacturing order or product cost collector. Dependency provides a high level of control and flexibility but also increases setup and maintenance requirements.

Discontinued Material

Discontinued materials will be replaced by another material after the remaining inventory is consumed. You can allow a discontinued material to be costed, but you may want to issue a warning or error message when creating a purchase order. The Discontinued parts section in the MRP 4 view allows you to enter the material number that the system can use in materials planning to replace the discontinued material after its warehouse stock is depleted.

Enhancement Package

A collection of new and improved business functions for SAP Business Suite and SAP ERP. These optional enhancement packages can be configured in a completely modular fashion by activating only the new features and functionalities customers want.

Fixed Lot Size

You choose a fixed lot size if production- or process-related constraints such as palette size or tank contents require this. In this lot-sizing procedure the procurement quantity of a receipt must equal the fixed lot size.

Goods Issue

A goods issue removes stock from inventory which you may post to an order or send to a customer.

Internal Order

An internal order monitors costs and revenue of an organization for short to medium-term jobs. You can carry out planning at a cost element and detailed level, and you can carry out budgeting at an overall level with availability control.

Reference Variant 

A reference variant is a costing variant component that allows you to create material cost estimates or costing runs based on the same quantity structure for the purpose of improving performance or making reliable comparisons.

 Long-Term Planning 

Long-term planning allows you to enter medium-to longer-term production plans and simulate future production requirements with long-term MRP. You can determine future purchasing requirements for vendor RFQs, update purchasing info records, and transfer planned activity requirements to Cost Center Accounting

Mark Standard Cost Estimate 

After a standard cost estimate is saved without errors, it can be marked. The cost estimate value populates the future column in the Costing 2 view. You can create and mark standard cost estimates many times before release. Within the same fiscal period, a new standard cost estimate overwrites the existing marked cost estimate.

Master Data 

Master data is information that stays relatively constant over long periods of time. For example, purchasing info records contain vendor information such as a business name, which usually doesn’t change.

Material Requirements Planning

​Material requirements planning (MRP) guarantees material availability by monitoring stocks and generating planned orders for Purchasing and Production.

Miscellaneous Costing Variant Tab

Contains error management controls.

Mixed Cost Estimate

SAP mixed costing allows you to cost materials with multiple alternatives when you manufacture a material with different production versions and master recipes. A cost estimate calculates the cost for each production version, then an average unit cost with weighting factors. A cost estimate displays the total cost with details of each procurement alternative.

Creating a mixed-cost estimate allows you to value your inventory at a mixed price.

Movement Type

This key indicates the type of material movement such as goods receipt, goods issue, and physical stock transfer. The movement type enables the system to find predefined posting rules, which determine how the stock and consumption general ledger accounts post and how the stock fields in the material master record are updated.

Overhead Group

An overhead group is used to apply different overhead percentages to individual materials or groups of materials. You assign an overhead group to an overhead key with Transaction OKZ2.

An overhead key is used to apply overhead percentages to individual orders or groups of orders. You assign the overhead key in the overhead rate component of a costing sheet.

PA Transfer Structure 

A PA transfer structure allows you to assign costs and revenues from other components to Value and Quantity fields in Profitability Analysis (CO-PA).

Preliminary Cost Estimate

A preliminary cost estimate calculates the planned costs for a manufacturing order or product cost collector. There can be a preliminary cost estimate for every order or production version, while there can only be one released standard cost estimate for each material. The preliminary cost estimate can be used to valuate scrap and work in process in a WIP at target scenario.

Process Order 

A process order is a manufacturing order that is used in process industries. A master recipe and materials list are copied from master data to the order. A process order contains operations that that are divided into phases. A phase is a self-contained work-step that defines the detail of one part of the production process using a primary resource.

In process manufacturing, only phases are costed, not operations. A phase is assigned to a subordinate operation and contains standard values for activities, which are used to determine dates, capacity requirements, and costs.

 

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Product Cost Collector 

A product cost collector collects target and actual costs during the manufacture of an assembly. Product cost collectors are necessary for repetitive manufacturing and optional for order-related manufacturing.

Production Order

A production order is used for discrete manufacturing. A BOM and routing are copied from master data to the order. A sequence of operations is supplied by the routing, which describes how to carry out work-steps.

An operation can refer to a work center at which it is to be performed. An operation contains planned activities required to carry out the operation. Costs are based on the material components and activity price multiplied by a standard value.

Profitability Analysis

Profitability Analysis (CO-PA) enables you to evaluate market segments, which can be classified according to products, customers, orders (or any combination of these), or strategic business units, such as sales organizations or business areas, with respect to your company’s profit or contribution margin.

Purchasing Info Record

A purchasing info record stores all of the information relevant to the procurement of a material from a vendor. It contains the Purchase Price field, which the standard cost estimate searches for when determining the purchase price.

Quantity Structure 

A quantity structure typically consists of a BOM and a routing. In the process industries, a master recipe is used instead of a routing, and in repetitive manufacturing, a rate routing is used instead of a routing. A quantity structure is used by a standard cost estimate to determine component and activity quantity.

Quantity Structure Control 

Quantity structure control is a costing variant component that automatically searches for alternatives if multiple BOMs and/or routings exist for a material when a cost estimate is created.

Release Standard Cost Estimate 

When you release a material standard cost estimate, the results of the cost estimate are written to the Costing 2 view as the current planned price and current standard price. Inventory is revalued, and accounting documents are posted. A standard cost estimate must be marked before it can be released, and it can be released only once per fiscal period.

Sales And Operations Planning

Sales and operations planning (SOP) allows you to enter a sales plan, convert it to a production plan, and transfer the plan to long-term planning.

Sales Order Controlling

In this scenario you have configurable products with super bills of material and super task lists whose individual variants you define through the characteristic values in the sales order. This means that the configuration in the sales order describes the variant.

The use of a valuated sales order inventory in this scenario means that you do not have to manage the costs of sales order items. This eliminates the need for results analysis and settlement of the sales order item in Controlling.

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Statistical Key Figure 

Statistical key figures define values describing cost centers, profit centers, and overhead orders such as number of employees or minutes of long-distance phone calls. You use statistical key figures as the tracing factor for periodic transactions such as cost center distribution or assessment. You can post both plan and actual statistical key figures.

Template 

A template allows you to assign senders and receivers, calculate what is to be sent based on nearly any field available in orders and master data, and determine when the line is activated. A template exists within an environment, which defines columns available in the template.

Transfer Control 

Transfer control is a costing variant component that requires a higher-level cost estimate to use recently created standard cost estimates for all lower-level materials. Preliminary cost estimates for product cost collectors use transfer control.

Unit Costing 

Unit costing is a method of costing that does not use BOMs or routings, typically when developing new products. You create a preliminary structure of materials and activities in a view similar to the layout of a spreadsheet.

Universal Journal

This eliminates the need for transaction tables in several different modules, and instead combines them into one line item table: ACDOCA. All financial reports read from the one table eliminating the need for reconciliation and table locks.

User Exit 

A user exit is a point in the standard program where you can call your own program. In contrast to customer exits, user exits allow developers to access and modify program components and data objects in the standard system.

Valuation Variant 

The valuation variant is a costing variant component that allows different search strategies for materials, activity types, subcontracting, and external processing. For example, the search strategy for purchased and raw materials typically searches first for a price from the purchasing info record.

SAP Customer Credit Limits
What is the difference between planning and budget...
 

Comments 4

Guest
Guest - Coycurrin on Tuesday, 05 July 2016 06:38

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Guest
Guest - nicholas on Tuesday, 14 August 2018 05:29

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Guest
Guest - Nicky on Wednesday, 06 June 2018 11:23

Hi,

I Just wanted to know, whether CK94 step i.e mix ratio input step be automated with the planned qty generated in Plaf table.The material with same date and Quantity structure type be used in CK94 instead of manually inputting for each material.

Hi, I Just wanted to know, whether CK94 step i.e mix ratio input step be automated with the planned qty generated in Plaf table.The material with same date and Quantity structure type be used in CK94 instead of manually inputting for each material.
Guest
Guest - Sunny Rao on Wednesday, 19 September 2018 11:09

Hello Dear,


Kindly let me know the purpose of maintaining the mixed costing ration in CK94N ?

Thank you.

Regards
Rao.

Hello Dear, Kindly let me know the purpose of maintaining the mixed costing ration in CK94N ? Thank you. Regards Rao.
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