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To start integrated planning you create sales plan quantities in Profitability Analysis (CO-PA) or sales and operations planning (S&OP), and convert the quantities to a production plan that you transfer to demand management.
Long-term planning determines work center loads and purchasing requirements. Activity quantities are transferred to Cost Center Accounting (CCA), where plan activity prices are determined.
We follow a best practice planning scenaro, including instructions on Sales and Operation Planning as shown in Figure 1, and long-term planning runs.
Figure 1 Sales and Operations Planning
The new 3rd edition includes a detailed explanation of flexible planning, in addition to instructions on how to upload plan data from Excel to CCA.
You plan procurement and production costs and set prices for materials and services. You determine the purchase price for externally procured items first and then the manufactured cost for assemblies.
The following master data and configuration chapters describe the setup necessary to create cost estimates.
Master data is information that stays relatively constant over long periods of time. In the next chapters, we examine in detail every master data field relevant to Product Cost Planning, including many examples and case scenarios. We discuss the following master data:
We discuss CO master data, including cost elements, cost centers, activity types, and statistical key figures as shown in Figure 2.
Figure 2 Maintain GL Accounts Centrally
You’ll also learn about cost of sales cost elements, how to swap the cost center standard hierarchy, and activity type groups.
We look at fields in material master views, including Material Requirements Planning (MRP), Controlling (CO), and Accounting as shown in Figure 3.
Figure 3 Change MRP2 View
We also examine:
We look at logistics master data, including bills of materials (BOMs), routings as shown in Figure 4, product cost collectors, and purchasing info records.
Figure 4 Example BOM and Routing
More specific topics include recursive BOMs, product cost collector lists, plant-specific purchasing info records, and source lists.
Most configuration settings are made when you first implement SAP. All configuration settings are closely controlled and monitored because they have a major impact on the system process design for your company. We explain configuration in the following four chapters:
We examine costing sheets and how you use them to set up overhead calculation as shown in Figure 5.
Figure 5 Costing Sheet
This chapter includes:
We analyze cost components and structures and how they group costs of similar type such as material, labor, and overhead for reporting purposes as shown in Figure 6.
Figure 6 Cost Components
We also look at how cost component groups can improve your reporting by making cost components available in standard cost estimate lists.
We examine in detail how you set up costing variant components that contain the configuration required to create cost estimates including:
You display a costing variant with Transaction OKKN to display the screen shown in Figure 7.
Figure 7 Standard Costing Variant PPC1
Detailed information on delivery costs for purchased materials is included.
We examine how you set up costing variant tabs that contain the configuration required to create cost estimates including:
We discuss how to create, mark and release standard cost estimates to update the standard price and revalue inventory as shown in Figure 9.
Figure 9 Create Standard Cost Estimate
We examine the mark and release process and costing runs, which mass process standard cost estimates. Information on marking allowances and optimizing costing runs is included.
We cover in detail how preliminary cost estimates calculate the planned costs for manufacturing orders and product cost collectors as shown in Figure 10.
Figure 10 Change Product Cost Collector
We look at how unit cost estimates are designed for use during the product development phase.
Figure 11 Unit Cost Estimate for Product Development
They are easily changed because they resemble a spreadsheet format as shown in Figure 11, which is ideal for a development environment.
Cost Object Controlling allows you to determine planned costs for cost objects, to post actual costs, and then to analyze variances as discussed in the following chapters.
In these chapters, we determine how to plan and post actual costs to cost objects:
We analyze how preliminary cost estimates plan costs for cost objects such as manufacturing orders and product cost collectors based on order type configuration as shown in Figure 12.
Figure 12 Preliminary Cost Estimate
We look at how actual costs such as component and sub-assembly goods issues and activity costs are posted to cost objects during production order and process order activity confirmations as shown in Figure 13.
Figure 13 Goods Issue to Production Order
We also cover information on default activities and operation sequence as well as margin analysis and detailed reports.
During period-end processing, you carry out overhead, work in process, and variance calculation, as well as settlement, as discussed in the following four chapters:
We examine how you carry out overhead period-end calculations shown in Figure 14 based on costing sheet configuration as we discussed in Chapter 5.
Figure 14 Overhead Calculation Results Screen
This third edition includes information on how SAP S/4HANA improves overhead processing.
We look at how work in process (WIP) is configured and how the period-end step is executed as shown in Figure 15.
Figure 15 Assign Cost Elements For WIP and Results Analysis
New 3rd edition information on how SAP S/4HANA improves WIP processing is included.
We look at production variance configuration, period-end processing, and analysis, and examples of the types of variance calculation as shown in Figure 16.
Figure 16 Variance Calculation Selection Screen
We also discuss how SAP S/4HANA improves variance calculation performance.
We analyze settlement configuration as shown in Figure 17 and period-end processing. We discuss settlement and processing types including the allocation structure and PA transfer structure.
Figure 17 Settlement Rule Parameters
We examine new transactions available with SAP S/4HANA.
We discuss configuration and period-end processing for:
This third edition includes information on how SAP S/4HANA improves sales order controlling and SAP Material Ledger processing and reporting.
Continue Reading: Product Cost Controlling with SAP
We discuss the standard reporting available for Product Cost Controlling.
We examine the standard reports available for both Product Cost Planning and Cost Object Controlling, as well as how you can drill down from high-level summarization reports to detailed reports based on cost elements, and line item reports. The production order information system and standard CCA reports as shown in Figure 19 are discussed.
Figure 19 Standard Cost Center Report
Now included are improvements SAP HANA introduces to order summarization and line item reporting.
In this chapter, we examine Enhancement Packages (EHPs) and how they deliver the latest developments through business functions to your system.
Figure 20 Universal Journal Table ACDOCA
We examine the benefits and improvements resulting from SAP S/4HANA including the Universal Journal, the single source of truth, and SAP Fiori apps.
Previously, SAP delivered new functionality through either Support Packages (SPs) or full software upgrades and new versions. This process required functional teams to write test scripts with expected results and fully test all processes used by the company to ensure none would be adversely affected. Coordination between different departments on the timing of an upgrade can be difficult since finance departments typically have different busy periods than sales and distribution or materials management. Consequently, many companies deferred the introduction of SPs or upgrades and thus missed out on the latest functionality and process improvements.
Now that we’ve discussed EHPs and business functions in general, let’s look at four specific business functions related to Product Costing and Controlling.
Available since EHP 5, this CO business function supports the valuation of the cost of goods manufactured (COGM) in multiple accounting approaches for depreciation, activity prices, and COGM and inventory values, described as follows:
The depreciation values for international accounting principles are updated to the leading ledger in the SAP General Ledger (G/L) application (or the global accounts in the classic general ledger) and to version 0 in CO. The depreciation values for a second accounting principle are updated to a nonleading ledger inthe SAP G/L (or the local accounts in the classic general ledger) and to a delta version in CO. This updating allows global manufacturing organizations to set activity prices that take account of depreciation according to International Financial Reporting Standards (IFRS) and local generally accepted accounting principles (GAAP).
In previous releases, you could only transfer the values in the leading ledger to CO. Other values were unavailable for CO, and you could not use them to determine activity prices or update inventory values for the goods manufactured.
During all operational processes, such as confirmations and backflushing inlogistics, the hours worked are valued with the planned activity rate in version 0 in CO. At period close, you use activity price calculation to determine the actual activity rates for the leading version (international accounting standard) and the alternative version (local GAAP) in that period. You calculate both as deltas to the initial standard activity price and can use both for inventory valuation as required.
In previous releases, you could only calculate activity prices to take account of the leading valuation. Alternative approaches required manual workarounds.
This business function allows the periodic costing run to use the activity price from leading valuation to determine the COGM according to the global accounting standard and update the inventory values accordingly. You may also use it to calculate actual costs according to the local accounting standard, if the group accounting approach is standard costs.
A new stock segment is available to keep the material quantity and value visible during transfer from one company code to another. This business function adds extra functionality that we’ll examine in the following two scenarios.
In sales and cross-company transfer processes, modeling stock in transit was not In sales and cross-company transfer processes, modeling stock in transit was not possible. The ownership of the material did not reflect correctly in SAP ERP. When selling materials from one company code to another using the two-step approach, the stock value did not automatically appear in the balance sheet after the first step.This business function enables companies to track and manage ownership changes more effectively when selling materials to a customer or another company code. Companies can more easily fulfill the legal requirement of showing all the stock values in the group.
Figure 20.2 Material Transfer Across Company Codes with Stock in Transit
Figure 20.2 displays the three scenarios enabled by LOG_MM_SIT. Let’s discuss each of these two-step scenarios:
Step 1: During the transportation phase, companies can keep ownership ofthe materials that are sent to a customer, or another company code, visible as stock in transit in this company.
Step 2: You also have the option to move materials from one stock in transit to another. Ownership will change during the transfer, upon arrival in the destination port.
Step 2, Alternative: Ownership for these materials, during the transportation phase, can be directly transferred to the receiving company code, visible as stock in transit in the receiving company code. Now let’s examine the other scenario available with this business function.
Up to now, customers could not transfer actual cost component split information from one company code to another. You could not use markups in a cross-company-code sales scenario.
Figure 20.3 Cost Structure Does Not Display in Receiving Company
Figure 20.3 displays an example of the cost components in this scenario. Actual costing provides no visibility into the cost structure after intercompany sales. The desired solution should ensure cost transparency during intracompany sales by adding freight costs and intracompany profits to the costs incurred in the selling company to provide a correct valuation from a group perspective, as shown in Figure 20.4
Figure 20.4 Desired Outcome of Intercompany Sales
By activating this business function, you can extend material and actual costing to run across company codes without losing actual costs or losing actual cost component split at the company code border. The intercompany sales process allows transfer of the costs and cost component split information from the sending company code to the receiving company code. You can also calculate markup or intercompany profit in such a value chain. Let’s look at an example of how this works in detail in Figure 20.5 and then discuss the three possible valuations in detail.
Figure 20.5 Valuation Example in Three Views
Let’s discuss each of the three views in detail:
The legal view contains the Cross-Company (CC) Markup but does not show cost component information from supply chain members outside the company. Materials purchased from affiliate companies will populate only the material costs component and the markup. The default currency type is 10.
This view contains the markup and preserves the cost component information coming from the affiliate companies if the logistical process allows. You can activate this by a BAdI in currency type 10.
You can use group view in parallel to the other two valuations. This view does not show a markup since you treat all processes as if the plants were part of the same organization without taking company code borders into account. You can use either currency type 11 or 31.
An implementation can use either legal view or transparent legal view. You can add a group view to both. The two typical scenarios are using a transparent legal view or using a legal view with a group view.
The Operation Account Assignment (OAA) business function, available since EHP 5, permits the detailed planning, capture, and reporting of maintenance or serviceorder costs at the operation level. The operations have their own settlement rules enabling more accurate cost updating of multiple assets maintained using a single order. Operation account assignment offers the following additional benefits:
These improvements are particularly useful in the following situations:
- Companies in asset-intensive industries, such as utilities, oil and gas, transportation,public sector, and mining
- Industries requiring detailed maintenance costs for regulatory reporting
- When you are working on multiple assets with different accounting requirements for the same work order
All of the account assignment functions available for the header are possible at the operation level, providing more flexibility in task costing, as shown in Figure 20.6.
Figure 20.6 Update of Plant Maintenance Cost View
Figure 20.6 provides an overview of the new process.
Now let’s examine the process on a more detailed level. Figure 20.7 displays a maintenance order at the header level with the order operation as the cost object.
Figure 20.7 OAA Maintenance Order Header Status
Sys.Status ACAS indicates that the order operation is the account assignment object. You’ll see the same status for a Project System network with activity-level costing. Now let’s look at the maintenance order at the operation level as shown in Figure 20.8.
Figure 20.8 OAA Maintenance Order Operation Details
You can see the account assignment details for an operation in the Acct Assgt tab of the operation detail view and view operation costs in the Costs tab in the lower section of Figure 20.8. You can run an operation overview report with Transaction IW40N to display the screen shown in Figure 20.9.
Figure 20.9 Operation Cost Overview Report
The Operation cost overview report shows costs for each Operation by Value Category. Now that we’ve examined how to activate cost by operation functionality, let’s look at new and easier ways to adapt CO master data screens for each individual user’s requirements.
The Cost Center Management business function is available as of EHP 6 for SAP ERP 6.0. You can implement improvements to the usability of planning, budgeting, and master data maintenance for cost center accounting and project accounting. These improvements empower operational managers and approvers and enable greater efficiency across the planning, budgeting, and master data maintenance processes. We’ll examine how to activate an alternative set of web applications to replace the following transaction codes:
As with all new functions in EHPs, start testing by activating the business function FIN_CO_CCMGMT in the switch framework. To activate the business function, run Transaction SFW5, open the folder Enterprise Business Functions, and then scroll down to FIN_CO_CCMGMT to display the screen shown in Figure 20.10.
Figure 20.10 Activate Cost Center Management Business Function
Unlike other business functions that immediately cause changes to the menuUnlike other business functions that immediately cause changes to the menustructure and individual screens, the new user interfaces do not affect existingtransactions. After you activate the business function, you will notice some newmenu items in the IMG. Run role maintenance with Transaction PFCG, whereyou will find three new roles:
SAP_CO_INTERNAL_CONTROLLER (internal controller)
SAP_CO_COSTCENTER_MANAGER (cost center manager)
SAP_CO_PROJECT_PLANNER (project planner and estimator)
The master data transactions are included in the role SAP_CO_INTERNAL_CONTROLLER.You can assign these roles to your user profile with Transaction SU01. Run the transaction, click the pencil icon, and click the Roles tab to display thescreen shown in Figure 20.11.
Figure 20.11 Enter New Roles in Maintain User Record
Enter the new roles into your user profiles so users can test the new applications. You can also assign the new applications to your existing master data maintenance roles with Transaction PFCG.
Now that we’ve activated the business function and assigned the new roles to our user profile, we’ll discuss further technical settings and how the new additional cost center functionality works in the following subsections.
At this stage, you still need to activate the Web Dynpro ABAP applications withsome technical settings as follows. Run Transaction SE38 to display the screen shown in Figure 20.12.
Figure 20.12 ABAP Editor Initial Screen
Type in WEB DYNPRO ABAP in the Technical Name field and click the Execute icon to display the screen shown in Figure 20.14.
Figure 20.14 Report for Activating Special Services during Installation
The traffic light icons (green squares) in the U column indicate that you have successfully activated the services listed. Now we’ll activate the services for each of the master data applications we intend to use. To find the new master data applications, run Transaction SICF to display the screen shown in Figure 20.15.
Figure 20.15 Find Services for the Master Data Applications
Type FCOM* in the Service Name field and execute to generate a list of all services in the FCOM package.
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:
Tis indicator is used to determine the frequency for Cycle Counting.
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.
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.
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.
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.
The Control tab lists the six costing variant control parameters that we discussed in detail in Chapter 7
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.
A costing run is a collective processing of cost estimates, which you maintain with Transaction CK40N.
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).
The costing type determines if the cost estimate is able to update the standard price. The costing ype is a costing variant component.
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.
The currency type identifies the role of the currency such as local or global.
Date control determines the proposed dates when you create a cost estimate and whether the user can change the dates.
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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 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.
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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.
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 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 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.
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.
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.
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.
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.
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.
A goods issue removes stock from inventory which you may post to an order or send to a customer.
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.
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 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
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 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 (MRP) guarantees material availability by monitoring stocks and generating planned orders for Purchasing and Production.
Contains error management controls.
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.
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.
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.
A PA transfer structure allows you to assign costs and revenues from other components to Value and Quantity fields in Profitability Analysis (CO-PA).
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.
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.
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.
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 (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.
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.
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 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.
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 (SOP) allows you to enter a sales plan, convert it to a production plan, and transfer the plan to long-term planning.
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 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.
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 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 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.
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.
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.
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.
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John Jordan is a seasoned SAP consultant with 20+ years of experience in SAP S/4HANA Controlling. As Lead SAP S/4HANA Controlling Consultant at ERP Corp, he specializes in seamless transitions to SAP S/4HANA, focusing on Product Costing, Material Ledger, and Margin Analysis.
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