SAP Product Cost Controlling in S/4HANA: A Complete Guide

By John Jordan

Introduction

SAP Product Cost Controlling in S/4HANA connects product cost planning, manufacturing cost collection, work in process (WIP), variance analysis, settlement, and Material Ledger reporting.

This guide introduces the 20 chapters of Product Cost Controlling with SAP S/4HANA, co-authored by John Jordan and Janet Salmon. Explore the chapter summaries and screenshots to follow product costing from master data and standard cost estimates through actual costs and reporting.

Quick takeaway: Product Cost Controlling helps you understand what a product should cost, what production actually costs, and why the amounts differ.

SAP S/4HANA Deployment Options

The examples cover SAP S/4HANA on-premise, Cloud Private Edition, and Cloud Public Edition. Available apps, configuration activities, and accounting processes depend on the edition and release.

• On-premise and Private Edition: SAP GUI transactions and SAP Fiori apps are available according to the installed release, scope, and assigned roles. Screens and configuration can differ between systems.
• Public Edition: Use the supported SAP Fiori apps and configuration activities for your activated scope. Check the Public Edition documentation before applying an on-premise example.

Chapter 19 distinguishes the illustrated event-based accounting scenario from other deployment options.

Chapter 1: Initial Planning

You first follow a best-practice scenario,  shown in Figure 1, that includes Sales and Operations Planning (S&OP) and long-term planning runs.
To initiate integrated planning, you create sales plan quantities in Profitability Analysis (CO-PA) or S&OP and convert them into a production plan that you then transfer to demand management.

Planning context: SAP Integrated Business Planning (SAP IBP) for Supply Chain provides sales and operations planning, demand, supply, and inventory planning capabilities. The appropriate solution and integration depend on your landscape.

Long-term planning determines work center loads and purchasing requirements. Activity quantities are transferred to Cost Center Accounting (CCA), where you determine plan activity prices.

Figure 1: Sales and Operations Planning

You plan procurement and production costs and set prices for materials and services. First, you determine the purchase price for externally procured items, and then the manufacturing cost for assemblies.

The following master data and configuration chapters describe the setup to create cost estimates.

Master data is information that stays relatively constant over long periods. The following three chapters detail master data for Product Cost Planning, providing many examples and case scenarios.

Chapter 2: Controlling 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 learn about the cost of sales G/L accounts, how to swap the cost center standard hierarchy, and activity type groups.

Chapter 3: Material Master Data

For a practical explanation of the Accounting view settings, compare Standard Price (S) and Moving Average Price (V) and review Material Ledger Price Determination 2 vs. 3.

As shown in Figure 3, we examine material master views, including Material Requirements Planning (MRP), Controlling (CO), and Accounting (FI).

 Figure 3: Change MRP2 View

We also examine: 

• ABC indicator
  
• Fixed lot size
  
• Discontinued materials
  
• Material Ledger documents
  
• Actual cost component split
  

 Chapter 4: Logistics Master Data

We examine logistics master data, including bills of materials (BOMs), routings shown in Figure 4, product cost collectors, and purchasing info records.

Figure 4: Example BOM and Routing

We also examine more specific topics, including recursive BOMs, product cost collector lists, plant-specific purchasing info records, source lists, and production versions.

Configuration

Most configuration settings are made when you first implement SAP. All configuration settings are closely controlled and monitored because they significantly impact your company's system process design. We explain the configuration in the following four chapters:

Chapter 5: Costing Sheets

Costing sheets calculate planned overhead in material cost estimates and can apply actual overhead to manufacturing orders. A calculation base, rate, and credit key determine the overhead calculation. Calculating a material cost estimate does not itself post actual overhead or credit a cost center. Figure 5 illustrates the settings.

For configuration details and an example, see SAP costing sheets and overhead allocation.

 Figure 5 Costing Sheet

In the previous three chapters, we discussed Controlling, material, and logistics master data, which provide cost estimates with the quantity and price information necessary to calculate the standard cost to procure or manufacture a material. This chapter discusses costing sheet configuration, which determines how cost estimates calculate overhead costs. We will explore overhead costs, the base to which overhead costs are applied, the overhead rate, and the credit key.

In addition to direct material and labor costs, overhead costs are typically included as a separate component of the finished product standard price. Overhead costs may consist of building lease, insurance, and general office staff not directly involved in production.

Chapter 6: Cost Components

For reporting purposes, we analyze cost components and structures and how they group similar costs, such as material, labor, and overhead, 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.

Chapter 7: Costing Variant Components

We examine in detail how you set up costing variant components that contain the configuration required to create cost estimates, including:

• Costing Type
  
• Valuation Variant
  
• Date Control
  
• Quantity Structure Control
  
• Transfer Control
  
• Reference Variant
  

You display a costing variant with Transaction OKKN as shown in Figure 7.

Figure 7: Standard Costing Variant PPC1

We also include detailed information on delivery costs for purchased materials.

Chapter 8: Costing Variant Tabs

We examine how you set up costing variant tabs that contain the configuration required to create cost estimates, including:

• Control
  
• Quantity Structure
  
• Additive Costs
  
• Update
  
• Assignments
  
• Miscellaneous
  

Chapter 9: Standard Cost Estimates

We discuss creating, marking, and releasing 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 automate the mass processing of standard cost estimates. We include information on marking allowances and optimizing costing runs.

Chapter 10: Preliminary Costing for Production Orders

We 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 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

Chapter 11: Simultaneous Costing

We also look at how unit cost estimates are designed for use during the product development phase.

 In simultaneous costing, we examine 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 illustrated in Figure 11.

Figure 11: Goods Issue to Production Order

We also cover default activities and operation sequences, Margin Analysis, and detailed reports.

Figure 11a: Unit Cost Estimate for Product Development

Unit cost estimates are easily changed because they follow a spreadsheet format, as shown in Figure 11a, which is ideal for a development environment.

Cost Object Controlling allows you to determine planned costs for cost objects, post actual costs, and analyze variances, as discussed in the following chapters.

Chapter 12: Overhead Calculation

We examine how you perform period-end overhead calculations, as shown in Figure 12, based on the costing sheet configuration discussed in Chapter 5.

Figure 12: Overhead Calculation Results Screen

Chapter 13: Work in Process (WIP)

We examine how work in process (WIP) is configured and how the period-end step is executed, as illustrated in Figure 13.

Figure 13:  Assign Cost Elements For WIP and Results Analysis

Chapter 14: Variance Calculation

We examine production variance configuration, period-end processing, and analysis, and provide examples of the types of variance calculations, as shown in Figure 14.

Figure 14: Variance Calculation Selection Screen

We also discuss how SAP S/4HANA improves variance calculation performance.

See SAP Fiori apps for manufacturing variance analysis for reporting examples and scenario-specific considerations.

Chapter 15: Settlement

We analyze settlement configuration and period-end processing, as shown in Figure 15. We discuss settlement and processing types, including the allocation and PA transfer structures.

Figure 15: Settlement Rule Parameters

We examine new transactions available with SAP S/4HANA.

Chapter 16: Material Ledger and Actual Costing

Material Ledger is mandatory in SAP S/4HANA; Actual Costing is optional. When Actual Costing is active, it collects relevant price and exchange-rate differences and can calculate a periodic unit price at closing. Revaluation depends on the selected settings and closing steps.

Read our SAP Material Ledger and Actual Costing overview for the distinction between preliminary and actual valuation.

For activation settings, periodic unit prices, and the CKMLCP closing process, see our SAP Actual Costing configuration and closing guide.

Chapter 17: Sales Order Controlling

 Sales order costing scenarios involve customer orders that require you to procure components or assemblies manufactured for individual customers or orders.

Because the customer's sales order involves special requirements, you need to treat the costing of sales orders individually. You cannot generally use the standard costs for the material ordered by the customer, but must adjust the cost estimate to reflect the customer's specific requirements.

The first indication that Sales Order Controlling is involved in a process is the requirements type, which you find in the Procurement tab of a sales order line item. You display a sales order with Transaction VA03 or via the menu path Logistics • Sales and Distribution • Sales • Order • Display. You may find it easier to locate a sales order by displaying a list with Transaction VA05.
SAP Fiori provides sales-order processing apps; check the available apps and assigned roles for your edition and release.

Chapter 18: Special Product Costing Topics

We discuss configuration and period-end processing for:

• Subcontracting
• Delivery costs
• Stock in transit
• Overhead templates
• Mixed cost estimates
• Cost estimate user exits
  
  
  Figure 18: SAP Material Ledger Actual Costing Without Revaluation

Chapter 19: Event-Based Production Costing

The following book example illustrates event-based production accounting in an on-premise/Private Edition context with Universal Parallel Accounting (UPA). SAP S/4HANA Cloud Public Edition provides Event-Based Production Cost Posting through scope item 3F0; its setup and supported processes must be checked separately. In this section, we’ll look at the configuration settings that control the posting logic for calculating overhead, WIP, and production variances. We’ll then explain how the system calculates overhead, WIP, and production variances and captures them as the underlying business transactions.

When moving to event-based production accounting, you can keep the overhead calculation rules we saw in Chapter 5, but you must flag your costing sheet as event-based, as shown for Costing Sheet 1010EP in Figure 19.15. It’s not possible to combine non-event-based costing sheets with event-based WIP because the assumption is that the creation of the reference document will trigger a first follow-on document for the overhead, followed by a follow-on document for either WIP or production variances, depending on the order status.

 Figure 19.15 Costing Sheet for Event-Based Production Accounting

You determine that a production order, a process order, or a product cost collector should generate journal entries for WIP and production variances by assigning the appropriate Event-Based Processing Key to the order. As we saw for WIP calculation in Chapter 13, the default key is selected using the order type and plant combination. Figure 19.16 shows the event-based processing key for production orders, which combines the settings for WIP calculation, variance calculation, and potential settlement receivers. Notice that if you use this key, WIP is calculated at actual costs, and variances (if calculated) can be split into the categories Input Price Variance, Input Quantity Variance, Resource Usage Variance, Lot Size Variance, and Remaining Variance, and it’s possible to assign some costs to cost centers or WBS elements rather than assigning all costs to the material. To access these settings, choose Controlling • Product Cost Controlling • Product Cost by Order • Period-End Closing • Event-Based WIP and Variance Posting from the menu bar and select the appropriate Event-Based Processing Key. If you work with best practices, these settings are delivered using scope item 3F0 and have been available since SAP S/4HANA 2022.

Figure 19.16 Event-based Processing Key for Product Cost by Order

 By comparison, the event-based processing key for product cost by period shown in Figure 19.17 calculates WIP at target costs. In other words, WIP is calculated using the target costs for the operation recorded at the reporting point reached. Production variances are only split into Input Price Variance, Input Quantity Variance, and Resource Usage. The variance, the remaining variance, and all costs must be settled with the material. Suppose you don’t create any reporting points and record all goods issues and confirmations as a backflush on completion of the finished product. In that case, no WIP will be calculated; only variances will be calculated if changes are made to the standard BOM or routing quantities. These settings are also delivered with scope item 3F0 and have been available since SAP S/4HANA 2023.

Figure 19.17 Event-Based Processing Key for Product Cost by Period

Unless you are working with the best-practice settings, you should check that all general ledger accounts for goods issues and confirmations of the orders and goods receipts on completion, together with follow-on costs for overhead, have been assigned to the delivered WIP sources, as shown in Figure 19.18.

The system will increase WIP for the values posted under the general ledger accounts for material cost (0MAT), labor cost (0LBR), and overhead cost (0OVH) and decrease WIP in proportion to the values posted under the general ledger accounts for delivered costs (0DLV).

Figure 19.18 WIP Sources for Event-Based Processing

You should also check the general ledger accounts to be updated to account for WIP and reserves for unrealized costs for each of the WIP sources, as shown in Figure 19.19.

 

 Figure 19.19 WIP Account Determination Rules

Event-Based Overhead

The rules for applying overhead are the same as those discussed in Chapter 5. The difference is that overhead is applied at a different point in time. The example in Figure 19.20 shows material overhead being calculated when the raw materials are issued to the production order. What’s important here is the link to the Reference document because it provides the link to the goods issue that resulted in the line item for material overhead. If the goods issue is cancelled, this link is needed to find and reverse the associated overhead and WIP. Notice also that these documents have a new business transaction type, KZPI. If you are involved in discussions about system sizing, bear in mind that an overhead document is created for each reference document rather than for the whole order during the period close and that this will result in extra documents, especially if you have many different confirmations and goods issues on a single order.

Figure 19.20 Line Item for Event-based Overhead

Event-Based Work in Process

Like overhead calculation, WIP is also associated with a reference document, so in Figure 19.21, we see two reference documents: one for the confirmation and one for the goods issue, and the associated WIP posting with the business transaction type EBWP. The WIP in the first line includes the activity costs for the operation confirmed and the production overhead, and the WIP in the second line contains the raw material costs for the goods issued at this operation and the material overhead (see Figure 19.20). In neither case was the WIP calculation triggered by the user. It was calculated automatically when the underlying reference document was posted. All the costs on order 1043166 are considered work in process because there has not yet been a stock delivery.

 Figure 19.21 Line Items for Event-based WIP (Goods Issue and Confirmation) 

Chapter 20: Product Cost Controlling Reporting

We examine the standard reports available for Product Cost Planning and Cost Object Controlling and how you can drill down from high-level summarization reports to detailed reports based on cost elements and line item reports. We also discuss the Production Order Information System and standard Cost Center Accounting (CCA) reports, as shown in Figure 20.

Figure 20: Standard Cost Center Report 

SAP S/4HANA includes improvements in order summarization and line-item reporting. We also examine the Universal Journal, as shown in Figure 21.

 Figure 21: Universal Journal Table ACDOCA

We examine SAP S/4HANA reporting improvements, including the Universal Journal as a single source of truth and SAP Fiori apps for financial and management accounting.

Legacy SAP ERP Context

SAP ERP Enhancement Packages and business functions form part of the historical background to product costing. They should be distinguished from the release-specific configuration and accounting options available in SAP S/4HANA.

FIN_CO_COGM: Multiple Valuation of Cost of Goods Manufactured

FIN_CO_COGM is a historical SAP ERP business-function example for multiple valuation of manufacturing costs. When designing an S/4HANA solution, check the supported parallel valuation and accounting approach for your target release instead of treating this legacy business function as a universal prerequisite.

Conclusion

Reliable product costs connect consistent master data and costing configuration with complete production postings and clear reporting. Use the chapter summaries to identify the area behind your costing question, then trace planned costs, actual costs, and differences through the relevant process.

Confirm the accounting scenario and capabilities available in your SAP S/4HANA edition and release before applying an example. For a detailed walkthrough, explore Product Cost Controlling with SAP S/4HANA; for help with a specific configuration or reporting issue, discuss your requirements with ERPCorp.

SAP Documentation

• Material Ledger activation and optional Actual Costing
• Public Edition: Production Costs – Event-Based (3F0)
• Target cost and variance calculation by accounting scenario

Glossary

ABC Indicator

A material master classification that groups materials as A, B, or C according to their consumption value. It helps planners prioritize materials for analysis and control; A materials generally have the highest consumption value.

Accrual Order

An accrual order enables you to monitor period-related accrual calculation between expenses posted in financial accounting and controlling.

Active Pharmaceutical Ingredient

An active pharmaceutical ingredient (API) is the substance responsible for a medicine’s therapeutic effect. Where separate cost visibility is useful, an origin group and cost component can distinguish eligible API costs.

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 the cost center and detailed reports.

Activity-Based Costing

While you typically allocate overhead costs during activity-type confirmations or with costing sheets, templates offer a more flexible alternative. Although setting up templates is more complex, they are set out logically and are worth considering as a flexible alternative for overhead costs.

Actual Cost Component Split

A breakdown of actual material costs into cost components such as materials, labor, and overhead. When activated, it supports analysis of the composition of periodic unit prices and the differences between preliminary and actual material costs.

Allocation Structure

An allocation structure groups source costs for settlement and maps them to the applicable settlement cost elements or G/L accounts. It should be distinguished from the rules used for assessment cycles.

Alternative Hierarchy

While there can only be one cost center standard hierarchy, you can create as many alternative hierarchies as you like. You create an alternative hierarchy by creating cost center groups.

Assembly Scrap

Assembly scrap is the percentage of assembly quantity that does not meet required quality standards. Assembly scrap is an output scrap because it increases the planned output quantity of items in the production process. You plan assembly scrap in the MRP1 view. It can be ignored with the Net ID checkbox in the basic data tab of a BOM item.

Automatic Account Assignment

Automatic account assignment enables you to specify a default cost center for each cost element within a plant using Transaction OKB9.

Availability Control

Availability control checks relevant actual costs and commitments against budgets for supported objects, such as internal orders and projects. Configured tolerance limits determine whether warnings or errors are issued. For configuration steps and examples, see our SAP Internal Order Budgeting and Availability Control guide.

Backflushing

Backflushing is the automatic posting of a goods issue for components after their actual physical issue for use in an order. The goods issue posting of backflushed components is carried out automatically during confirmation.
Backflushing reduces the amount of work in warehouse management, especially for low-value parts. The material components from the BOM required in the operation should be assigned to the operations in the routing.

Base Quantity

All component quantities in a BOM relate to the base quantity. You increase the accuracy of component quantities by increasing the base quantity, similar in concept to the price unit.

Base Unit of Measure

Material stocks are managed in the base unit of measure. The system converts all quantities you enter in other units of measure (alternative units of measure) to the base unit of measure.

Bill of Material (BOM)

A bill of material is a structured hierarchy of components required to build an assembly or subassembly.

BOM Application

A BOM application is a costing variant component for automatic determination of alternative BOMs.

BOM Group

A BOM group is a collection of BOMs for a product or number of similar products.

BOM Item Component Quantity

The quantity of a BOM item that is entered in relation to the base quantity of the product.

BOM Item Status

Six indicators, such as costing relevancy, are contained in the Status/Long Text tab of a BOM item.

BOM Status

This controls the current processing status of the BOM. For example, a BOM may have a default status of not active when initially created, which then may be changed to active when the BOM is available for use in material requirements planning (MRP) and released for planned orders.

BOM Usage

This determines a section of your company, such as production, engineering, or costing. You define which item statuses can be used in each BOM usage; for example, all items in BOMs with a certain usage may be relevant to production.

BOMs, together with purchasing info records, allow cost estimates to calculate the material costs for assemblies.

By-Product

A by-product is a product that is produced in conjunction with other products. The system does not create a separate order item for each by-product. The material valuation of a by-product is always based on the price specified by price control in the material master. If a by-product is indicated as being relevant to costing in BOM, the total cost of the process is reduced by the costs of the by-products.

CKM3N - Material Price Analysis

CKM3N/CKM3 is used to analyze the price and cost components of a material in a plant, including variances and other Material Ledger values.

Co-Product

You select the co-product indicator in the MRP 2 and Costing 1 views if a material is a valuated product that is produced simultaneously with one or more other products. Setting this indicator allows you to assign the proportion of costs this material will receive in relation to other co-products within an apportionment structure.

Condition Type

A condition type is a key that identifies a condition. It indicates, for example, whether the system applies a price, a discount, a surcharge, or other pricing, such as freight costs and sales taxes.

Controlling Area Currency

You use the controlling area currency for cost accounting. You specify the controlling area currency when defining it in customizing for Controlling. You can assign multiple company codes with different currencies to a controlling area.

Cost Center

A cost center is master data that identifies where the cost occurred. At period end, a responsible person assigned to the cost center analyzes and explains cost center variances.

Cost Center Accounting

A Controlling component used to plan, collect, allocate, and analyze costs by area of responsibility. In Product Cost Controlling, cost centers supply activity quantities and prices used to value production activities and support the analysis of planned and actual costs.

Cost Component

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

Cost Component Group

Cost component groups allow you to display cost components in standard reports. In the most straightforward implementation, you create a cost component group for each component and assign each group to a corresponding cost component. You assign cost component groups as columns in cost estimate list reports and costed multilevel BOMs.

Cost Component Split

The cost component split refers to the combination of cost components that comprise the total cost of a material. For example, suppose you need to view three cost components— material, labor, and overhead —for your reporting requirements. In that case, the combination of these three cost components represents the split of these cost components.

Cost Component Structure

You define which cost components make up a cost component split by assigning them to a cost component structure. You assign cost elements and origin groups to cost components within the cost component structure.

Cost Component View

Each cost component is assigned to a cost component view. When you display a cost estimate, you can choose a cost component view, which filters the cost components displayed in the cost estimate.

Cost Element

Cost elements are included in a general ledger account. Primary cost elements identify external costs, while secondary cost elements identify costs allocated within Controlling, such as activity allocations from cost centers to manufacturing orders.

Cost Estimate

A material cost estimate calculates planned procurement or manufacturing costs using the applicable quantity structure and valuation strategy. The valuation variant selects material and activity prices; the calculation is not restricted to standard prices.

Cost Object

An SAP cost object, such as a cost center or internal order, describes where the cost occurs. A cost element or account describes what the cost is.

Costed Multilevel BOM

A costed multilevel BOM is a hierarchical overview of the values of all items of a costed material according to the material's costed quantity structure (BOM and routing). You display a costed multilevel Bill of Materials (BOM) on the left side of the cost estimate screen. You can also view a costed multilevel BOM separately with Transaction CK86_99.

Costing BOM

Costing BOMs are assigned a BOM usage of costing and are usually copied from BOMs with a production usage. You can adjust the costing BOMs to differ from the production BOMs if necessary. With system-supplied settings, standard cost estimates search for costing BOMs before production BOMs.

Costing Lot Size

The costing lot size should be close to actual purchase or production quantities to reduce lot size variance. Unfavorable variances may result if you create a production order for less than the costing lot size. Setup time is required to prepare equipment and machinery for production, and that preparation time is generally the same regardless of the quantity produced. Setup time spread over a smaller production quantity increases the unit cost. This applies to externally procured items because vendors typically quote higher unit prices for smaller amounts.

Costing Run

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

Costing Sheet

A costing sheet combines calculation bases, percentage-based or quantity-based overhead rates, and credit keys. Planned overhead in a material cost estimate is a calculation; actual overhead allocation can debit a manufacturing order and credit the configured cost center or other permitted object.

Costing Type

The costing type determines the purpose and update behavior of a cost estimate, including whether its results are eligible to update the standard price.

Costing Variant

A costing variant groups the control settings used to create a cost estimate, including costing type, valuation variant, date control, quantity structure control, and transfer control. It can support different costing purposes, depending on its configuration.

Costing-Based Profitability Analysis

Costing-based profitability analysis enables you to evaluate market segments, which can be classified according to products, customers, orders (or any combination), or strategic business units, such as sales organizations or business areas concerning your company's profit or contribution margin.

Currency Type

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

Demand Management

Demand management involves planning the quantities and dates of assemblies and defining the strategy for designing, producing, or procuring a finished product.

Dependent Requirements

Dependent requirements are caused by higher-level dependent and independent requirements when running MRP. Independent requirements, created by sales orders or manually planned independent requirement entries in demand management, determine lower-level dependent material requirements.

Deployment Options

SAP S/4HANA Cloud Private Edition:

SAP S/4HANA Cloud Private Edition is a managed cloud offering that enables a smooth, secure migration of an on-premise enterprise resource planning (ERP) system—including SAP ERP and SAP S/4HANA—to the cloud. This deployment option allows you to preserve your existing configuration, customization, and historical data from SAP ERP.

SAP S/4HANA Cloud Public Edition:

SAP S/4HANA Cloud Public Edition is a ready-to-run cloud ERP that delivers the latest industry best practices and continuous innovation. This deployment option is often abbreviated to SAP S/4HANA Cloud.

Detailed Reports

Detailed reports display cost element details of manufacturing orders and product cost collectors. During variance analysis, you can drill down on cost elements to display line-item reports.

Discontinued Materials

Materials being phased out and replaced by follow-up materials. With the relevant discontinuation settings, MRP can transfer dependent requirements that the discontinued material cannot cover to a follow-up material.

Distribution Rule

You maintain distribution rules in settlement rules, as well as in manufacturing orders and product cost collectors.

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 wholly modular fashion by activating only the latest features and functionalities customers want.

Event-Based Production Costing

In supported scenarios, relevant goods movements and confirmations trigger overhead, work-in-process, and variance postings. Prerequisites, calculation logic, and closing tasks depend on the edition, release, and accounting scenario. Public Edition scope item 3F0 and on-premise/Private Edition examples must be evaluated in their own contexts.

External Processing

An external vendor performs external processing of a manufacturing order operation. This is distinct from subcontracting, which involves sending material parts to an external vendor, who manufactures the complete assembly via a purchase order.

F.13 - Automatic Clearing

You use Transaction F.13 to automatically clear open items.

F.19 - Analyze GR/IR Account and Accrual

F.19 analyzes the GR/IR clearing account and posts adjustment entries for outstanding amounts to adjustment accounts. It makes the offsetting entry to the account for goods delivered but not invoiced or to the account for goods invoiced but not delivered.

FBL3N - G/L Account Line Item Display

FBL3N displays G/L account line items in supported SAP ERP and SAP S/4HANA environments. Available line-item reporting and SAP Fiori alternatives depend on the account settings and system release.

Fixed Lot Size

A fixed procurement or production proposal quantity used by the applicable MRP lot-sizing procedure. If one lot does not cover a shortage, MRP can create several lots. This setting is distinct from the costing lot size used in a material cost estimate.

FS10N - G/L Account Balance Display

This report lets you view the totals of a single or a range of G/L accounts. The totals are by month to give you an overview of how the account has changed. You access this report with transaction FS10N.

Goods Issue

A goods issue is the movement (removal) of goods or materials from inventory to manufacturing or a customer. When goods are issued, the inventory quantity is reduced.

Goods Receipt

A goods receipt is a goods movement used to post goods received from external vendors or in-plant production. Goods receipts for stock materials increase inventory quantities.

GR/IR

The goods receipt/invoice receipt clearing account records offsetting entries for goods receipts and supplier invoices. Remaining quantity or value differences require investigation and appropriate follow-up processing.

GR/IR Account Maintenance

Transaction MR11 helps you correct the GR/IR balance when there is a difference in quantity (not price) between the invoice and the goods receipt. It should only be used when no more invoices or goods receipts are expected or can be posted.

Group Valuation

Group valuation aggregates legal entities while eliminating intercompany profits within the group.

Internal Order

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

Invoice Receipt

You enter a vendor invoice in SAP with Transaction MIRO or via menu path

Logistics - Materials Management - Logistic Invoice Verification - Document Entry - Enter Invoice.

Legal Valuation

Represents the view of individual legal entities, showing transfers of goods according to strict legal reporting requirements.

Long-Term Planning

Long-term planning enables you to develop medium—to long-term production plans and simulate future production requirements using long-term MRP. You can also determine future purchasing requirements for vendor RFQs, update purchasing information records, and transfer planned activity requirements to cost center accounting.

Margin Analysis

Margin Analysis is the SAP S/4HANA evolution of account-based profitability analysis. It uses G/L accounts and profitability characteristics in the Universal Journal to support financial reporting by market segment. Available functions depend on the release and configuration.

Master Data

Master data is information that stays relatively constant over long periods. For example, purchasing information records typically contain vendor information, such as a business name, which remains relatively unchanged.

Material Ledger Documents

Records of valuation-relevant transactions and price differences in Material Ledger. They support tracing material values to the underlying business postings and analyzing changes in material valuation. The technical document and data structures depend on the SAP release.

Material Ledger Drilldown Reporting

You access ML drilldown reporting with Transaction KKML0 via the following menu path:

Controlling - Product Cost Controlling - Actual Costing/Material Ledger - Material Ledger - Information System - Drilldown Reporting - Run Drilldown Report

Material Master

A material master contains all the information required to manage a material. Information is stored in views, each corresponding to a department or area of business responsibility. Views conveniently group information for users in different departments, such as sales and purchasing.

Material Requirements Planning (MRP)

MRP ensures material availability by monitoring stock levels and generating planned orders for Purchasing and Production.

MB5S - List of GR/IR Balances

MB5S displays differences between goods receipt (GR) and invoice receipt (IR) quantities and values.

ME23N - Display PO History

You use ME23N to display information about an existing purchase order to see whether the vendor invoice has been received and/or paid.

MR11SHOW - Display/Reverse MR11 Document

MR11 documents can be reversed using MR11_SHOW or by clicking on Account Maintenance, which documents the PO history. Be cautious if more than one PO has been corrected in an MR11 document, as it may reverse the entire document.

On-Premise

SAP S/4HANA On-Premise is deployed on infrastructure managed by the customer or its service provider and provides extensive control over configuration, customization, and upgrade schedules.

PA Transfer Structure

A PA transfer structure is used in costing-based CO-PA to assign costs and revenues from other applications to value and quantity fields in profitability analysis.

Process Order

A process order is a type of manufacturing order used in process industries. A master recipe and materials list are copied from the master data to the order. A process order contains operations that are divided into phases. A phase is a self-contained work step that defines the details 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 activity values to determine dates, capacity requirements, and costs.

Procurement Alternative

A procurement alternative represents one of several methods for procuring a material. You can control the level of detail in which the procurement alternatives are represented through the controlling level. Depending on the processing category, there are single-level and multilevel procurement alternatives. For example, a purchase order is a single-level procurement, whereas production involves multilevel procurement.

Procurement Type

The procurement type indicates whether a material is produced in-house (E), procured externally (F), or supports both (X). Quantity structure selection and price determination in a cost estimate also depend on special procurement and costing configuration; procurement type alone does not define the complete valuation strategy.

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

For discrete manufacturing, a production order is used. A BOM and routing are copied from the master data to the order. The routing supplies a sequence of operations describing how to carry out work steps.
An operation refers to a work center where it is to be performed. It contains planned activities required to carry out the operation. Costs are based on the material components and activity price multiplied by a standard value.

Production Variance

In classic period-end analysis, target cost version 1 compares net actual costs with target costs derived from the preliminary cost estimate and actual output. It supports analysis; target cost version 0 determines settlement-relevant total variances. Event-based production accounting uses scenario-specific target-cost logic.

Production Version

A production version determines which alternative Bill of Materials (BOM) is used, along with which task list or master recipe, to produce a material or create a master production schedule. You can have multiple production versions with varying validity periods and lot-size ranges for one material.

Profit Center

A profit center receives postings parallel to cost centers and other master data, such as orders. Profit center accounting is integrated with the Universal Journal with S/4HANA. You usually create profit centers based on areas in a company that generate revenue and have a responsible manager.

Profit Center Valuation

Profit center valuation values goods exchanged between profit centers using transfer prices. Unlike group valuation, it explicitly records internal profits between profit centers.

Profitability Analysis

Profitability Analysis (CO-PA) evaluates revenues, costs, and contribution margins by market segment, such as product, customer, or sales organization. In SAP S/4HANA, Margin Analysis uses accounts and the Universal Journal, while costing-based CO-PA uses value fields. Available approaches depend on the edition and scope.

Purchase Order

A purchase order specifies the materials or services requested from a supplier, together with quantities, prices, delivery dates, and purchasing conditions. It provides a reference for goods receipt and invoice receipt processing.

Purchase Price Variance

When raw materials are valued at the standard price, a purchase price variance will be posted during goods receipt if the goods receipt or invoice price differs from the material standard price.

Purchasing Info Record

A purchasing info record stores information for a material and supplier combination, including prices and purchasing conditions. Its price is used in costing when selected by the applicable valuation strategy.

SAP Universal Journal

The SAP S/4HANA Universal Journal provides a single source of financial and management accounting data. ACDOCA stores actual line items, while ACDOCP supports planning data.

SAP S/4HANA supports both period-end and event-based processing.

Special Procurement Type

The Special Procurement Type field, found immediately below the procurement type in the MRP 2 view, is used to define the procurement type more closely. For example, it may indicate if the item is produced in another plant and transferred to the plant you are analyzing. Special procurement type 30 indicates the material is procured by subcontracting.

Statistical Key Figure

A statistical key figure records a quantity used in reporting or as a tracing factor for allocations, such as distribution or assessment. Examples include employee counts or floor area.

Subcontracting

You supply component parts to an external vendor who manufactures the complete assembly. The vendor has previously supplied a quotation, which is entered in a purchasing info record with a subcontracting category.

Tracing Factor

Tracing factors determine the cost portions received by each receiver from senders during periodic allocations, such as assessments and distributions.

Unit Costing

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

Valuation Approach

A valuation approach describes the values that are stored in accounting as a combination of a currency type (such as the group currency) and a valuation view (such as the profit center valuation view). The combination of various valuation approaches is known as a currency and valuation profile.

Valuation Class

The valuation class, maintained in the material’s accounting or valuation data, helps determine the G/L accounts used for inventory-related postings together with the transaction key and other account-determination settings.

Valuation Date

The valuation date determines which material and activity prices are selected when you create a cost estimate. Purchasing info records can contain different vendor-quoted prices for different dates. Different plan activity rates can be entered per fiscal period.

Valuation Grouping Code

The valuation grouping code allows you to assign the same general ledger account assignments across several plants with Transaction OMWD to minimize your work.
The grouping code can represent one or a group of plants.

Valuation Type

A valuation type identifies an individual valuation within a split valuation category. For example, a configured category may distinguish material procured externally from material produced in-house. Category definitions and valuation types depend on the system configuration.

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.

Valuation Variant for Scrap and WIP

This valuation variant allows you to select cost estimates for valuating scrap and WIP in a WIP-at-target-cost scenario. If the routing structure changes after a costing run, WIP can still be valued using the valuation variant for scrap and WIP, resulting in more accurate WIP valuation.

Valuation View

In the context of multiple valuation and transfer prices, you can define the following views:
- Legal valuation represents the view of individual legal entities, showing transfers of goods according to legal reporting requirements.
- Group valuation aggregates legal entities while eliminating intercompany profits within the group.
- Profit center valuation values goods exchanged between profit centers using transfer prices and explicitly records internal profits between profit centers.