5-steps-to-understanding-product-costing-part-4-costing-run.pdf

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SAP ERP Financials - Controlling: 5 Stepsto Understanding Product Costing- Part 4Costing Run

Posted by Tanya Duncan Jan 2, 2013Product Costing, part of the Controlling module, is used to value the internal cost of materials and productionfor profitability and management accounting. Product Costing is a niche skill. Due to costing's high integrationwith other modules, many people avoid it due to the complexity. This 5 part blog will seek to simplify ProductCosting.

The fourth step in understanding the basics of product costing is the costing run. Costing runs are usedto cost mass amounts of materials in a single company code. The costing run allows you to select certainmaterials, explode their quantity structure, cost, analyze, and mark and release.

Prerequisites: Material Masters (including MRP, Accounting, & Costing views) Quantity Structure (Bill of Materials, Routing or Master Recipe, Production Versions are optional) Purchase Info Records and Condition Types (If desired for costing) Configuration (Cost Component Structure, Costing Variant, Valuation Variant, Costing Sheet if

required) CO Master Data (Primary and Secondary Cost Elements, Activity Types, Mixed Costing Ratios &

Alternatives if required, Additive Costs if required)

Overview:During the annual or monthly costing process, materials are costed in a costing run. Transaction CK40N isused to execute costing runs, analyze results, and mark and release costs. The costing run must be createdusing a costing variant (read more in configuration section), costing version, controlling area, company code,and transfer control. Therefore, a costing run can only be created for one company code at a time. The costingrun is also created for a particular date range.

SAP ERP Financials - Controlling: 5 Steps to Understanding Product Costing- Part 4 Costing Run


The costing run contains six steps: Selection, Structure Explosion, Costing, Analysis, Marking, and Release.Each step requires you to enter parameters, save, and then execute. The selection parameters are enteredwhich indicates which materials should be costed. In the structure explosion step, the selected materialsare exploded to pick up component materials from BOMs.

As discussed in the previous blog on Quantity Structure, a bill of materials (BOM) is created for each internallyproduced material. In the costing step, finished good materials selected from the previous step are costedbased on their BOM and routing or master recipe. A routing or master recipe is also created to indicate theprocesses required for a material. Component materials are also costed based on costing configuration.

You can analyze the costing results using the available reports in the analysis parameters. In the marking step,you open the lock to authorize marking for a company code, costing variant, and period. Once marked, costsappear as planned standard cost estimates in the material master. After executing marking, you release thecosting results. Once released, costs are valid for the given date range and appear as current standard costestimates in the material master.

After executing each step, it is important to review the error log and resolve errors. Once resolving errors in agiven step, you must re-execute each step from the beginning to see the effect. If results do not update afterexecuting, you can press the refresh button. You have the option to execute any step in background whenprocessing a large number of materials or if you prefer to execute a step at a given date and time.

Configuration:



Configuration of costing and valuation variants and cost component structure are required to set the strategyfor costing materials. The costing variant holds the criteria for costing. Costing variants contain a costing type,which determines the object to be created, and valuation variant. Valuation variants contain parameters forvaluation of a cost estimate. In a valuation variant, you can specify the strategy sequence forhow costs are selected. For produced materials, the components standard cost, moving averageprice, purchase info record price, or planned prices may be selected. You can also choose aparticular plan/actual version and average the plan activity rates for the year or take the currentactivity rates. The cost component structure is used to indicate which costs should be included, whether toinclude the variable or total costs, and group costs in logical groupings called cost components.

Relatable Example:Let's say we are using Product Costing to value our inventory in a cookie baking shop. This will help us valueour cookies (finished good), frosting (semi-finished good), and baking items like eggs, milk, and sugar (rawmaterials).Using the costs for each ingredient (Material Master) in our ingredient list (BOM) and the rates for activities inour recipe (Routing or Master Recipe), we can calculate the cost of producing a cookie. In costing our cookies,we will cost the ingredients. Once we are satisfied with our standard cost, we can choose to value our inventoryat that cost (release).

Further information: Product Cost Collectors, used in repetitive manufacturing, must be costed in a separate transaction

(Individual- KKF6N or Mass- KKF6M). You must re-calculate and release costs to reflect changes in production data like BOMs, Routings or

Master Recipes, Production Versions. Note that only the first production version will be used in costing.

In the final blog of this series, I will explain how actual costs are calculated and plan to actual variance analysis.http://scn.sap.com/community/erp/financials/controlling/blog/2013/01/04/5-steps-to-understanding-product-costing-part-5-actual-costs

If you missed the previous three blogs, catch up by following these links:

http://scn.sap.com/community/erp/financials/controlling/blog/2013/01/02/5-steps-to-understanding-product-costing-part-1-cost-center-planninghttp://scn.sap.com/community/erp/financials/controlling/blog/2013/01/02/5-steps-to-understanding-product-costing-part-2-activity-rate-calculationhttp://scn.sap.com/community/erp/financials/controlling/blog/2013/01/02/5-steps-to-understanding-product-costing-part-3-quantity-structure11872 Views Tags: scn, sap, beginner, erp, business_process_expert, business_process_management,sap_developer_network, controlling, fico, co, finance, product_costing, enterprise_resource_planning,sap_erp_financials



solaiappan kovilpillaiMar 7, 2015 7:58 AMTanyaA very lucid explanation to simplify the complex subject.Can you give an excel template for the same so that comparison becomes easy.Thanks

Din Yal#nDec 24, 2014 2:32 PMThanks Mrs. Duncan

Vinay KOct 29, 2014 2:29 AMGood One.

Oscar DiazAug 26, 2014 11:33 PMTanya,

Great job. Excellent document and good explanation. Thanks for this.

Oscar

shreyas hichkadJul 28, 2014 5:45 PMhi tanyawell to begin with im a fresher, but your blogs are so easy to digest,Thanks for your valuable information & not to forget the illustration you gave is very easy to absorb.

Tanya Duncan in response to Ahmed Ibrahim on page 4Apr 10, 2014 10:51 PMThanks for the suggestion Ahmed. The goal of this post was to explain a simple overview of the costingprocess, and not focus too heavily on costing configuration. There are many other resources that cover costingvariants in detail. I am actually writing a book due out this summer on product costing which covers the detailsof business processes and configuration in SAP. It's called Practical Guide to SAP CO-PC (Product Costing). Ifyou're interested, you can read more on my book: TanyaDuncanBlog.com.

Thanks again for your input!

Ahmed IbrahimMar 24, 2014 7:23 AMthanks ,but may Clarify costing variant in details

BR

Devendra F



Feb 12, 2014 5:47 AMWell done tanya.

Martin DAngeloDec 2, 2013 9:06 PMHi Tanya, Do you have some information about alternatives for costing materials in ATO (Assemble to Order)scenario?The final assembly is valuated in stock.

Very good your post!Thanks and regards,

Sai NirmalSep 12, 2013 6:38 PMHi Tanya,

Excellent document and good explanation.

Regards,Sai

Rajneesh SaxenaJul 16, 2013 6:33 PMDear Tanya

Great job indeed.

But I want to add one small thing in this is that in the last line of this part you mentioned that "only the firstproduction version will be used in costing." here one point is already added by Patricia the other point is thatwe can make default any production version in the material master (Costing1 Tab) to be used for Costing.

Rajneesh SaxenaPatricia Brainard

May 30, 2013 11:25 PMVery well done!

Just one thought -- in "Further Information" where you have the note about the first production version, youmight also mention procurement alternatives and mixed costing, which allow cost estimates to be based onweighted averages of multiple production versions, or a combination of production versions and different formsof procurement.

5-steps-to-understanding-product-costing-part-4-costing-run.pdf

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