CO PC made easyProduct costing flow:
overview:......................................................................................2
Product costing flow for discrete manufacturing w/o
PA.............................................2
Overview:.....................................................................................................................2
Processing throughout a
period...................................................................................3
Series A: posting to cost centers:
........................................................................3
Step B: raw material is issued from inventory to the PRD
order...........................3 Series C: activities are
allocated from PRD cost center to the PRD order...........3 Step E:
FGs are received into inventory from the PRD
order...............................3 Month-end
processing:.................................................................................................3
Series F: Apply overhead from the overhead cost centers to the
production
order......................................................................................................................3
Series G: WIP for the production
order:................................................................3
Series S: post cost center
variances:...................................................................4
Step T: production order variances (posted at
settlement)...................................4
T-accounts:...................................................................................................................4
Product costing flow for discrete manufacturing with
PA:...........................................9 Product costing
flow for repetitive manufacturing with
PA..........................................9
Overview:.....................................................................................................................9
Processing throughout a
period:................................................................................10
Series A: posting to cost
centers........................................................................10
Step B: Raw material is issued from inventory to the run
schedule/production cost
collector:......................................................................................................10
Series C: activities are allocated from the production cost center
to the run schedule/production cost
collector......................................................................10
Step E: Finished goods are received into inventory from run
schedule/production
collector.............................................................................10
Step X: deliver product to the
customer:.............................................................10
Step Y: invoice the
customer:.............................................................................10
Month-end
processing................................................................................................10
Series F: apply overhead from the manufacturing overhead cost
centers to the product cost
collector:.........................................................................................10
Series R: assess cost center
variances:.............................................................11
Step T: Calculate production cost collector variance with the cost
object hierarchy (posted at
settlement)..........................................................................11
End period: run settlement of the cost object hierarchy to settle
production cost collectors(posts
T)...............................................................................................11
Summary of this
scenario:..........................................................................................11
T-accounts:.................................................................................................................11
FI/CO
reconciliation:...................................................................................................13
Cost-based
PA...........................................................................................................14
CO-PA fields updated by an
invoice...........................................................................14
Co-PA fields updated by period-end controlling
processes.......................................14
Cost object
hierarchy.................................................................................................14
Product costing flow for make-to-order production with valuated
stock and PA....14 Product costing flow for make-to-order
production with PA......................................14 Product
costing flow for assemble-to-order production with
PA..............................14 Product costing flow for
engineer-to-order with
PA....................................................14
Product costing flow: overview:1. Product costing flow for
discrete manufacturing w/o PA 2. Product costing flow for discrete
manufacturing with PA: 3. Product costing flow for make-to-order
production with valuated stock and PA 4. Product costing flow for
make-to-order production with PA 5. Product costing flow for
assemble-to-order production with PA 6. Product costing flow for
repetitive manufacturing with PA Product costing flow for
engineer-to-order with PA
Product costing flow for discrete manufacturing w/o PA
Overview:
Processing throughout a periodSeries A: posting to cost centers:
The following is a list of the types of possible postings 1.
posting of costs to service or administrative cost centers Often,
these costs are incurred regardless of whether the production line
is running. In this cost center design, the costs are managed at a
cost center level, and allocate their costs to the manufacturing
overhead pools (also cost center) 2. allocating from service and
administrative cost centers to manufacturing overhead pools This
allocation may be accomplished with direct activity allocation
postings or cost center assessments and distributions. 3. posting
costs to the production cost center Production workers salaries are
directly posted to the PRD cost center. The PRD cost center will
later supply resources, such as labor and machine time, to PRD
order. These resources are represented by activities. The rate of
these activities may be manually entered or calculated by the
system based on the planned expenses and planned hours available in
the cost center. Step B: raw material is issued from inventory to
the PRD order. The raw materials may be issued in one of the
following ways 1. As a manual goods issue 2. With backflushing 3.
Automatically when the first operation is confirmed, if materials
are allocated to the operation. For 2&3 only if there is a
problem with the quantity of previously issued component
Series C: activities are allocated from PRD cost center to the
PRD order.Step E: FGs are received into inventory from the PRD
order. An automatic goods receipt is possible when the final
operation is confirmed.
Month-end processing:Series F: Apply overhead from the overhead
cost centers to the production order. 1. Overhead, which are
indirect costs related to the direct cost such as material,
machine, is applied to the PRD order. This cost is a percentage of
the direct costs that have already been posted the PRD order.
Material overhead such as material handling or quality inspections.
Machine overhead: maintenance or utility consumption 2. If this
step is run many times during the same period, only the overhead
difference from the previous run is applied to the PRD order.
Series G: WIP for the production order: 1. The balance of all open
production orders must be moved to the B/S at period-end, since the
PRD order costs are tracked on the P&L statement. This movement
ensures that material issued to the PRD order remain in inventory
and are not written off before production is complete. Dr/Cr:
WIP-inventory(B/S account), Cr/Dr: product cost-factory
output(WIP)(P&L account)
2. when displaying PRD order costs, the WIP posting to the G/L
is not displayed. WIP amount (order is open): costs debited minus
standard cost of completed FGs credited .RA cost elements: separate
cost elements, called results analysis(RA) cost elements, track the
WIP amounts. These amounts are used to make the entry to the G/L,
but not directly posted to the PRD order. 3. Calculate WIP(posted
at settlement): with a status of REL-released. 4. Cancel WIP
(posted at settlement): with a status of DLV or TECO. Series S:
post cost center variances: These variances can be cleared by
manually posting a financial entry. The side of the journal entry
that clears the cost center entry use a cost element. The other
side uses a G/L account that is not a cost element(cost center
variance). Step T: production order variances (posted at
settlement) 1. The variances calculated determine the reason for
the variances. 2. Variances are only calculated and stored on a PRD
order when the orders status is DLV or TECO. Run settlement of PRD
orders (Posts G, T) The steps illustrated by the T-accounts
include: Period 1: A B C F G1 Settlement S Period 2: A B C E F G2 T
Settlement S
T-accounts:1. T-accounts: FI GL accounts Balance sheet
P&Lstatement
The WIP offset account(511000), the production variance
account(531000), the cost center variance account(532000, 533000)
are not created as cost elements in CO. 2. T-accounts: CO secondary
cost elements
3.
T-accounts: CO controlling objects
Material costs are directly posted to the production order Labor
and machine time are posted to the production cost center, then to
the production order from the production cost center. Overhead are
posted to the manufacturing pool cost centers, then allocated to
the production order from the manufacturing pool cost center. After
the controlling objects are cleared with the production order
settlement and the manual clearing the cost centers, no balance
existed on these controlling objects ( debits credits = 0). 4.
T-accounts: FI/CO reconciliation
Conclusions: There is a net impact of zero on the production
process for the production order. Only variances have a P&L
impact. The variances on the controlling objects are the same as
the variances in the G/L accounts.
Product costing flow for discrete manufacturing with PA: Product
costing flow for repetitive manufacturing with PA
Overview:
The production cost collector is the focus of the direct,
controllable costs incurred during the repetitive manufacturing
process. The cost collector is a Controlling (CO) production order
that is linked to the run schedule header. Direct manufacturing
costs, such as materials and resources, are incurred during the
production of a finished product or a semi-finished product
(subassembly). The indirect costs associated with the products cost
are: 1. Collected using the systems overhead costing capabilities
2. Allocated to the production cost center 3. Allocated (in direct
proportion) to the direct costs posted to the production cost
collector The differences between SAPs product costing process and
most U.S. legacy systems are that: In R/3, inventory does not flow
through cost centers Instead of cost centers, our production cost
collectors capture the products total cost in the repetitive
environment. In most U.S. systems, until variances are recognized,
production costs remain on the balance sheet
In most legacy systems, production costs are moved from the raw
materials inventory account to the WIP account to the FGs inventory
account. In R/3, using CO, the production costs associated with an
order are temporarily tracked on the profit and loss
(P&L)statement. This process allows for greater flexibility
when accounting for valueadded costs. At monthend, these production
costs are moved to a WIP balance sheet account. In the repetitive
environment in this example, backflushing is used so no WIP
balances need to be processed. In this example, since backflushing
is used and all goods issues, activity confirmations, and receipts
into inventory occur in one step, all remaining balances on the
cost collector are calculated as variances. WIP does not need to be
calculated, since there is no timing difference between debits
(goods issues and activity confirmations) and credits (goods
receipts) to the production cost collector.
This business process may not reflect every manufacturing
scenario. For example, backflushing may not always be used, so
material components are issued to the production cost collector as
they are used, which requires a WIP calculation. There may also be
differences in the cost center design between companies. In such
cases, the following scenario should be modified.
Processing throughout a period:Series A: posting to cost centers
See: posting to cost centersStep B: Raw material is issued from
inventory to the run schedule/production cost collector:
See: Raw material issue In this example, all required components
are issued to the run schedule using backflushing. The goods issue
occurs at the same time that resources (activities) are confirmed
and posted, and the FGs are received into inventory.Series C:
activities are allocated from the production cost center to the run
schedule/production cost collector
Step E: Finished goods are received into inventory from run
schedule/production collector
The inventory value is updated with the actual quantity produced
by its standard cost. This goods receipt automatically posts the
financial and material documents. Receiving the product into
inventory at a moving average cost is possible. Step X: deliver
product to the customer: At this time, the cost of sales is posted
to the G/L using standard value, but there is no posting to
cost-based CO-PA. Step Y: invoice the customer: At this time, the
revenue is posted to the G/L and to CO-PA, the cost of sales that
has already been posted to FI, posted to co-based CO-PA with the
invoice data, so that the cost of the product is matched with the
revenue.
Month-end processingSeries F: apply overhead from the
manufacturing overhead cost centers to the product cost collector:
See overhead:
Series R: assess cost center variances: 1. These variances are
assessed to CO-PA at the end of the month where they can be
allocated to products, product lines, customers, geography or other
combinations of dimensions (characteristics) tracked in CO-PA. The
assessment takes place only in CO, so no posting is made to the
G/L. 2. Optionally, these variances can also be reflected in FI by
manually posting a financial entry. However, the assessment to
CO-PA already clears the cost center, so if this posting were
desired, neither G/L account should be a cost element, and the
FI/CO reconciliation would change. Step T: Calculate production
cost collector variance with the cost object hierarchy (posted at
settlement) 1. Variances are calculated on the cost object
hierarchy. 2. Variance keys should not be defaulted into the
production cost collectors from the material master, and all
variance keys must maintained at the cost object level. 3.
Variances are posted to the G/L during settlement of the cost
object hierarchy. The actual financial transactions still occur at
the production cost collector level. 4. During settlement,
variances are posted to CO-PA when they are posted to the G/L. The
variances are posted to CO-PA when they are incurred, not when the
product is sold. End period: run settlement of the cost object
hierarchy to settle production cost collectors(posts T) When
settlement of the cost object hierarchy is run at the end of each
period, the variance values of each production cost collector that
is linked to the cost object hierarchy are posted to the FI module
and CO-PA.
Summary of this scenario:1. The graphic of this scenario
illustrates steps A to Y. The T-accounts reflect the postings made
during the repetitive manufacturing process using: One utilities
cost center Four manufacturing overhead cost centers One production
cost center. One production cost collector, linked to the cost
object hierarchy. since backflushing is used, there is no timing
difference between the goods issue, activity confirmation, and
goods receipt, so no WIP resides on the cost collector. All
remaining costs on the production cost collector after confirmation
are variances, which are calculated and posted during
settlement.
2.
T-accounts:T-accounts: FI G/L accounts:
T-accounts: CO secondary cost elements:
T-accounts: CO controlling objects
FI/CO reconciliation:1. 2. When CO-PA is used, the cost center
variances are not directly reflected in variance accounts in FI,
but are analyzed in CO or CO-PA. The manufacturing process managed
by the production cost collector should have a net zero impact on
the P&L. The only impact should be the calculated production
variances that are written off, and which are posted at settlement.
In this example, cost center variances are not reclassified in the
P&L. One the manufacturing process is complete, variances in
the CO objects must be cleared using period-end processes. Variance
calculated on the production cost collector are settled to a
variance account and to CO-PA. cost center variances are assessed
to CO-PA, but the variances reported in CO reporting and CO-PA
reporting are the same. T-accounts: FI/CO reconciliation:
3.
4.
Cost-based PA CO-PA fields updated by an invoice Co-PA fields
updated by period-end controlling processes Cost object
hierarchy
Product costing flow for make-to-order production with valuated
stock and PA
Product costing flow for make-to-order production with PAProduct
costing flow for assemble-to-order production with PA
Product costing flow for engineer-to-order with PA