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20284327 product-costing-material-ledger-ppt

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1. Product Costing & MaterialLedger 2. Product Costing OverviewAcquire an overall perspective of Product CostPlanning within R/3.Observe a product life cycle from the…
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  • 1. Product Costing & MaterialLedger
  • 2. Product Costing OverviewAcquire an overall perspective of Product CostPlanning within R/3.Observe a product life cycle from the perspective ofProduct Cost Planning.Acquire an overall perspective of product cost objectcontrolling within R/3.Understand the period oriented product costcontrolling.Obtain an understanding of the functions in thematerial ledger.Analysis of product costs.
  • 3. Material Ledger OverviewObtain an understanding of the actual costingfunction in the material ledger.Know how to revaluate inventories of semi finishedproducts, and finished products with calculatedactual costs or accrue variances.Analysis of actual product costs.
  • 4. Why utilize Product Costing?•Product Costing is the backbone of a strong standard costsystem. This is the process by which production activitiesare recorded at standard values and variances from actualcosts are isolated.•For planning purposes, the corporation wants a preliminarytarget of what they think it will cost to produce X units of aproduct.•To set attainable standards by which efficiencies within theproduction operations can be measured.•To provide feedback to management on the actualperformance of the production process in relation to thosetargets. Identified variances may indicate inefficiencies thathave to be investigated. Corrective action may have to betaken.
  • 5. Costing MethodologyMaterial MasterMaterial MasterPricePrice ControlControlStandard Price(S-Price)- Constant- Recommended for all materialtypesMoving average price(V- Price)- Adjusted with every receipt- If at all, only to be used for rawmaterials and materials procuredexternally
  • 6. Costing MethodologyThe method of valuing inventory of amaterial is determined whenextending/creating the material master.Price that changes in consequence of usageand entry of invoices. Calculated bydividing the value of material by the quantityin stock. Automatically recalculated basedon activity.Constant price without considering usage orinvoices. Material stock valued at the sameprice over an extended period. Pricevariances are posted to price differenceaccounts; not affecting the standard price.
  • 7. Moving average price – Stock CoverageGR/IR AccountVendor200300200100200100300Consumption300If the invoice receipt isfor 100 units, the stockcoverageis 200 units:all differences goes onstockStockQtyQty Stk. ValStk. Val V priceV price1.Begin. inventory: 100 PC at 1.001.Begin. inventory: 100 PC at 1.00 100100 100100 1.001.002. Goods receipt: 100 PC at 2.002. Goods receipt: 100 PC at 2.00 200200 300300 1.501.503. Invoice receipt: 100 PC at 3.003. Invoice receipt: 100 PC at 3.00 200200 400400 2.002.004. Goods issue: 150 PC at 2.004. Goods issue: 150 PC at 2.00 5050 100100 2.002.001.1.2.2.333.3. 2.2.3.3.4.4.4.4.
  • 8. Moving average price: Stock shortageStockPrice differenceGR/IR accountVendor1002005020020050300Consumption2253.3.225StockStock StockStock ValueValue V PriceV Price1. Begin. inventory:1. Begin. inventory: 100100 100100 1.001.002. Goods receipt: 100 PC at 2.002. Goods receipt: 100 PC at 2.00 200200 300300 1.501.503. Goods issue: 150 PC at 1.503. Goods issue: 150 PC at 1.50 5050 7575 1.501.504. Invoice receipt: 100 PC at 3.004. Invoice receipt: 100 PC at 3.00 5050 125125 22.50.501.1.2.2.33.. 4.4.4.4.2.2.A delayed invoice receipt results in price differenceA delayed invoice receipt results in price differencedue to stock shortagedue to stock shortage44..4.4.
  • 9. Characteristics of Price Control V√ The stock value is adjusted each time goods are received√ Real-time price fluctations are posted to stock√ Price difference postings only take place in exceptional casesDisadvantages:× Price fluctuations cannot be adjusted to the finished products of higherlevels (S price)× Only recommended for raw materials or goods procured externally (real-time price for goods receipt known)× False entries with severe consequences (compounded errors)× Danger of incorrect valuations with delayed invoice receiptMoving average priceAdvantages:Advantages:
  • 10. Posting Example: Standard PriceStockPrice differenceGR/IR accountVendor3450Stock Stock Value Standard PriceOpening stock: 100 400 4.00Goods receipt: 100 at 5 200 400 4.00Invoice receipt: 100 at 4.50 200 400 4.001231 4004002500 23 5002 100 350
  • 11. Characteristics of Price Control S√ All stock postings take place at the standard price√ Prices remain constant throughout at least one period√ Price fluctuations do not debit/credit the cost objects (e.g. orders)√ Calculation of the standard prices with cost component splits√ Recommended for all material typesDisadvantages:× Price differences cannot be subsequently adjusted to the endinginventories or the consumed products (sales, productionwithdrawals)Advantages:Advantages:Standard Price
  • 12. Costing MethodologyValuation Method by Material:Finished Goods Standard w/ MLIntermediates Standard w/ MLRaw Material Moving Average ActualPackaging Moving Average Actual
  • 13. Organizational unit dividing up a company for thepurpose of valuating stocks in a standardized andconsistent manner.• Level at which material value is managed.• The valuation area may is defined:- by plantValuation Area
  • 14. QualityCCALabourCCAF. GoodsInventoryBOMRoutingProductionordersCO-CCACO-PACO-PCManufacturing Cost MM: RMSteamCCAProductionCost CenterVAR.VAR...Product Cost FlowActvActvActvActvActvActv
  • 15. Product Cost FlowPlant Cost ViewSales & Mktg. ViewMfg. Cost Center(Activity Types)UtilitiesSalariesSuppliesMaintenanceDepreciationTrainingDirectConversionInsur. & TaxesLaboratory/QCWaste TreatmentShops & StoresGeneral ServicesIndirectConversionTotal Product CostMach. Hrs.orlbs.ProducedLab testsSetup Hrs.P A(Profitability Analysis)Raw Mat’l 1 & 2 CostsPkg. Mat’l CostsCosts to ProduceProduct testing costsChange Over costs(setup costs)RoutingProduct Unit CostCost of Goods Mfg.Raw Mat’l 1 CostsRaw Mat’l 2 CostsPkg. Mat’l CostsRoutingMach. Hr. CostsLab Tests CostsMach. Setup CostsProcess OrderRaw Mat’l 1Raw Mat’l 2Pkg Mat’lBOM(Cost Component View) (SAP Value Fields)Three Views Available:1. Cost Component2. Cost Element3. Cost ItemizationCost of Goods SoldFixed & Variable Cost Fixed & Variable Cost
  • 16. Product Costing At A GrpProduct Cost PlanningYesExecute costingrunAutomaticReleaseofStandard PriceMark StandardCost EstimateActivitytypeplanningcompletedQuantitystructurein PPcreatedOverheadcostplanningcompletedPlan pricesof rawmaterialswereenteredStandardCostCalculatedReview forApprovalAdjust costingmaster data/parametersStandardprice hasebeenreleasedOKNot OK
  • 17. Product Costing At A GrpProduct Cost Allocation - Simultaneous CostingYesSimultaneousCostingCostestimatehas beenreleasedManufacturing orderhas beenreleasedCost objecthas beencreatedProduct costareallocated
  • 18. Product Costing At A GrpPeriod End Closing Product CostingYesRevaluationactivity types atactual pricesProductcost areallocatedPE ProductCosting hasbeen doneCalculation ofWIPPeriodicVaraiancecalculationSettle costobject
  • 19. Product Costing At A GrpMaterial Ledger/Actual CostingAllocation ofFollow up Coststo Finished/SemiFinishedProductsPrice Update inActual CostingMaterial PriceDeterminationGL PostingsMM GoodsMovementsRecordedMaterialM,asterUpdatesGL Postings &ReversalMaterialM,asterUpdatesRevaluateStockProvisionalPosting
  • 20. Product Cost Planning: OverviewFunctions of Product Cost Planning:Product Cost Planning with reference to cost objectProduct cost planning with quantity structure – with structuresprovided by PP (Production Planning) moduleDetermination of the cost of goods manufacturedProduct Cost Planning supplies information for othermodules:Update of prices in a material masterUpdate of the cost of good sold with the detailed structure ofcost component (grouped cost elements)Standard (material) cost estimate as the base for calculationof production variances
  • 21. What is a Product Cost Estimate?Cost Estimate With Quantity StructureUtilizes a Bill of Material (BOM) and routing, I.e. Master Recipe for costingpurposes. Integrated with Production Planning (PP).AdditiveYou use additive costing to enable you to manually add costs that cannotbe calculated by the system to a material cost estimate.A tool for planning costs and establishing prices formaterials. It is used to calculate the cost of goods sold foreach product unit.Cost Estimate WITHOUT Quantity StructureUtilizes a material master data and activity types entered manually into costestimate.
  • 22. Product Costing: OverviewStandard Cost Estimate(once a year)Standard Cost Estimate(once a year)Release cost estimate with quantity structureMark cost estimate with quantity structureCreate Cost estimate with quantitystructure
  • 23. Concept of Cost Roll UpThe purpose of cost rollup is to include the cost of goodsmanufactured of all the materials in a multilevel productionstructure within the costs of the material located at the top ofthe structure. The costs are rolled up automatically using thecosting levels.
  • 24. Costing VariantValuationValuationVariantVariantQuantity StructureQuantity StructureDeterminationDeterminationCosting VariantCosting VariantPricesPricesQuantitiesCost of goodsCost of goodsmanufacturedmanufactured
  • 25. Costing VariantCOSTINGVARIANTStrategy forStrategy fortransfer oftransfer ofthe existingthe existingcost estimatescost estimatesDetermination of :Determination of :-- Bills of MaterialBills of Material-- RoutingRoutingDefaulted dates forDefaulted dates forcostingcostingCosting SheetCosting SheetDetermination of:Determination of:-- prices updateprices updatein material masterin material masterValuation control for:Valuation control for:-- materialsmaterials-- internal activitiesinternal activities-- external activitiesexternal activities-- subcontractingsubcontracting-- overheads viaoverheads viacosting sheetcosting sheet
  • 26. Quantity Structure for Product Cost PlanningQuantity Structure of Product Cost Planning:-Material MasterBill of MaterialWork Center/ ResourcesRoutingsMaster RecipeProduction VersionProcurement Alternative/ Mixing Ratios
  • 27. Quantity Structure for Product Cost PlanningMaterial master dataAccounting viewsCosting viewsMRP viewsBOM - Bill of MaterialBOM type & identificationBOM headerMaterial dataRouting - tasks listRouting type & identificationRouting headerOperation dataMaster RecipeRecipe headerOperationsMaterials listWork Centers / ResourcesBasic dataCostingProduction VersionValidity PeriodProduction line
  • 28. Quantity Structure: Material Master DataMaterial Master Data:Material Master Data is an object in SAP that consistsall relevant data for raw materials, semi-finished andfinished products divided into views.Important Views relevant for product costing:AccountingCostingMRP
  • 29. Quantity Structure: Production VersionProduction versions combine a specific BOM alternativewith a specific routing/recipeFor one material, you can have several Productionversions for various validity periods and lot size rangesProduction version facilitate different situationsProduction using different resourcesProduction using different procedures
  • 30. Quantity Structure: Procurement AlternativesQuantity structure determination for mixed cost estimate.
  • 31. Quantity Structure: Mixing RatiosProduct <FERT or HALB >Mixed ProductCost EstimateQuantity structure determination for mixed cost estimateValidity period for mixing structure
  • 32. Costing StructureCosting Structure for Product Cost Planning:-Activity TypesCost ElementsCost Component StructureCost CentersMaterial Master
  • 33. Costing Structure for Product Cost PlanningMaterial master dataAccounting viewsCosting viewsCost CentersValidity periodCategoryFunctional areaActivity TypesValidity periodActivity unitAllocation cost elementCost ElementsValidity periodCategory
  • 34. Costing StructureActivity types define the type of activity that can be providedby a cost center (work activity, production hours, and so on).
  • 35. Cost centerhCost center:MachinePlanned costs:430000 (salaries) 44,000440000 (miscl.) 10,000473120 (telephone) 30,000Plan activity qty: 100 hPlanned costs: 84,000CalculatedPrice: 840Activity Price Calculation:Apportionment of cost center coststo activity types according toparticular criteria1PDH01Activity Price Calculation12100
  • 36. Costing StructureSteam service9103004943954 UT: Steam fixProduct91000045 - TEGProduct91000060 - LLDPE9103000…..…..DistributionActivityAllocation943954viaRoutingCost SplittingPlanning9103000Utilities (Common)ProductCost EstimateActivity Types Used:1UTSTF Steam - fixedOriginalCE1UTSTF Steam - fixed1UTSTV Steam – var.235Primary costs planning on allCost Centers.1Planned Price CalculationPrices for 1UTSTF arecalculated.41. Assign CC 9103004 to SplittingStructure Z9 Steam service2. Perform cost splitting
  • 37. Cost Component StructureRaw MaterialsUtilitiesPersonnel Exp.DepreciationPrimary cost elementsProduct Cost PlanningCost CentersUtilitiesPersonnel Exp.DepreciationStructure of primarycostsCO-PCCO-OMRaw MaterialsInternalActivityAllocationStructure ofprimarycostsZ9A Grp-Primary
  • 38. Product Costing: OverviewStandard Cost Estimate(once a year)Standard Cost Estimate(once a year)Release cost estimate with quantitystructureMark cost estimate with quantitystructureCreate Cost estimate with quantity structure
  • 39. Price updateStandard priceOnly one validated standard price per product per period,The price represents most desired (or most likely) costsOnly one price per product over the year (recommended)Determined during costing runs for Z9P1 costing variants - standardcost estimate is populated in appropriate valuation viewsIncludes variable and fix cost elementsBase for variances calculation; which is then posted to FI and CO-PAUsed for stock valuation of finished goods and semi-finishedproductsStored in material master data (accounting view) in Legal, Groupand Profit Center valuation views after releasing the cost estimate
  • 40. Price updateFuture priceFuture standard priceStored in material master data (accounting & costing view) in Legal,Group and Profit Center valuation views after marking the costestimate.Previous priceReplaced standard price by current one due to releasing the costestimateStored in material master data (accounting & costing view).
  • 41. Price updateExisting StdMaterial Master DataMaterial Master DataStandard PriceFuture Current Previous1010Future Current PreviousMarking StandardMarking StandardCost EstimateCost Estimate 1015Future Current Previous101515Stock RevaluationStock RevaluationReleasing StandardReleasing StandardCost EstimateCost EstimateAnalysis of Costing Results
  • 42. Costing runCosting runYou can use the costing run to process mass data. It enables you tocost, mark, and release more than one material at the same time.Every processing step involved in costing with quantity structure isperformed by the costing run, from the same screen.Costing run consists of:General data (organizational units, selection criteria)Selected materialsExploded BOMsCosting run resultsPrice update results
  • 43. Costing runMarking and releasing costing run results(price update)Execute costing runSelectionofall materialsPartial selectionof materialsBOM explosionCosting Run CreationCosting Run CreationCompany CodeCosting variantDatesOROR
  • 44. Product Costing: OverviewPrepare Cost ObjectPrepare Cost ObjectProduction CostsProduction CostsReceive Finished StocksReceive Finished StocksMonth End ClosingMonth End ClosingPost Materials CostsDebit Secondary costCredit Production OutputWIP CalculationVariance CalculationSettlementPreliminary costingCreate cost object
  • 45. Cost Object Controlling: OverviewFunctions of Cost Object Controlling:Supporting make-or-buy decisionsDetermining price floorsPerforming complex cost analysisDetermining inventory values
  • 46. Cost Object Controlling: OverviewCost Object Controlling Scenarios:Product Cost by PeriodProduct Cost by Period is used for recurring periodic costcontrol of products that are manufactured in the same wayover a longer period of time.Product Cost by OrderProduct Cost by Order is mainly used to control the costs ofindividual production lots.
  • 47. Cost Object Controlling: OverviewProduct Cost by Order or by PeriodFull settlement (by Order)Periodic settlement ( by Period)Actual costs =Work in processActual costs -Goods receipts =Work in processActual costs -Goods receipts =VariancesReleasing anorderPartial delivery Delivered /TechnicallycompletedActual costs -Goods receipts =Work in process +VariancesPeriod 1 Period 2 Period 3Actual costs -Goods receipts =Work in process +VariancesActual costs -Goods receipts =Work in process +VariancesTimeTimeTimeTime
  • 48. Cost Object Controlling: OverviewProduct Cost by OrderType of settlementruleWork-in-ProcessVariancesSettlementHierarchy ofCost ObjectsFULL PERIODICWIP calculated on baseof actual costsVariance = Actual Costs -Goods ReceiptsVariance = Actual Costs -Goods Receipts - WIPShould be periodicallyImpossible PossibleFunkcjeFunctions Product Cost by PeriodWIP calculated on baseof target costsMust be periodically
  • 49. Cost Object Controlling: OverviewFunctions of Product Costs by Period:Create product cost collectors.Create a preliminary cost estimate for product costcollectors.Calculate and analyze target costs and actual costs forproduct cost collectors.Calculate or update the work-in-process inventory andthe finished goods inventory.Calculate and analyze variances for each period.Transfer data to: Financial Accounting, ProfitabilityAnalysis, Profit Center Accounting and MaterialLedger.
  • 50. Product Costing: OverviewPrepare Cost ObjectPrepare Cost ObjectPreliminary costingCreateProduct Cost Collector
  • 51. Objects in Cost Object ControllingProduct cost collectors in the following productionenvironments:In order-related production (that is, when you are usingproduction orders) when you want to analyze the costs byperiod rather than by lotIn process manufacturing (that is, when you are using processorders) when you want to analyze the costs by period ratherthan by lotIn repetitive manufacturing you always use product costcollectors as the cost objects.
  • 52. Objects in Cost Object ControllingProduct <FERT or HALB >Bill of Material• Usage• AlternativeRouting• Group• Group counterProduction Version• ID,• Production line,• Validity period.Product CostCollectorProduct Cost Collector
  • 53. Objects in Cost Object ControllingMasterRecipeProductionVersionPROCESS ORDER 2OperationList/RoutingMaterialsList/BOMResourceRequirementsOperation 10Operation 20Phase AMaterial YMaterial XProduct CostCollectorPROCESS ORDER 1Product<FERT or HALB>
  • 54. Preliminary costingCosting variant PREM - preliminary costing:Created during product cost collector creationCreated per each production versionProvides split and balanced information of cost items, quantities andprices that are planned to occur during production of a productVariable costs coming from BOM and routingResult used mainly for actual activities postingsMay be used for further analysis up to cost managementrequirementsMay be changed all the time in the way of changing (updating)Product Cost Collector; i.e. different quantity structures allowed overthe periodChanges in BOMs take effect immediately, i.e. cost estimate updatenot requiredChanges in routings take effect after cost estimate update
  • 55. Preliminary costingProduct Cost CollectorItem Plan ActualMaterials 4.000Internal activities 2.500Over
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