SAP Product Costing

Configuration
SAP R/3 ENTERPRISE ECC6
Published by Team of SAP Consultants at
SAPTOPJOBS
Visit us at www.sap-topjobs.com

Copyright 2009-11@SAPTOPJOBS

All rights reserved. No part of this publication may be reproduced,

stored in a retrieval system, or transmitted in any form, or by any
means electronic or mechanical including photocopying,
recording or any information storage and retrieval system without
permission in writing from SAPTOPJOBS.
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 TABLE OF CONTENTS

1.INTRODUCTION............................................................................................................5

2. PRODUCT COST PLANNING .....................................................................................8

2.1Basic Settings for Material Costing .....................................................................................................................10

2.2 Maintain Overhead Cost Elements ....................................................................................................................11

2.3 Define Calculation Bases......................................................................................................................................16

2.4 Define Percentage Overhead Rates.....................................................................................................................20

2.5 Define Quantity-Based Overhead Rates.............................................................................................................23

2.6 Define Credits .......................................................................................................................................................24

1. INTRODUCTION

Product Cost Controlling is part of the Controlling application

component. It’s a tool for managing costs related to the
manufacturing products or Rendering services.

It uses information from Overhead Cost Controlling to

calculate such costs as labor, machine, or factory overhead. It
also supplies Information to Profitability Analysis so that
component can calculate Contribution margins.

Product Cost Controlling includes the following tools:

 Product Cost Planning
 Cost Object Controlling
 Information System

Product Cost Controlling can help you:-

 Plan your product costs accurately

 Compare alternative cost estimates to optimize your
business decisions
 Monitor your product costs in every stage of the
manufacturing process
 Carry out detailed variance analysis on each order,
product, and product group
 Calculate actual costs by period

Product costing is a tool for planning costs and establishing

prices for materials. It is used to calculate the costs of goods
manufactured and the costs of goods sold for each product
unit. If costing is carried out on the basis of data in Production
 Planning (PP), then the cost estimate is a product cost
estimate with a quantity structure (for example, BOM and
routing). If costing is carried out on the basis of data that you
enter manually, then the cost estimate is a product cost
estimate without a quantity structure. Product costing
belongs to both the Production Planning (PP) Module and the
Controlling (CO) Module.
You make all settings for product costing in Customizing for
Product Cost Controlling. Cost Object Controlling assigns the
costs incurred by a company to units within the company,
such as products, product groups, or order. Cost Object
Controlling is used in the following areas:

 Order Related Production.

 Repetitive Manufacturing.

 Process Manufacturing.

 Sales Order Related Production.

 Engineer to Order.
.
To arrive at the material cost, SAP picks up the quantity of
raw and packing material required from the Bill of Material. It
then valuates this quantity with the various prices available in
the material master in accordance with the strategy specified
in customizing.

In a like manner it does the same to arrive at the labor cost.

The time required for each operation is specified in the
routing or recipe. This quantity is multiplied by the activity
prices maintained in the cost center accounting module. We
will cover all this and more in this document

We will also cover product cost planning, cost object

controlling by period (repetitive manufacturing), cost object
controlling by order, cost object controlling by sales order and
configuration settings for co-product costing.

We had configured controlling area 1100, in the document on

cost center accounting. We will now do the product-costing
configuration in controlling area 1100.
 2. Product Cost Planning

For doing the configuration we will use the following path on the
SAP application screen:-

Menu Path

SAP Menu  Tools  AcceleratedSAP  Customizing  SPRO -

Edit Project 

Product Cost Planning is a planning tool that helps you predict the
costs Incurred when you manufacture a product or provide a
service.

Organizations use it to:

• Set prices for the valuation of finished and semi finished

goods in the Materials Management application component

• Set prices for finished and semi finished goods in the Sales
and Distribution application component

• Calculate the cost of goods manufactured or the cost of

goods sold for the Profitability Analysis function in
Controlling

• Set a standard to measure production efficiency in Cost

Object Controlling

Product Cost Planning shows you:

• The cost composition of each product
• The value added in each manufacturing step
• The value added in each overhead process
You can also create an inventory cost estimate at the end of your
fiscal year to provide alternative valuations of your inventory for
balance sheet Purposes.

Other functions include reference and simulation costing, which

allow you to simulate the cost impact of changing one production
factor or modifying the amount of overhead allocated to a
product.
 2.1 Basic Settings for Material Costing

The company A Ltd for its plant 1100 requires the following
overheads:-

1) Material overhead

2) Production overhead

It should be calculated as follows:-

On materials 5 % material overhead should be calculated and on

Wages 4 % Production overhead should be calculated.

Let us go about configuring the costing sheet from steps below.

We will now see how to create a costing sheet for the purpose of
overhead calculation.
 2.2 Maintain Overhead Cost Elements

Menu Path

IMG  Controlling  Product Cost Controlling  Product Cost

Planning  Basic Settings for Material Costing  Overhead 
Maintain Overhead Cost Elements

Purpose of Configuration

To allocate overhead to products, you need to define overhead

cost elements.

The SAP system then posts the overheads to these overhead cost
elements.

The cost center is credited with the overhead cost element and
the product or the production order is debited with the overhead
cost element.

Let us now create secondary cost elements for overhead.

Create secondary cost elements of type 41 (overhead).

Update the following:-

Click on Save

Create another overhead cost element for production overheads

Click on Save
 2.3 Define Calculation Bases

Menu Path

IMG  Controlling  Product Cost Controlling  Product Cost

Planning  Basic Settings for Material Costing  Overhead 
Costing Sheet: Components  Define Calculation Bases

Purpose of Configuration

The calculation base determines to which cost elements overhead

is applied together.

We will define 2 bases on which overheads will be calculated:-

1) Materials
2) Wages

Proceed as follows:-

Click on and update the following:-

Click on Save

Select

Double click

Update

Click on and Update the following:-

The Raw material consumption is booked to cost elements

400000, 400013 and 400700. This is created as a cost element
group 11RMPM.
We update this as base for our calculation of overhead.

Click on Save

Select

Wages are booked under the primary cost element 420003 and
420506 and also wages allocation from other cost center is
allocated using secondary cost element 943201.Therefore we
specify this as base.

Double click and Update the following:-

Click on
Click on Save
 2.4 Define Percentage Overhead Rates

Menu Path

IMG  Controlling  Product Cost Controlling  Product Cost

Planning  Basic Settings for Material Costing  Overhead 
Costing Sheet: Components  Define Percentage Overhead Rates

Purpose of Configuration

We want to calculate 5 % overhead on Material and 2% on wages.

But the condition is that, it should be only calculated for plant
1100.

To fulfill the above requirement we need to select the

dependency overhead type/ plant. Thus the system will only
calculate overhead rate for plant 1100. In the Std. SAP system
there are quite a number of dependencies available such as plant,
order type, overhead type, overhead key, company code etc.

Here we can calculate Plan and actual overhead. Plan overhead

rate is required for the purpose of planning the cost of the
product (standard cost estimate). Actual overhead rate is required
for the purpose of charging it to the production order.

In this step we will create the overhead rate, attach the

dependency and define the overhead rate. Further we will also
define whether it is plan or actual.

Click on and update the following:-

Click on Save

Select

Double click

Click on
Overhead type – 1 is actual overhead rate

Overhead type – 2 is planned overhead rate

Click on Save

Click

Select

Double click

Click on and update the following

Click on

To maintain a new dependency the path is as follows:-

Menu Path

IMG  Controlling Cost Center Accounting  Actual Postings

Period-End Closing  Overhead  Costing Sheet: Components
 Extras: Dependencies / Condition Tables Define Condition
Tables/ Define Dependencies.

Create a new Condition table with table name as 999

You need to select fields Controlling area, Overhead type. Profit

center and plant.

Create a new dependency.

Create a new access sequence. In this access sequence you will

assign the condition table.

2.5 Define Quantity-Based Overhead Rates

Menu Path

IMG  Controlling  Product Cost Controlling  Product Cost

Planning  Basic Settings for Material Costing  Overhead 
Costing Sheet: Components  Define Quantity-Based Overhead
Rates

Purpose of Configuration

In addition to percentage-based overhead rates, you can also

define quantity-based overhead rates, for example, 100 USD per
tonne).

You can determine overhead rates in the plan and actual. Here
too you need to attach the dependency.

We will not configure a quantity overhead.

 2.6 Define Credits

Menu Path

IMG  Controlling  Product Cost Controlling  Product Cost

Planning  Basic Settings for Material Costing  Overhead 
Costing Sheet: Components  Define Credits

Purpose of Configuration

By defining the credit key you are crediting the cost center and
debiting the product or the production order. The credit on the
cost center happens with the overhead cost element which we
created earlier 1101101 Material overhead and 1101104
production overhead.

Here we attach the overhead cost center which is to be credited.

You can also define what percentage of the overhead is to be
allocated as fixed costs.
Therefore we will create 2 credit keys one for material overhead
and other for the production overhead.

Click on and update the following:-

Click on

Select

Double click

Update the following:-

Click on

We update the cost center which is to be credited using the

overhead cost element.

Click on

Select

Double click

Click on
Click on

This is just a small portion of the overhead and product costing covered to walk you
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 SAP Product Costing
Configuration
SAP R/3 ENTERPRISE ECC6
Published by Team of SAP Consultants at
SAPTOPJOBS
Visit us at www.sap-topjobs.com

Copyright 2009-11@SAPTOPJOBS

All rights reserved. No part of this publication may be reproduced,

stored in a retrieval system, or transmitted in any form, or by any
means electronic or mechanical including photocopying,
recording or any information storage and retrieval system without
permission in writing from SAPTOPJOBS.
Standard Cost Estimate

Standard cost estimate are created at the beginning of a fiscal year or a new season. The
standard cost estimate is then valid for the entire year or season. It is used to determine a
standard price for materials in this period.

The standard cost estimate will write the results of the cost estimate into the costing details
screen of the material master record as the future standard price once it is marked. This price is
then active for internal material valuation. For example, it can be used to valuate a material
components in the cost estimate.

Once the cost estimate is released, the system transfers the result of the standard cost estimate
into the material master record of the material as the standard price. This price is then active for
Financial Accounting and is used for valuation of the material until the next time a standard cost
estimate is released.

In this period, all transactions involving products produced in-house in the Logistics module are
valuated using the results of the standard cost estimate. If a material with standard price control
is delivered to stock, for example, inventories of this material are valuated with the standard
price determined by the standard cost estimate.

The standard prices calculated in the standard cost estimate applies only for materials with S
price control.

Cost Estimate with Quantitative Structure

The cost estimate is a tool for establishing prices for materials. It is used to calculate the costs of
goods manufactured and the costs of goods sold for each product unit.

In order to establish the cost estimate with quantity structure of a material, the bills of materials
and routing of the material must exists for the materials to be costed.

The cost estimate with quantity structure uses the material master data to determine the material
consumption and internal activities required to produce the product.

Costing calculates the cost of goods manufactured for each material made in-house in the BOM
structure.

The materials in a BOM are called BOM components, these can consist of a material without its
own BOM (material components), or a material with its own BOM (assembly). If the product
has a multilevel BOM, then the costs for the material components are calculated and taken into
account when the next highest assembly is costed. The structure of the BOM determines the
sequence in which the materials are costed. The BOM components with the largest low-level
code (that is, the material components) are costed first, then the BOM components with the next
low-level code and so on.
Costing can also determine the cost of goods manufactured for materials produced in another
plant if the two plants are assigned to the same controlling area and the company codes of the
plants use the same cost component structure. In this case, the structure of the cost component
split must be the same in both plants.

For raw materials, the system determines the procurement price using the entry in the material
master record. A cost component split is created automatically for the material costs. You can
add manually entered costs to the material costs by means of an additive cost estimate that
contains separate cost components. This enables you to include such costs as freight charges and
insurance costs with raw materials or stock transfer costs with semi-finished products. Other
reasons for adding manually entered costs to the material cost estimate include missing routings
or BOM components.

Normally, a multi-level production structure is costed using costing with a quantity structure.
The costs are rolled up automatically using the low-level codes.

• The materials in the low-level code with the largest number (such as raw materials) are
costed and the costs are assigned to cost components.
• The materials in the next highest low-level code (such as semi-finished materials) are
costed. The costs for the materials costed first are rolled up and become part of the
material costs of the next highest level.

This process is continued until the calculated costs of the highest material in the structure (such
as the finished product) contain the costs of goods manufactured for every material in the
structure.

Creating a cost estimate for a single material and its child parts with quantitative
structure
Procedure

• Transaction CK11
• Enter PPC1 (standard SAP variant - configuration transaction OKKN) as the costing
variant, material and plant. If you do not enter a lot size, the system uses the costing lot
size from the costing view of the material master record.
• Hit Enter
• The dialog box: Control Data appears
• Check the proposed costing dates in the dialog box and the transfer control ID. The
transfer control would determine whether the cost estimates of the child parts supplied by
other plants are to be recomputed or taken as its is without recomputation. Use Transfer
Control PC01 which would recompute.
• Press Enter and the system will costs the material.

Result

• The system creates and valuates the quantity structure and calculates overhead. You can
analyze and display the costing results.
 • After carrying out costing with quantity structure, you can see the costing results for the
header material (the highest material) in the BOM.
• Choose the desired view with costs -> disp.Cost components.
• Click Save (Note the standard cost is still NOT updated yet at this point.

Marking a standard cost estimate for a single material master and its child parts

• Transaction CK20
• Enter the Material, plant, future posting period and fiscal year. This period indicates the
"from" date.
• Click Save (Marking of standard cost estimate is being updated) is displayed.
• The results of the standard cost estimate are updated as the futured standard price in the
material master (accounting and costing view). Note that marking does not affect the
material stock value yet.

Releasing a standard cost estimate for a single Material Master and its child
parts.

• Transaction CK21
• Enter the Material and Valuation Area.
• Click Save
• The corresponding future standard prices are updated as the current standard prices in the
material master. How often you release a standard cost estimate depends on its planned
validity period. If stocks of materials exist, the stock value changes and a document is
created in Financial Accounting documenting the price change.
• The system post to the inventory account with offsetting entry posted to the price
difference account.

Costing Run Steps

• CK41 - Create costing run

Some Material

• CK43/CK60 - Selection of materials and display results of selection

• CK62 - Explode BOM
• goto Continue

All Material

• CK43/CK60 - Material field left blank and display results of selection

• goto Continue

Continue
Before this step you have to finished the step for either Some Material or All Material.
 • CK42 - Select the low-level code with the highest number
• CK64 - Perform costing run for that low-level code
• CK66 - Mark and review the results

After getting approval for costing results from costing controller, you can finally post the
cost estimate

• CK68 - Release of standard cost estimate - Repeat the process for the next low-level code
for All Material

If Error

• CKR1 - Delete cost estimate and start again.

Correcting the Cost Estimate

• CKR1 - Delete cost estimate

• Make necessary changes to BOM, material routing etc.

SOME material

• CK41 - Create costing run

• Repeat process start
• CK43/CK60 - Selection of materials and display result of selection
• CK62 - Explode BOM
• CK42 - Select the low-level code with the highest number
• CK64 - Perform costing run for that low-level code
• CK66 - Mark and review the results
• Get approval for costing results from the costing controller
• CK68 - Release of standard cost estimate
• Repeat the process for the next low-level code (goto Repeat process start)

ONE material

• CK11 - Perform single material cost estimate

• CK20 - Mark and review results
• CK21 - Release of standard cost estimate

Costing Run

Costing run is used to process mass data. The costing run enables you to cost more than one
material at the same time, either online or in the background. It reproduces the entire process of
costing with a quantity structure.

Process Flow Overview

Create costing run

 • Company code
• Posting parameters
• Costing variants
• Costing dates

Some material
Select specific assemblies for the costing run
Quantity structure determination for the selected assemblies

All materials
Select all assemblies for the costing run

After completing the steps for either Some material or All materials
Carry out costing run

Mark and release costing

The costing run involves separate steps, being the selection of materials for costing, determining
material components via the BOM explosion, and then carrying out costing level by level.

BOM explosion is only necessary if a complete selection of materials is not carried out, such as
the selection of finished products only.

Logs are generated for each step of the costing run, and can be printed out and saved in the
system. With Extras you can print the logs for selection and quantity structure determination, for
costing and for marking and release (online or background mode).

Creating a costing run

Procedure

• Transaction CK41
• Enter a name identifying the costing run (i.e. test x and the (i.e. XX.XX.XX) on which
the costing run is to be executed.
• Press Enter. This brings you to the general data for the costing run.
• Enter the necessary data and press Enter.
• The dialog box Costing Dates appears.
• Check the proposed data's and make any necessary changes. Press Enter. The release is
only possible within this period message is displayed. Press Enter.
• If costing across company codes has been activated in the Customizing for Product Cost
Planning, the system displays the controlling area in which existing cost estimates from
other company codes can be transferred.
• Specify the Update Parameters.
• Press Enter.
• Specify the Print Parameters.
• Press Enter and Save the costing run.
Selecting Materials for a costing run
Procedure

• Transaction CK60
• Goto -> Variants -> Get. Select the variant name.
• Enter a range of material numbers and plant. If the materials selected come from
different plants, leave the plant field blank.
• As a default value, the last costing run entered and its data are displayed. You can
change both as needed.
• Click the Copy button.
• To start the selection, choose Execute. The release is only possible message is displayed.
Press Enter.
• After the selection, a list screen appears with information on the costing run and data on
each material selected.
• To check all messages that occurred during selection, choose Extras -> Log
• Save the costing run.

Displaying the results of selection

Procedure

• Transaction CK43
• Enter the name and date of the costing run and press Enter.
• Before carrying out any further steps, choose Extras -> Log -> For Selection. The log
provides an overview of the results of the selection and the option to correct possible
errors before carrying out further steps.
• Choose the desired view with Goto.
• For example: Goto -> Material Overview.

Exploding BOMs for a costing run (only necessary if ALL materials are NOT
selected)
Procedure

• Transaction CK62
• Enter the name and date of the costing run.
• Choose Execute.
• The release is only possible message is displayed. Press Enter.
• Choose Settings -> Field selection to obtain further information on this overview.
• The dialog box List Field Selection appears. You can specify that
o information on special procurement is displayed
o information on the BOM is displayed
o the status of the selection is displayed
o the number of messages is displayed
• Choose Edit -> Sort to sort the list either by low-level code of by material number. To
view the system messages that were issued during the BOM explosion, choose Extras ->
Log.
• To save the materials selected under this costing run, choose Costing run -> Save.
Choose the selected materials or low-level codes for costing
Procedure

• Transaction CK42
• Enter the name and date of the costing run and press Enter
• Choose Goto -> Low-level code overview. The release is only possible message within
this period is displayed. Press Enter. This would set the materials in the "low-level
code" order.
• Mark the low-level codes or materials and choose For costing. (**Remember that the
lower low-level codes that is, the low-level codes with the highest numbers must be
costed first.)
• The system will display the number of low-level code(s) selected for cost estimate. Press
Enter.
• Save the costing run.
• Perform transaction CK64 to execute costing run contains that low-level code. Then save
the costing run.
• Perform transaction CK66 to mark the costing contains that low-level code. Review the
results and save.
• Perform transaction CK68 to release the costing run contains that low-level code.
• Repeat the process from step 2 to 9 for the next higher number of low-level code.

Executing a costing run

Procedure

• Transaction CK64
• Enter the name and date of the costing run.
• Choose Execute. Release is only possible within this period is displayed. Press Enter.
• When the costing run is finished, you come to the overview of the low-level codes.
• Select Materials and choose Goto -> Detail screen.
• The system displays the costs for the material as cost of goods manufactured, cost of
goods sold, inventory costs and so on.
• For detailed information on the costs, choose Costs -> Display cost components or
Itemization or Cost element itemization or Costed BOM.
• The system displays the costs for the material as cost of goods manufactured, cost of
goods sold, inventory costs and so on.
• For detailed information on the costs, choose Costs @ Display cost components or
Itemization or Cost element itemization or Costed BOM.
• Costing run -> Save.

Marking multiple standard cost estimates

Procedure

• Transaction CK66
• Enter the name and date of the costing run.
• Choose Execute. The release is only possible message is displayed. Press Enter.
• Choose Execute. The release is only possible message is displayed. Press Enter.
• Check the prices and save.
Releasing standard cost estimate
Procedure

• Transaction CK68
• Enter the name and date of the costing run.
• Choose Execute.
• Costing run -> Save.
• The results of the standard cost estimate are updated in the material master record as the
current standard price. At this time, the stock value of the material is changed and the
new standard price for valuating material movements is active.
• Make sure the status is FR for all. If not, call the consultant.

Deleting material cost estimates from the database

Procedure

• Transaction CKR1
• Enter a company code, plant, material number, costing variant, costing version, Interval
for validity form and Interval for validity to or overwrite them.
• Select the Current std cost estimates.
• Specify whether the deletion should be simulated (Test run) or actually carried out
(Reorganization). Set the With log indicator if desired.
• Choose Execute.
• Save. The system issues a message indicating the number of cost estimates deleted.

Status Management in costing

The costing status provides the following information:

• informs you about the current processing status of the cost estimate
• informs you about errors in the cost estimate
• prevents incorrect data from being passed on
• prevents a cost estimate from being released again

The status is set for each low-level code. This means that you can release the costing results for
specific low-level codes even though the costing run itself has the status KF.

The following costing status can be set by the system:

Status Meaning

• ER Opened
• SE Selected without errors
• SF Selected with errors
• KA Costed without errors
• KF Costed with erros
• VO Marked without errors
• VF Released with errors
• FR Released without errors
• FF Released with errors
• FM Release through material ledger closing