Product cost calculation (CO-PC) and event based costing
Efficient product cost calculation in SAP
For every company, the production and procurement costs of products play a central role, whether for a correct and audit-proof inventory valuation or for the determination of margins and returns on sales. In addition, product cost planning enables an evaluation of production and sales orders in plan and actual, as well as for future orders in LTP processes. In the context of Cost Object Controlling (CCC), it is the basis for determining target and actual variances in production as well as for determining the WiP (work in progress) or the PoC (percentage of completion) for IFRS valuations.
Functions of the product cost calculation
- Determination of product costs for single and multi-stage production processes
- Calculation of standard prices for inventory valuation for tax purposes
- Historical cost structures for variance calculation and profitability analysis
- Separate costing for inventory prices, transfer prices or simulations
- Costing in series production with product cost collectors
- Cross-plant and cross-country costing, joint production and subcontracting
- Customer order costing of make-to-order orders or preliminary costing of make-to-stock orders
- Calculation of process costs with templates (ABC Costing)
- Calculation of manufacturing costs and/or cost of goods sold (with additive costs)
Functions of cost object accounting
During the month-end closing, the functionalities of cost object accounting are performed. During the month, certain key figures (such as WiP and variances) are not yet available:
- Determination of target and actual variances of production orders (process orders, product cost collectors, sales orders) as part of the month-end closing process
- Determination and posting of WiP (work in progress) and PoC (percentage of completion)
- Settlement of orders and posting of variances stratified by variance categories
- Allocation of production cost center activities and overhead costs
Event-based costing is a highly interesting development for product cost controlling in companies with a large number of production orders. WiP and variances can already be monitored and analyzed in the current month in order to accelerate the month-end closing and to be able to correct errors promptly. We are happy to support you in the implementation of product costing in SAP.
Event based product costing in S/4HANA
Due to the close interlocking of postings in S/4HANA in the ACDOCA table ("Single Source of Truth") and the mandatory use of the Material Ledger, it is now no longer necessary to wait for the month-end closing to be able to determine certain key figures such as variances or WiP as so-called "Event Based Cost".
Based on the material movements and confirmations in production (Goods issues, Goods receipts etc.) postings can be generated and evaluated. In this way, errors or inconsistencies that occur during the month can already be evaluated and processed in order to accelerate the month-end closing. FIORI apps are available for execution and evaluation.
- Event based WiP
- Event based variances
- Target cost „on-the-fly“
Currently, this functionality is available for production orders in make-to-order (MTO) or make-to-stock (MTS) processes based on product cost planning.
A ledger-specific process and mapping of event-based-variances in joint production is under development.
