SAP S/4 HANA CO -Complete End to End Scenarios of "COSTING"

Added new recording session of SAP CO S4 HANA -Complete End to End Scenarios of Cost center accounting, Product Costing, Material Leger and COPA ( Account based-Margin ANLYSIS)

The Product Costing module allows organizations to determine the production costs of products. This is integral for controlling and for assessing profitability. Material Ledger enables actual costing and supports multiple valuations in parallel.

Product Costing Techniques:

1. Product costing by order (Make to Stock): Costs are determined based on manufacturing orders. It’s suitable for non-repetitive production.

2. Product costing by Sales order (Make to Order): Costing is done for specific sales orders. Typically used for customized products.

3. Product costing with Sales order controlling vaulted stock with sale order controlling: When both anticipated stock and actual sales order-driven stock exist.

4. Product costing with sales order controlling non-vaulted stock with sale order controlling: For products produced directly against sales orders without anticipation.

5. Product costing by period: Periodic costing for products irrespective of orders.

6. Repetitive manufacturing without reporting points consideration: Costs for products that are manufactured repetitively and without specific checkpoints.

7. Repetitive manufacturing with reporting points (work in process) consideration: Costs are captured at different stages or checkpoints of the production process.

8. Joint Production Process: Multiple main products are derived from one production order.

9. CO-Product costing process and By Product Costing Process: Co-products are main products with similar value, whereas by-products have minor value compared to the main product.

10. Mixed Costing process- Split Valuation: When a material can be procured/manufactured in more than one way.

11. Sub-Contracting, External Operations Product costing process: Costs when a part of the manufacturing process is subcontracted to external suppliers.

12. Cross plants –Special Procurement product costing: Costs are determined when procuring from a different plant within the same company.

13. Additives cost estimation: The costs of additive materials in the manufacturing process.

SAP CO S/4 HANA -Material Ledger/Actual Costing

1. Multiple Currencies:

   • Company Code Currency: Primary currency for a company code.

   • Group Currency: Consolidation currency.

   • Index based Currency: Adjustments for inflation or other index-based factors.

2. Multiple Valuations:

   • Legal Valuation: As per local regulations.

   • Group Valuation: Consolidated valuation.

   • Profit Center Valuation: Based on profit center reporting needs.

3. Transfer pricing:

   • Inter Company: Pricing between different company codes.

   • Intra Company: Pricing within the same company code.

4. Work in process functionalities to Actual Costing: Determines the cost of semi-finished goods.

5. Physical Inventory count integrated with Material Ledger/Actual Costing: Actual stock valuation as per physical count.

6. Distribution Usage variances: The differences between planned and actual usage of materials and activity types in production.

7. Activity Types: Quantitative measures of services provided by a cost center. Adjustments made for variances between planned and actual activity provided.

8. Material Ledger- Actual Costing Execution and CKM3: The CKM3 transaction provides a detailed material price analysis showing the evolution of material prices.

This overview provides a detailed but condensed understanding of the topics related to SAP CO: S/4 HANA 2021 in the context of Product Costing and Material Ledger. Each of these topics can further be elaborated into detailed processes, configurations, and examples based on real-time scenarios.

Variance analysis is a critical component of controlling in the manufacturing sector, as it highlights the deviations between the planned (or standard) and the actual outcomes, which then informs management decisions.

Let’s delve into the nuances of these variance categories for a better understanding:

Input Side Variances:

1. Input Price Variance:

This is the difference between the standard cost and the actual cost of inputs.

For instance, if a company planned to purchase raw material at 10 per unit but actually purchased it at 11 per unit, this leads to a price variance.

2. Input Quantity Variance:

It’s the difference between the standard quantity and the actual quantity used.

If a company planned to use 50 units of a raw material but ended up using 52 units, this will result in a quantity variance.

3. Resource-Usage Variance:

This arises when alternative resources are used instead of the ones originally planned.

• For instance, using a higher-grade material instead of a standard one can lead to this variance. It’s essentially the difference in cost between the actual resource used and the planned one.

4. Remaining Input Variance:

Any variance that cannot be attributed to the previously mentioned categories falls under this. Overhead rate changes during the production cycle are common culprits.

Output Side Variances:

1. Output Price Variance:

This arises from the difference between the actual selling price and the standard selling price of the finished product.

• 2. Mixed Price Variance:

In scenarios where materials are valuated using a mixed cost estimate, any difference between the standard cost (derived from a standard mix) and the actual cost (resulting from an actual mix) leads to this variance.

3. Lot Size Variance:

Differences between the actual batch size or lot size used in manufacturing and the lot size considered during standard costing lead to this variance. This is crucial because certain costs might be fixed per batch, and deviations in batch sizes can lead to cost discrepancies.

4. Remaining Variance:

This is a catch-all category for variances that don’t fit into any other specified category. A common reason for such a variance is the absence of a target cost for the material, which can arise if a standard cost estimate is unavailable or if there’s been no goods receipt against a production order.

Scrap Variances:

In manufacturing, scrap refers to the portion of a raw material or semi-finished goods that, due to defects or inefficiencies during the production process, doesn’t end up as a part of the final product. Understanding the sources and reasons for scrap is vital to optimize production processes, minimize waste, and control costs. Scrap variances help pinpoint where in the process the wastage is happening and how it might be minimized.

1. Assembly Scrap:

Definition:

Assembly scrap pertains to the waste or defects that occur during the main assembly process. This is when different components or materials are being assembled to form the final product or a significant subassembly.

2. Operation Scrap:

Definition:

Operation scrap refers to the waste that happens at a specific operation or stage in the manufacturing process, well before the assembly.

3. Component Scrap:

Definition:

Component scrap is related to the waste of specific components or parts used in the production process. This isn’t necessarily about a stage in the process but is about defective parts.

In Conclusion: Variance analysis is crucial in manufacturing to pinpoint areas of inefficiency or unforeseen changes. By understanding where and why variances occur, companies can adjust their operations accordingly, resulting in better cost management and profitability. However, the key is not just to identify but also to act upon these variances by taking corrective measures

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