Product Costing in SAP

SAP CO-PC module is one of the most important SAP components for the manufacturing companies. The main purpose of CO-PC is to calculate and show costs appearing during production process. When costing with quantity structure is performed, the system uses master data from Logistics. Product cost planning function costs individual products precisely and provides various, flexible and quick analysis options.

In principle, the data for CO-PC are obtained from the PP module, through Bill of Materials and Master recipes.

There are three necessary preconditions for a good and reliable operation of the CO-PC modules:

  • properly defined master data structure (BOMs, Resources and Master Recipes)
  • correctly defined CO structure (Cost centers and Profit centers)
  • correctly defined structural parameters related to the way of monitoring costs.

PP master data necessary for Product Costing:

  • PP parameters in Material Master Data
  • PP Resources
  • Master Recipes with Bill of Materials

CO-PC master data necessary for Product Costing:

  • FI-CO parameters in Material Master Data
  • Activity Types
  • Primary Cost Elements
  • Secondary Cost Elements

Structural parameters required for Product Costing define a method of calculating and analyzing production costs. There are nine major structural parameters:

  • Cost Components Structure
  • Production Overhead Costing Sheet
  • Costing Type
  • Costing Variant
  • Valuation Variant
  • WIP costs
  • Production Variances
  • Cost Categories (Plan, Actual, Target)
  • Settlement Profile

CO-PC module covers an area of management of production costs, which technically covers three areas of work:

  • CO-PC-PCP    ...      Product Cost Planning
  • CO-PC-OBJ    ...      Cost object Controlling
  • CO-PC-IS      ...      Product Cost Info System

Estimated cost of production is done prior to the start of production and as a result is a cost of making products and semi-finished products. The price comes on the basis of product structure, price of materials, the cost of activities and correct overhead keys, and cost analysis is done using the Cost components structure. The calculated price can be released to material master once per month. The difference compared to the previous price is posted to the special FI account.

Cost of PP orders are displayed as planned, actual and target costs:

  • Planned costs are calculated when a PP order is created
  • Actual costs are the result of the posting of materials and activities
  • Target costs are calculated as part of period closing procedure and represent normative costs for the actual quantity produced.

During the period closing, the system calculates the Variances or WIP (Work in Progress), depending on whether the PP orders are completed or not:

  • for all completed PP orders system calculates Production variances
  • for all uncompleted PP orders system calculates WIP (Work In Progress)

The Product Cost info system contains two types of production reports:

  • Reports on current costs of PP orders
  • Drill-down reports based on specific data collection process after PP orders are completed

Reports on current costs include data on the basis of production posting

  • The value of the quantities produced
  • The value of the consumed materials
  • Production Variances

Drill-down reports are based on a hierarchical basis. For them it is necessary to use specific tools for collecting data from PP orders after the completion of the closing period procedure. The collected data are analyzed on the basis of pre-defined data hierarchy.