Internal order needs to be restricted for specific postings since some internal order should be posted directly from MM, SD or any other module. These Internal Order should not be posed in FI or CO directly.

Requirement can be achieved with slandered customizing by creating status profile, order type and order .

Below shown are the customization and the results for the same.

Create Status profile– New status profile needs to be created at following path: SPRO ==> IMG==>Controlling ==>Internal Order==>Order Master Data ==>Status Management ==>Define Status Profile

Click on create button

Click on object type to select Internal Order

Check on Internal Order

Create Status – Provide Status name in highlighted field.

Double click on test to select Business Transactions and Check the radio button (Forbidden) for the required Business Transactions:

Create Order Type - New order type can be created at following path: SPRO ==>IMG ==>Controlling ==>Internal Order ==>Order Master Data ==>Define Order Types

  Click on Define Order Types and Click on New Entries

Provide Status Profile, which was created earlier in status profile field.

Create Order – New order can be created at following path: SAP Menu ==>Accounting ==>Controlling ==>Internal Order ==>Master Data ==>Special Functions ==> Create or T-Code KO01

Provide Input details for Assignments tab

Under Control Data tab click on Set/reset button. Check the box, which is highlighted in red color.

User status will get updated and IO is created

Results

Post FI document with created IO – System will not allow to post document for the created Internal Order:

Planning for created IO – System will give error message if planning is carried out for the created IO.

Conclusion

Postings can be controlled for the Internal Order by Business Transactions customization.

There is a lot of forum question answers and content available in SCN about Standard Costing

Note-This is a beginner's and basic guide to understand cost estimate and various settings behind it.

This document is intended to explain the cost flows to a standard cost estimate. Explaining various settings in background.  I will try to explain this from backward from Cost estimate to configuration. This will answer some basic questions like Material Cost, Overhead Cost, Labor etc. in a standard cost.

When you take a look at a material cost estimate what you will understand the Quantity Structure, Valuation, Costing Dates etc.

• Standard cost of a material looks like in T-Code- CK13n (you can view this from costing-2 view in material master too T-Code-MM03.)
• I will try to walk through these 6 tabs below explaining basic configurations and data flows from different configuration to Standard Cost estimate.

     Screenshot-1

• For our analysis purpose I have selected standard layout 1SAP02-Costing items (overview)
• there are several  layout  available in standard SAP and user can define their own too.

     Screenshot-2

Screenshot-3

1-Costing Data-

It contains data like Costing variant, Costing Version, Lot Size and Transfer Control. Lets talk about Costing Messages and Costing status later on.

Screenshot -4

• Costing variant-Configuration Costing Variant in T-code OKKN- (Will  cover in more detailed way in part 2.)

-Assign various Control parameters like Costing Type, Valuation variant, Date Control QTY structure Control, Transfer Control etc.

-Maintain parameters different Tabs like Control, Qty Structure, Addictive Cost, Assignment and Misc.

Screenshot 5

• Costing Version configuration using  T CODE- OKYD

-Number that serves to differentiate between cost estimates for the same material.

     Screenshot 6

• Lot Size

- The costing lot size in the material master record is usually used as a basis for costing all materials, however one can manually change the lot size during cost estimate.

• Transfer Control-Configure in T-code OKKM usually used the standard.

Screenshot 7

- This controls how costing with quantity structure searches for existing cost estimates when existing costing data are transferred to another cost estimate. In this example we assigned PC02 in TCODE OKKN.

2-Costing Dates-we will learn more about date control in Costing variant

     Screenshot 8

-Costing Date from -Date from which the cost estimate is valid.

-Costing Date to- This date determines the date up to which the cost estimate is valid

-Qty Structure Date-Date with which the quantity structure is selected for the cost estimate with quantity structure.

-Valuation Date-Date on which the materials and activities in a cost estimate are valuated.

3-Qty Structure-It contains BOM and Routing data. ( Usually PP functionality)

Screenshot 9

• Bill Of Material (BOM)- T CODE- SET up CS01 , To view T-code -CS03

Screenshot 10

If you go back and refer my screenshot 3 the detailed cost (M) comes from this settings.

Note- we will have to do cost component settings too will cover the point in net part.

• Routings- Create Routings T-Cod-CA01 ( PP functionality) to view CA03

- A routing shows operations in a sequence. This form the basis for

Lead time scheduling. Product costing, capacity planning, Refer screenshot 3 Cost Internal Activity (E) comes from this settings. We will understand more detail in my next part about assigning work center, activity and activity planning.

Screenshot 11

4- Valuation- It contains the currency, Costing sheet and Overhead key.

T CODE-KZS2-Creating and maintaining Costing Sheet,

T CODE-KOOK-Defining and changing Overhead key

Screenshot 12

if you refer to screenshot 3 Overhead cost (G) flows from this settings from costing sheet and overhead key.

• Costing Sheet-It controls the calculation of Overhead basically we use one costing sheet for each object for which system is to determine overhead costs. ( will see more detail in my next part)

• The Overhead Key-The overhead key is used to determine order-specific or material-related overhead rates. The overhead amounts depend on the plant and the overhead key. The overhead depends primarily on the overhead key. If an overhead key is not maintained for the material or the order, overhead is to be determined in relation to the plant.

After defining a costing sheet that points to two condition tables. In the first table, the overhead amount depends on the overhead key. In the second table, the overhead amount depends on the plant. An access sequence determines which conditions have priority.

5- HISTORY- It contains the user and costing run date data.

Screenshot 13

Cost By/Marked By/released By- The user names who performed respective costing run task.

Some large companies have different person to mark the cost and different person to release the cost as it rectifies the human errors if any. But in my experience i have seen mostly it is performed by the same person.

Costing run - usually this data updated when we use T-code CK40n to do standard costing in case of individual material costing using CK11n this field will not populate. So we can always go and check that costing run data to verify the settings at that point of time.

6-Costs-Baiscally it is summarization and cost component view

TCODE-OKTZ setting up cost component Structure (we will see in detail in part 2 of this document)

• If you refer back screenshot 8 breaking out cost like overhead, labor and material based on these settings here.In Product Cost Controlling, the cost component structure determines how the results of material costing are updated. The cost component structure groups the costs for each material according to cost component (such as material costs, internal activities, external activities, and overhead). If the material is used in the production of another material, the cost component split (which breaks down the costs according to material costs, internal activities, external activities, overhead, and so forth) remains in the system when the costs are rolled up

Screenshot 14

Error Log- Identifies the messages if costed with error or without error.

Intention of creating this document is to reach out to the beginners and those who wanted to know and understand the flow of Standard Costing. i will update the document as n when some more points needs to be included .

This is my first document and I should thank Ajay , Forum members,and SCN  SAP ERP Financials - Controlling

I was nervous to put together the basics in a document and publish it in SCN.  I will continue edit it for improvement.

The next part of document will update the more detailed configuration and steps to understand Basics of Standard costing

Refer to next part here http://scn.sap.com/docs/DOC-49167

Best Regards

Hrusikesh Dalai

This document is in continuation of my first document Basics of SAP Standard Cost estimate- Understanding the flow of cost settings-Part 1  http://scn.sap.com/docs/DOC-48908. This is basic and structural way of documenting the steps involved in defining Costing Variant.

This document explains the costing Variant configuration and components assigned to costing variant like Valuation variant, Qty structure Control, Transfer Control and Assignments. originally i thought of writing only 2 parts to complete it but it seems it will need few more parts to complete.This document is intended to explain the cost flows to a standard cost estimate. Explaining various settings in background as previous part.

• Costing Variant

T CODE OKKN- Define Costing variant and name it. For analysis purpose we are taking PPC1.

Screenshot 1

Then double click on PPC1 and configure other parameters.

Screenshot 2

Now let's understand each of these parameters and its assignment..

• Control

1-Costing type- The costing type enables you to specify the purpose of a cost estimate.

Click on create Costing type n existing or create a new one, or define it using T-code OKKI

In Save parameter tab selec Start with Period ( Most commonly used),

Screenshot 3

In Price Update tab select Standard price. The reason we select standard price because we want to calculate standard cost.

Screenshot 4

2-Valuation variant- T CODE OKK4

This is most important part of configuration, We will understand the importance of Different tabs.

For  Material valuation,Internal Activity,Sub-Contracting, Overhead and Misc.

Screenshot 5

If you want to use different valuation strategies or different overhead rates in plants that belong to the same company code, you can define plant-specific valuation variants by assigning a valuation variant to a plant. Choose the push button Valuation variant/plant. If you don't do this, the valuation variants apply to all your plants.

Here I have created a Valuation variant in a plant then most important part comes is Material valuation

Here we define how do we wanted our Material to be valuated Strategy Sequence. The one above used is most commonly used however it can be modified according to Business requirement.

For material valuation, you can choose up to five (5) strategies for each valuation variant.

-Planned price-According Planned price in Costing 2 tab of Material master (MM03 view)

During cost run or standard costing if this has maintained the system will consider this value first.

-In case the system did not find price in priority 1 , It goes to priority 2 Valuation Price accordingly to Price control in Material master, Costing 2 tab (MM03 view)

-L Price from Purchasing Info Record-This one used in case of outside buy or sub contract materials. And for this we also maintain a sub sequence that too in Sequence wise.

Explore more options in TCODE OKK4 and understand each options and its usage.

Internal Activity Here you define the sequence in which the system searches for prices in activity type planning or actual activity price calculation in Cost Center Accounting or Activity-Based Costing to valuate the utilized activity types and business processes. You also specify which plan/actual version is used.

Screenshot 6

For activity types/processes, you can choose up to three (3) activity prices for each valuation variant.

In the above example I have selected 1 planned price for the period option as per planning data in Cost center planning/ activity planning (TCODE-KP26/KP06 We will see more in next document Part 3)

Subcontracting Here you define the sequence in which the system searches for prices in the purchasing info record. In purchasing, the quota arrangements are used to create a mixed price for materials that are manufactured with external vendors with parts provided by the customer. You can specify whether the quota of the individual vendors that are entered in the list for the material to be processed should be determined through the planned quota arrangement or the actual quota arrangement.

For subcontracting, you can choose up to three (3) strategies for each valuation variant

Screenshot 7

I have selected 3 Net Quotation price from Info record where as there is 8 other options out there which you can select according to your business need. Quotation in Purchasing i have selected Actual Quota Arrangement you have an option of Planning Quota Arrangement as well to select as per business need.

External Processing-Here you define the sequence in which the system searches for prices in the purchasing info record or routing operation for valuation of the external activities

Screenshot 8

I have selected Net purchase order price here however for external processing, you can choose up to three (3) strategies for each valuation variant. Based on Business requirement you can select priorities amongst 9 Strategies available in standard SAP.

Overhead Costs

You can link the valuation variant for definition of overhead to a costing sheet. You can also enter a costing sheet for the allocation of overhead to raw materials, if you want to use specific overhead conditions for raw materials.

If you want to differentiate overhead application according to material groups, you must have defined overhead groups (T CODE OKZ2) and made the necessary settings for the costing sheet in the step Define costing sheet (T CODE KZA1- I will explain that in My Next Document). Here in the example I liked a Costing sheet for our analysis purpose.

You can also specify whether overhead is calculated for subcontracted materials in material costing.

Miscellaneous-Price Factors

Screenshot 9

If you want to use the valuation variant for inventory costing, you can link it with price factors.

Specify whether the factors of the relevancy to costing indicator should be valid for all valuation variants or only for particular valuation variants.

If you enter three plus signs (+++) as the valuation variant, the factors are valid for all valuation variants that do not have specific entries. I have selected this option for our analysis purpose

If you specify a particular valuation variant, the system uses the associated relevancy to costing indicator and the associated factors. Enter a relevancy to costing indicator for each line. Enter a factor for the fixed costs and a factor for the variable costs.

3-Date Control

Key that controls the dates for material cost estimates.

For example you can use date control to define the day for selecting the quantity structure when costing with a quantity structure

Screenshot 10

When you checked manual entry that means during cost estimate you can manually change the date according to your requirement.

4-Qty Structure Control-

You can use the quantity structure control to specify how the system selects a bill of material and a routing for the material to be costed.

You define the quantity structure control in Customizing for Product Cost Planning. The quantity structure control can apply to either a specific plant or to all plants. You enter the quantity structure control in the costing variant. When the cost estimate is created, the system selects the quantity structure control ID through the costing variant.

When you create a cost estimate for a material, you always use a costing variant. This variant is the link between the cost estimate and the quantity structure control.

Screenshot 11

I have selected BOM application PC01 and selection ID 05 (TCODE OS30 define BOM Application, A PP Functionality)

Screenshot 12

The BOM application controls the following:

The order of priority of the BOM usages (selection ID), When a BOM is required to embrace various enterprise areas (in other words, it has several BOM usages), you can determine which usage will be selected by the system first by using a selection ID.

The priority of an alternative BOM for a specific multiple BOM, You can control which alternative BOM the system selects as of a certain date for a specific material, taking into account the plant and the BOM usage. You can use the application to determine whether the system takes this specification into account or ignores it.

Whether the system includes only those BOMs with a status containing particular status indicators

An alternative BOM is only exploded if the BOM status contains the indicator required in the application.

You can check the BOM application and the parameters that are linked to it in Customizing for Product Cost Planning.

I have selected Routing 01 ( TCODE OPEB can be used to define automatic selection, A PP functionality)

Screenshot 13

The routing selection ID determines how the system selects a routing. You can define several priorities. You assign selection criteria (task list type, task list usage, and task list status) to each of these priorities.

The routing that corresponds to the selection criteria with the highest selection priority is selected. If, however, no alternative routing can be found, the system continues searching using the selection criteria of the next selection priority.

When determining the BOM and routing, the system also checks, Whether the BOM and the routing are valid on the quantity structure date (refer date Control screenshot 10). Whether the lot size in the BOM and in the routing are the same as the costing lot size.

4-Transfer Control-

In this step you define parameters for partial costing. You use partial costing to prevent the system from creating a new cost estimate for a material when costing data already exist. Instead, the existing costing data is simply transferred into the new cost estimate. This improves performance.

Screenshot 14

Single-Plant Transfer -If cost estimates for certain materials already exist in the individual levels of the BOM, they are not recosted. Rather, the existing costing data is transferred into the cost estimate in accordance with the transfer control.

If you always want to recost, choose the transfer control No transfer.

Cross-Plant Transfer-The special procurement types are used for material cost estimates:

Transfer from other plant, Withdrawal in other plant, Production in other plant

Strategy Sequences for Single-Plant and Cross-Plant Transfer-You can define up to three strategies for single-plant transfer and three strategies for cross-plant transfer. The strategy sequence determines the order in which the system searches for costing data. If the system cannot select a cost estimate even after reaching the end of the strategy sequence, it explodes the BOM of the material and creates a new cost estimate.

• Qty Struct.-

Pass on Lot Size- Controls whether the system determines the costing lot size using the lot size of the highest material in the BOM and the input quantities of the components.

1) Do not pass on lot size

If this indicator is not selected, the materials further down in the structure are costed in accordance with the lot size in the costing view of the material master record. When the materials in the next-highest costing level are costed, the costing results of the semifinished materials are converted to the lot size of the finished material to calculate the material costs for the finished product.

2) Pass on lot size only with individual requirement

In the MRP view of the material master record, you can specify that a material is planned as an individual requirement. If such a material is added to another material, costing uses the lot size of the highest material.

3) Always pass on lot size

Here, the costs for all the materials in a multi-level BOM are calculated using the costing lot size of the highest material. This function is used principally in sales order costing.

Screenshot 15

Ignore Product Cost Estimate without Quantity Structure-

Determines whether a cost estimate with quantity structure can access data that was produced by a cost estimate without quantity structure

You set this indicator if you do not want to work with a cost estimate without quantity structure.

If this indicator is set, the system will ignore data produced by a cost estimate without quantity structure when selecting the BOM as well as when costing. Instead, the system will attempt to calculate the costs of manufacturing the material using an existing BOM or an existing operation.

In the costing view of the material master record, you can use the With quantity structure indicator to specify that the material should be costed either with or without a quantity structure. If the Ignore cost estimate w/o qty structure indicator in the costing variant is set, the system will ignore the entry in the material master record.

• Addictive Cost

You use additive costing to add costs manually to a material cost estimate when they cannot be calculated by the system. Examples of such costs are freight charges, insurance costs, stock transfer costs, incomplete or changed BOMs, and routings.

As a rule, costing calculates the costs of a material on the basis of the quantity structure. This type of cost estimate is performed automatically by the system. However, you can also manually enter estimated values for costs that cannot be calculated by the system. This allows you to add costs to a cost estimate that was calculated automatically.

Screenshot 16

When you cost materials, the system determines the BOM for the material, and selects a price for the valuation of the material components through the valuation variant. If you set the Incl. additive costs indicator in the valuation variant, the system looks for any existing additive cost estimates for the material. The system adds the costs entered manually to the costs calculated by the system. The costs in the automatic cost estimate and the additive cost estimate are added together for each cost component.

• Update

Screenshot 17

Update Allowed- Indicator that determines whether a cost estimate can be saved.

Dependencies

Since the cost estimate must be saved if the costing results are to be used further, you must set this indicator.

Examples of further use of the costing results

1. Update in the price fields of the material master:

As the standard price: the results of the standard cost estimate

As the tax or commercial law price: the results of the inventory cost estimate

As special planned prices 1,2,3: the results of all cost estimates

1. Use of the costing results in Cost Object Controlling for:

Variance calculation

WIP calculation

Results analysis

• Assignments-We will know more about Cost Component Structure in my next part, I have already explained in my first part about costing version.

Screenshot 18

Cost component Structure Specifies which costs are contained in the cost component split. You can use the cost component structure to specify that certain costs

Remain visible in the cost estimate are passed on to Profitability Analysis.

• MISC.-Parameters for Error Management

Controls how messages (information messages, warning messages, and error messages) are collected within an application.

Screenshot 19

Online Messages-The messages are issued individually from the status bar. The log function is inactive in the cost estimate.

Messages logged and saved, mail inactive ,The messages are collected in a log, which can be saved. The messages cannot be sent.

Messages logged and saved, mail active, The messages are collected in a log, which can be saved. The messages can be sent to the person responsible for correcting the error.Messages logged, saving not possible, mail inactive, The messages are collected in a log, which can be processed online, but not saved.

Note

To be able to use a costing variant for the costing run, you must save the log.

This is a long Document i tried to capture each and every aspects of Costing variant. We will see some more configuration and explanation about it in my Next Part. I will try to close this document series in my next part if its too lengthy then i will try to put together a separate document.

Intention of creating this document is to reach out to the newbies and beginners and those who wanted to know and understand the flow of Standard Costing. i will update the document as n when some more points needs to be included or any suggestion from Experts.

Refer to next Document here-http://scn.sap.com/docs/DOC-49425-Basics of Standard Costing - Understanding the Cost Component Structure-Part 3

Refer to previous document here-http://scn.sap.com/docs/DOC-48908- Basics of SAP Standard Cost estimate- Understanding the flow of cost settings-Part 1

Best Regards

Hrusikesh Dalai

This document is in continuation of my second document http://scn.sap.com/docs/DOC-49167 -Basics of SAP Standard Cost estimate- understanding costing variant-Part 2 and 3rd in the series

This document explains the Cost Component Structure (CCS) and components assigned to CCS.  Explaining various settings in background as previous part.

Cost Component Structure (CCS)

The cost component structure determines how the results of material costing are updated. The cost component structure groups the costs for each material according to cost component (such as material costs, internal activities, external activities, and overhead). If the material is used in the production of another material, the cost component split (which breaks down the costs according to material costs, internal activities, external activities, overhead, and so forth) remains in the system when the costs are rolled up.

In the cost component split, you also define the following for material costing:

• Which part of the costs are fixed costs
• Which costs are costs of goods manufactured and what are sales and administration costs
• Which costs are relevant for stock valuation, commercial inventory valuation and tax inventory valuation
• When the cost component structure is assigned to the organizational units, you can specify that two cost component splits are created:

Main cost component split
This is the principal cost component split, meaning that it is used in the standard cost estimate, which can be used to update the material master. The main cost component split can be a cost component split for cost of goods manufactured or a primary cost component split.

Auxiliary cost component split
this can exist in addition to the main cost component split, and is not used in the standard cost estimate. It can be used for analysis purposes, in that it can be displayed with the cost estimate and passed on to Profitability Analysis.

.

Step 1 - T Code OKTZ

Screenshot 1

I have created Z1 and Z2 CCS for our analysis purpose. You can use two cost comp structure for reporting purpose and different reporting need.

Material cost estimates are created in the Product Cost Planning component. Sales order cost estimates and order BOM cost estimates are created in Product Cost by Sales Order component. The cost components separate the results of a cost estimate into raw materials, material overhead, external activities, setup costs, machine costs, labor costs, production costs, and other costs.

• Display the cost components in the cost estimate

  T code ck13- view of Cost estimate Cost element and cost component like Mat, Labor, OH etc.

                         Screenshot 2

The above screen shows the distribution of cost as per the Cost component structure

T-code OKTZ

In Cost Center Accounting, the cost component structure determines how the results of the activity price calculation are updated. The cost component structure groups the costs for each activity type of the cost center according to cost components (such as material costs and labor costs). If an internal activity allocation is carried out, the cost component split (which breaks down the costs according to material, labor costs, and so forth) is retained at cost rollup.

If the cost component split is not to be retained, you can create a switching structure for the cost component structure for Cost Center Accounting. In the switching structure, you specify which sender cost component goes into which receiver cost component

See below

     Screenshot 3

From screenshot 2 you will notice there is a Column called cost element. We get those from settings in Cost component structure setting by assigning cost elements for respective cost component.

     Screenshot 4

Different Settings in Cost component Structure in see below.

Control

Cost Share- which includes Variable, Fixed and variable Cost

Indicator for Roll up Cost Component

This indicator determines whether the costing results of a cost component are rolled up into the next-highest costing level (cost roll up).

You can specify which cost components are rolled up into the next-highest costing level according to the criteria specific to your organization.

Example

If the sales and administration costs and the cost of goods manufactured are to be costed simultaneously in a costing level, you can proceed as follows:

• You set this indicator for the cost components identified as the cost of goods manufactured. These costs are rolled up into the next-highest costing level.
• You do not set this indicator for the cost components identified as sales and administration costs. These costs remain on the costing level on which they were originally calculated.

     Screenshot 5

Also the filter criteria for itemization are important for example anything which we wanted for statistically analysis purpose we can check not relevant for inventory valuation.Some examples below shows based on the settings how the result will affect. Below screen you will see the cost element separated by the Material, Labor and Overhead as we defined in CCS.

Cost estimate itemization view (T CODE-CK13n)

     Screenshot 6

Target/Actual Comparison: Cumulative report (T CODE- KKO0), there is additional configuration required in OKKN. You can build your own report using report painter too.The cost components we defined in CCS will flow into these reports based on our section in Report painter.

Screenshot 7

In this document i tried to explain in a simple manner the use of cost component structure. This is a basic and beginners understanding of cost component structure. In my Next series of documents i will try explaining Costing Sheet,Activity Planning,and Summary of Standard Costing and its integration with production Planning.

Refer next document here-

http://scn.sap.com/docs/DOC-49880- Basics of Standard Costing-Understanding Overhead cost Flow.

Refer to previous Document here-

http://scn.sap.com/docs/DOC-49167 -Basics of SAP Standard Cost estimate- understanding costing variant-Part 2

http://scn.sap.com/docs/DOC-48908- Basics of SAP Standard Cost estimate- Understanding the flow of cost settings-Part 1

Best Regards

Hrusikesh Dalai

This is in continuous of my other document of understanding Standard Costing and its flows.

Basics of Standard Costing - Understanding the Cost Component Structure-Part 3

Overhead costs are costs which can only indirectly be attributed to the product, such as electricity or general storage costs. We can allocate these overhead costs in various ways: Here I have discussed about overhead calculation through costing sheet. This is a beginner's guide to understand the costing Sheet.

Overhead application

In the conventional method, overhead is applied to the reference object as a percentage rate or a quantity-based rate. The overhead is applied by means of costing sheets. The very purpose of using a cost sheet is that we want to apply indirect costs to the final cost of the product or process. Costs that cannot be assigned to the product cost collector directly can be allocated by determining the overhead expenses and applying them to the cost collector. Overhead costing is the means by which we allocate indirect costs to the appropriate objects.

The costing sheet links all the functions of overhead calculation. The direct costs to which overhead is applied (calculation base),The conditions under which overhead is applied (dependency),Whether overhead is allocated on a percentage basis or on a quantity basis, The amount of the overhead percentage, or the amount of overhead for each unit of measure (overhead), The validity period for the overhead, Which object (cost center, process, or order) is credited, and under which cost element in the case of actual postings (credit key)

Define Costing Sheet- T CODE KZS2

Screenshot 1- AAAAA costing sheet has been created for Example

Costing Sheet has 3 important components within it.

-Base

-Overhead rate

-Credit

Defining Base- T CODE KZB2

The calculation base consists of a group of cost elements to which overhead is to be applied according to the same conditions. This process involves assigning individual cost elements or cost element intervals for each controlling area to a calculation base.

We can apply different overhead amounts to the fixed and variable portions of the same base cost element. We can also make the amount of the overhead dependent on not only the direct costs, but also on the material itself. We can define material-specific calculation bases by entering the origin groups in the material master record and by specifying them in the calculation bases.

Screenshot 2 Example ZV01 base

The calculation base determines to which cost elements overhead is applied together.

For each controlling area, we assign individual cost elements or cost element intervals, or origins or origin intervals, to the calculation bases.

For production overhead costs, we can differentiate between fixed and variable costs for the calculation base. In this way, we can charge the fixed and variable portions of the activity price differently for activity types.

For material overhead costs, we can differentiate the materials used. If we want to define different material overhead costs for particular raw materials, we can define origin groups and define where own calculation bases for particular origin groups. (Origin group need to be defined)

If we do not specify any origins for a cost element interval, the SAP System considers all the origins in the relevant interval.

-Overhead rate here we can define Quantity or percent base overhead rate

Percent based Overhead rate T CODE KZZ2

Screenshot 3 Percent based overhead rate

Quantity based Overhead rate- T CODE KZM2

Screenshot 4 Quantity based overhead rate.

-Define Credit T CODE-KZE2

Cost allocation is part of the process of determining overhead rates. If this leads to an object being debited with actual costs, another object in Cost Accounting must be credited at the same time. This can be either a cost center, order or a business process. This type of posting is recorded under a secondary cost element of cost element category 41 (overhead rates) in the SAP System.

When you define credits, you also specify which credit object is to be credited under which cost element when overhead is to be applied to an object in the actual.

You can also define what percentage of the overhead is to be allocated as fixed costs.

Screenshot 5 Defining credit (Cost center being credited in the example)

Define Origin Groups T CODE OKZ1

Here you can create origin groups. These groups serve to subdivide the material costs further. For controlling purposes, materials assigned to the same cost element by automatic account determination can be separated into origin groups. You enter the origin group in the costing view of the material master record. Account determination assigns each material to a G/L account and thus also to a primary cost element.

Screenshot 6

Screenshot 7

If an origin group is entered in the costing view of the material master record, the combination of origin group and cost element is updated in the Controlling module.

If the Material origin indicator in the costing view of the material master record is specified in addition to the origin group, the costs are updated under the combination of material number and cost element in the Controlling component.

You can do the following for each cost element and origin group:

Calculate overhead

If you have maintained origin groups for the raw materials, you can define a calculation base in the costing sheet for each group of raw materials. This enables you to define different overhead surcharges for each group of raw materials.

Screenshot 8

Make assignments to cost components

If you have maintained origin groups for the raw materials, you can create separate cost components for important materials or groups of materials.

Screenshot 9

Calculate variances

Variances are calculated for each cost element. If you have maintained origin groups for the materials used, the variances (such as input price variances and input quantity variances) will be calculated not only for the relevant material cost element but also for each origin group assigned to that cost element.

Calculate work in process or results analysis data

For each cost element, you can specify whether the work in process for those costs can be capitalized in the balance sheet. If you have maintained origin groups for the materials used, you can specify this separately for each origin group.

There is other way around to calculate and overhead cost which is not part of this explaination

Template allocation

Here, cost drivers are used to assign overhead to the reference object on a source-related basis according to usage. The overhead is applied by means of templates. Sender objects can be business processes or cost centers/activity types.

Integration of business processes into the routing

Assigning process costs to routing operations is particularly suitable for direct production processes. On the other hand, indirect processes should be assigned using templates.

I will continue to edit this document for enhancing the quality of document.In my Next document i will explain about Costing Run and different other aspect of material setting that affect costing.

Document Level- Beginners

Refer to previous Document here-

Basics of Standard Costing - Understanding the Cost Component Structure-Part 3

Basics of SAP Standard Cost estimate- understanding costing variant-Part 2

Basics of SAP Standard Cost estimate- Understanding the flow of cost settings-Part 1

Thank You

Hrusikesh Dalai

Hi All,

During the Controlling Month End Process, analysis of the Sender Object and the subsequent Settlement Document becomes utmost important. Recently came across an excellent Standard Report which gives the output in the most acceptable way.

PART A:

Overview:

A critical step during the Month End Process refers to settlement of the Cost Objects to the respective receivers plus analysis of the Settlement Cost.

The Analysis of the settled order many times is bit difficult to know the amount which is either fully settled or which are yet to be settled.

SAP Note 193586 – Refers to a Program which makes the settlement analysis much easier.

Report: RKA_SETTLE_TABLES_COMPARE

The Object Number refers to the Sender Object Number for which the Settlement Analysis is to be made.

Note: How to know the Object No.? – please refer at the end section (Part B)

Report selection is bifurcated to 3 categories as:

1. Total Records
2. Line Items
3. Settlement Documents

Each Category has multiple selection option under it:

1. TOTAL RECORDS:

It reflects the Total Records under each of the Check Boxes with further execution type as Radio Button.

For these data, you can select one of the following execution types:

• Debits minus data records: All the Debit values from the Tables are selected and the Settlement Values are deducted, plus it displays the Cumulative Value for each Fiscal Year.

• Debits (cumulative): All the Debit Lines items are selected from the Tables and the credit values from settlement are not displayed.

• Debits (periodic): It displays the debit lines from the table; it displays periodic values per fiscal year

• Data records: Only the settled values are selected and displayed cumulatively per fiscal year

• Credit from settlement (***.): Credit Lines are displayed cumulatively per fiscal year

• Credit from settlement (period.):  Credit Lines are displayed periodically per fiscal year

2. LINE ITEM:

It displays Line Item data for the selected Check Box with an option to have an output with or without Time Stamp.

3. SETTLEMENT DOCUMENT:

• Non Hierarchical Display: The output is displayed in a tabular format reflecting each settlement document

• Hierarchy Display: The Output is displayed in a Hierarchy view

If the SAP Report is not available  Z Report and its respective implementation code is mentioned in SAP Note.

Refer SAP Note 193586

PART B:

DETERMINATION OF OBJECT NUMBER & TABLE RECORDS:

An excellent transaction code is available which reflects the CO Transaction Tables and no. of records under each CO Table.

Transaction Code: RKACSHOW

Enter the respective Object (Internal Order, Cost Center, WBS Element, Sales Order, PSG)

Output reflects all the respective CO Table which stores a record with context to the entered CO object.

Hope the document may help either in analysis of the Sender Object or for determination of CO Table records.

Thanks,

BR, Jaymin R. Bhatt

Abstract

Learn how to add or change the new currency type with new valuation views as parallel currency on a production site with SAP SLO support for conversion. This article is focused on the process and procedural steps in configuration to be performed prior to SLO conversion and validation after the SLO conversion. Further, the impact on New GL, Asset accounting will be discussed along with important test scenario for smooth activation of Parallel currency. You need to have SAP ERP Central Component (SAP ECC) with the SAP New General Ledger

Key Concept

In SAPERP Central Component (SAP ECC) 6.0, addition & / change in the new currency type with new valuation views coupled with data migration can be adopted by default with no restriction on the kind of industry. It has the flexibility to adopt country-specific legal valuation requirements via customizing.

To start with, below table shows an overview of what is ‘As is’ and ‘To be’ scenario expected.

For our analysis, let us take a scenario where the current situation has only Company code and Group Legal view with Group Currency = CHF and in the proposed solution, to have two new views (Group view and Profit center view) with additional currency after the migration.

10 is Company code currency with Legal Valuation view (0)

30 is Group currency with Legal Valuation view (0)

31 is Group currency with Group Valuation view (1)

32 is Group currency with Profit Center Valuation (2)

Current Situation

The Group view is active with the currency type 30. It means that the figures posted on the legal view are automatically converted in the group view in the controlling area currency CHF (based on the Exchange rate maintained under T-code: OB08 for all company codes not manage in CHF in their legal view)

To be Situation                                                                                                                     

Group view will be assigned to the currency type 31 and Profit center view to the currency type 32. It means that the actual figures & standard cost estimate posted in this view will still be in CHF but without any intercompany margin during cutover.

In Material Ledger, to attain the aboveSAP SLO can only do a conversion, but not a revaluation.

Rounding difference accounts: At implementation or reimplementation of LC2 and LC3 has no impact on LC1. So, there will be no rounding differences for LC1.

Global Settings

Use T-code: OB22 or follow IMG menu path: Financial Accounting > Financial Accounting Global Settings > Company Code > Parallel Currencies > Define Additional Local Currencies.

Select all the live company codes for which update needs to be done. At the time of change of configuration, SAP gives the message about the criticality of change– Irreparable changes if activated and hence to contact SAP if required. But, please go ahead and update the change.

Non Leading Ledgers

IMG menu path: Financial Accounting (New) > Financial Accounting Global Settings (New) > Ledgers > Ledger > Define and Activate Non-Leading Ledgers

In the legal entities implemented with Non-Leading ledgers, it is required to update new currencies LC2 and LC3 (Figure 3 & Figure 4)

If there are settings for non-leading ledger during depreciation run & to post different depreciation amount ONLY in non-leading ledger, then during conversion depreciation area 31 & 32 will be converted based on LC1.

From this perspective, there is an impact in the Non-Leading ledgers. Hence, for these new postings, the settings in Tr. Code: OB22 are relevant for the determination of LC2 and LC3. In few countries with Non leading ledger such as FR, TR, MX, IN etc., need to update the Currency type 2(C2) and Currency type 3(C3).

It is recommended by SAP to do the above changes only doing the downtime of SLO. Other option is by the import of a corresponding special transport order request or by doing it directly in the system that is supposed to be converted.

Asset Accounting:

If already exists a depreciation area XX linked to 30, it is required to change the depreciation area to 31 and assign the same to the Currency type 31. Further, to create a new depreciation area 32 and assign the same to the currency type 32.

With the current situation, the Chart of depreciation appears as in Figure 5.

Functional consultant should create new depreciation areas under all ‘chart of depreciation’ (country specific) and to update in all the Asset classes. Depreciation area 31 and 32 are created as Copy of depreciation area 02 as shown in Figure 6.

It is very important to note, only after the SAP SLO conversion to copy the values from deprecation area 02 to 31 and 32, depreciation area 02 should be deleted. Further, it is recommended by SAP to close the previous fiscal year, even in the Test system.

Strategy

The Best strategy is to plan the cut over on the beginning of the Fiscal year with the support of SAP SLO. Further, there are lot of prerequisites steps to be performed by the Business, configuration update by the Consultants and SLO activities by SAP. It is also required to run the tests in couple of test boxes to avoid surprises in production system.

Pre-Checks

Step 1

Report EWUARCH2 checks whether all critical archiving objects were marked as non-critical. Details of log in shown in Figure 7

Solution

To be checked, whether this archiving object is related to any FI-document of the current fiscal year 20XX. If it is not related to any FI-document of fiscal year 20XX, then it can be marked as non-critical (T-code EWS3)

Step 2

Report EWUMMPOA checks if a G/L account to be posted to is assigned to each posting transaction and if there are differences between the purchase order history records and the line items on the GR/IR clearing accounts

In case of Error as shown in Figure 8

Solution

Error can be ignored, as LC2 & LC3 are not relevant for MM

Step 3

Report RAEWUS1A analyzes the preconditions for starting the local currency changeover in Asset Accounting (FI-AA).

In case of Error as shown in Figure 9

Solution

The year-end closing of 20XX has not been performed for ALL company codes yet. This has to be done before starting the currency conversion (T-codes AJAB, AJRW).

Step 4

Report RFEWA012 checks the balance sheet and compares the debit items from a period with the credit items.

In case of Error, as shown in Figure 10

Detailed log, as shown in Figure 11

Solution

No fiscal year variant has been assigned to company code MX03. To assign Fiscal year variant K4 for company code MX03 as shown in Figure 12

Note: As shown above, even though the company code corresponds to the Country template legal entity provided by SAP, there should be a Fiscal Period variant to be assigned. During conversion, all the sanity checks will be done to avoid any inconsistency of data.

Step 5

Report RFEWACUS checks the necessary Customizing settings for the reconciliation programs and for document conversion:

In case of Error as shown in Figure 13

Testing

It is strongly recommended to test main Business processes, month-end-closing, processing of processes that have been created before the conversions (e.g. in logistics, CO, ML, FI…) & interfaces and reporting.

Solution

To create, rounding difference accounts for parallel currency conversion in the Chart or accounts and in company code. Also for tracking purposes, special document type and Posting keys to be created.

Step 6

Report RFEWASOAchecks whether the Balances in local currency only switch is activated for particular accounts

In case of Error as shown in Figure 14

Solution

Error can be ignored for company codes that are not in the scope of the currency conversion (country templates), but has to be corrected for company code live.

"Balances in LC only" to be switched on (T-code FS00) as shown in Figure 15

Step 7

Report RFEWUC1F checks the balance carried forward in the customer, vendor and G/L account ledgers using the total of the open items as seen in Figure 16

For more details, report RFEWSBAL to be executed:

Solution

a. For Customer balances, as shown in Figure 17, if there are differences between the closing balance of previous year and opening balance of consecutive year, balance carry forward to be executed for fiscal years 20XX – 20XX (T-code F.07)

b. If      he Clearing document of the Billing document is not equal to Zero: In such scenarios, to follow SAP Note 129042 (installation of report ZFCLEAR).

Step 8

Report RGFLS1P selects the open items of a company code that were still open on the key date (beginning of current fiscal year). Only items from accounts managed on an open item basis are selected. For any errors, the system displays as shown below in Figure 18

Reason for the above error:Master records of GL-account XXXXXX/ Legal entity100X has been changed from Non-open item management to open item management AFTER the posting from above (T-code: FS00)

Solution

Mismatch between master records (T-code: FS00 -> OI-management) and document (no entry in table FAGL_SPLINO, as GL-account XXXXXX/100X was not OI-managed as the posting took place. OSS-ticket for correction to be created (component FI-GL-GL-X)

Just Before Migration

Step 1

FI

·         All open payment runs to be processed / deleted (T-code: F110):

·         Open dunning runs  to be processed / deleted (T-code: F150)

·         Parked documents to be deleted / processed (Table VBKPF): To be clean: Also, VBKPF entries are ZERO

·         Balance carry forward to be executed for all the company codes and fiscal years (up to last closed fiscal year (T-code F.07)

Step 2

FI-AA

·         Year-end-closing in FI-AA till last closed Fiscal year to be done for ALL company codes (T-codes: AJAB & T-code: AJRW)

Tasks to be done during downtime:

FI

·         Posting periods to be opened from 01-16/2XXX (T-code OB52)

·         Open payment runs (T-code F110) and dunning runs (T-code F150) to be processed / deleted -> double check

·         Parked documents to be deleted / processed -> double check

Basis

·        SAP-note 534036 to be applied - in order to achieve a good runtime for the conversion

·         Lock all users

·         Reschedule background jobs

·         Backup of all the data – in case the conversion fails for any reason

Possible issues after Data Migration and new valuation areas

In some special cases (For Eg: T-code: FAGL_YEC_POSTINGS for closing fiscal year 20XX (previous fiscal year) ), 2^nd local currency balance is correctly calculated, however the closing document is saved with LC1 only. The LC2 remains equal to Zero.

Solution:

Implement SAP note 2035800 or to download the corresponding support pack

No Target Costs in Product Costing

Certain transactions and reports are run but they display zero in the Target Costs Column.

Transactions like KKBC_PKO,KKBC_ORD,KKPX,CO01,CO03 (Cost Analysis Report).

Reason and Prerequisites

This may occur because one of the following criteria are true:

1 - there is no Valid Standard Cost Estimate. (Check in table KEKO, the valid to and from dates)

2 - variance calculation has not been done yet. The order should have status VCAL (see order header or RKACSHOW(table JEST)

3 - No Goods Receipts - see costs analysis report

4 - In the variance calculation target costs are calculated only for that part or those cost elements of the relevant cost estimate which are relevant for the stock valuation. (see CK13N, Inventory valuation view)

5 - Is the Cost Element a factory output or also called target credit?   The target credit is not calculated on-the-fly by the target cost  calculation in KKBC_ORD   or COR2/3 but only by the variance calculation and therefore they appear with value zero as long as the variance calculation has not been run in update mode.
  As an alternative you could apply the note 834317. But please notice that this note contains a modification and not a standard correction.

Solution

Please note that the target costs are calculated and written to the database only at the point of variance calculation.
Before that point, you can still see the 'online' calculation of the target costs for example in CO03 cost analysis report in report 'Target/Actual comparaison', only if good receipt have taken place. This is only for information purposes since no variance calculation has taken place yet.

Target costs are calculated by multiplying the receipt quantity by the planned prices from the current cost estimate (in version 0). Please note that the system looks for the released cost estimate of the head material for calculating the target costs of each item. That means that the costing status of the head material must be 'FR', not the one of the component.

In addition to this, please check entries for target cost in table COSP to make sure that the released cost estimate was the current one for the period were the target costs were calculated.

The note 414378 mentions that you need to set status DLV/TECO and carry out the variance calculation in order to be able to see the target cost in your cost analysis report.

CO-PRODUCT SCENARIO

The order has co-products which creates a different scenario with target costs. Specific to co-products however is, actual costs remain on the header

until CO8B is executed and distributed to the individual items. You can only display target costs for joint production on the level of the order items. For this you can use report KKBC_ORD, "Settings" -> "Order Items" ->  "on/off". You can now enter in the item number and view the target costs. This has to be done on an individual basis as there is no collective method to view this data for co-products.

Dear Forum,

Sometimes business wants to settle the AUC investment order to main asset partially at that time please follow the below process to achieve the user requirement.

As per standard SAP if you change the percentage less than 100% it will through the error message KD092, we can achieve this by SAP note   “303741 - Final sttlmnt/inv.measure: Amount in settlement rule not pos”

To achieve the user requirement please follow the below process.

Maintain the settlement rule less than 100%

Transaction code: KOB5

Execute the transaction code KOB5 for the investment order 120000566 and give the desired depreciation area.

Select all the line items and click on final settlement

Now click on create new rules.

Now give the percentage you want to settle it to main asset in the example I am giving 10% the total amount in the order is 95286.78 USD

Now execute the settlement in KO88 with partial capitalization

Settlement output:

After settlement only 10% value will settle to the main asset.

Regards,

Ravi

Internal order needs to be restricted for specific postings since some internal order should be posted directly from MM, SD or any other module. These Internal Order should not be posed in FI or CO directly.

Requirement can be achieved with slandered customizing by creating status profile, order type and order .

Below shown are the customization and the results for the same.

Create Status profile– New status profile needs to be created at following path: SPRO ==> IMG==>Controlling ==>Internal Order==>Order Master Data ==>Status Management ==>Define Status Profile

Click on create button

Click on object type to select Internal Order

Check on Internal Order

Create Status – Provide Status name in highlighted field.

Double click on test to select Business Transactions and Check the radio button (Forbidden) for the required Business Transactions:

Create Order Type - New order type can be created at following path: SPRO ==>IMG ==>Controlling ==>Internal Order ==>Order Master Data ==>Define Order Types

  Click on Define Order Types and Click on New Entries

Provide Status Profile, which was created earlier in status profile field.

Create Order – New order can be created at following path: SAP Menu ==>Accounting ==>Controlling ==>Internal Order ==>Master Data ==>Special Functions ==> Create or T-Code KO01

Provide Input details for Assignments tab

Under Control Data tab click on Set/reset button. Check the box, which is highlighted in red color.

User status will get updated and IO is created

Results

Post FI document with created IO – System will not allow to post document for the created Internal Order:

Planning for created IO – System will give error message if planning is carried out for the created IO.

Conclusion

Postings can be controlled for the Internal Order by Business Transactions customization.

Applies to

SAP ERP 5.0 / 6.0 with the focus of One XML format for global payments including SEPA

Summary

The purpose of this document is:

• To provide possible country specific requirements (Europe and Americas) used at Banks to extend the XML format
• Development highlights to extend XML format as Global format

It is necessary the consultant is aware of all the basic settings of the Automatic payment process. This document is only focused on the creation of complete structure of payment file in XML format with the use of SAP standard template SEPA_CT.

Table of Contents

1       Introduction.

2       Benefits of using XML format as Global format

3       General Configuration.

4       XML SEPA Country specific Configuration.

4.1        Rules to determine a SEPA Payment

4.2        General Considerations: All EU – SEPA countries.

4.2.1         Invoice reference in Payment file.

4.3        Country specific changes.

4.3.1         Spain.

4.3.2         Belgium.

4.3.3         France.

5       XML SEPA extension as Global format

5.1        General Considerations.

5.2        If Beneficiary Bank has ‘IBAN’

5.3        If Beneficiary has ‘No IBAN’ – User exit

5.4        DKK Payments in Denmark.

5.5        SEK Payments in Sweden.

5.6        NOK Payments in Norway.

5.7        GBP Payments in UK.

5.8        USD Payments in US.

6       Related Content

7       Disclaimer and Liability Notice.

1  Introduction

This document aims to understand and to use the XML format as Global format including SEPA requirements / Transactions.

To start, SAP’s standard template SEPA_CT for Credit Transfer is used. The basic requirements and technicalities to generate the payment file takes into consideration the requirement of EPC (European Payments Council)

The EPC rulebooks contain the business requirements and rules for the operation of the SEPA. The implementation guidelines specify the SEPA core requirements that apply to the UNIFI (ISO20022) XML

standards and cover mandatory bank-to-bank messages and optional recommended customer-to-bank messages.

2  Benefits of using XML format as Global format

• Converging to SEPA requirements, hence in line with the legal requirements
• Less maintenance cost for the company
• Adaptability and flexible to accommodate any future changes  either by Financial institutions or by business
• Highly Secured

3  General Configuration

Standard SEPA_CT for credit transfer cannot be used unless changes are adopted as per the bank and country specific requirements. It also depends on the Beneficiary Bank details, Currency of payment and Beneficiary bank country.

A new format can be created as there are no formats available for a specific bank/ country. This customization can be either done through modifying the standard function modules of an existing PMW  (Payment Medium Workbench) format or through developing via Data Medium Exchange Engine (DMEE). (However this document does not deal with customizing through DMEE).

4  XML SEPA Country specific Configuration ¨

4.1 Rules to determine a SEPA Payment

·      Data Format

• Ordering and beneficiary accounts have to be in IBAN format
• BIC is required for both ordering and beneficiary parties
  

       How recognize a payment elligible for SEPA

·      The following are few of the rules to make SEPA Credit Transfer:

• The transactions have to be in Euro
• The Debtor and Creditor must each hold an account with a Participant located within the SEPA
• The transfers have to be in the SEPA area.

The SEPA area comprises the following countries:
     o   EU : Euro-zone countries:

          Austria, Belgium, Cyprus, Estonia, France, Finland, Germany, Greece, Ireland, Italy, Luxemburg, Malta, Netherlands, Portugal, Slovakia, Slovenia

          and Spain

     o   Non-EU : non-Euro-Zone countries Bulgaria, Croatia, Czech Republic, Denmark, Great Britain, Hungary, Latvia, Lithuania, Monaco, Poland,

          Romania and Sweden

4.2 General Considerations: All EU – SEPA countries

SAP Standard template SEPA_CT to be copied as a base template with the necessary naming convention.

Path: SPRO      IMG      Financial Accounting (New)     Accounts Receivable and Accounts Payable Business Transactions       Outgoing Payments     Automatic Outgoing Payments      Payment Media    Make Settings for Payment Medium Formats from Payment Medium Workbench

The above path can also be accessed through the T. Codes OBPM1 / OBPM2 / OBPM3 / OBPM4.

The steps in implementing PMW:

• Create/ change payment medium formats
• Assign variant to the format
• Assign the format to payment method

Tr. Code: DMEE: To Copy (highlighted below) the Standard template – Fig 1. This will copy all the standard segments of XML format used in payment file. 

The output structure of standard DMEE file is as shown below - Fig 2

Important Considerations

• In the Payment file, a swift BIC code can be on 8 or 11 characters. i.e., for example you can indicate in files as BNPAGB22 or BNPAGB22XXX. The four first characters have to be Letters & the 5 - 6 characters is the ISO country code.
• In the payment file, Charges always set-up to SLEV for SEPA payments. This indicates to Bank that default charges set-up will be applied and is born by the debtor. Other charges available for NON SEPA payments are : CRED, DEBT and SHAR.
• For example, in Denmark, default charges are shared. You can force charges to what you want by specifying one of the following values: SHAR or DEBT or CRED. This depends on the Business agreement with Beneficiaries.
• If the Payment is SEPA relevant, it is always mandatory to have the Payment type information as follows:

<PmtTpInf>

    <SvcLvl>

          <Cd>SEPA</Cd>

               </SvcLvl>

</PmtTpInf>

• Batch booking option.

§  If batch booking= true. The bank statement will mention a global debit of the instruction.

§  If batch booking= false. The bank statement will mention the details of all transactions within the instruction.

Sample as follows:

4.2.1 Invoice reference in Payment file

Based on the Business requirements, either the payment can be executed by grouping the invoices per vendor & currency or can be separated per invoice.  Thus with the following changes in SAP, invoice references can be transferred in the Payment file

4.2.1.1 Group of invoices paid per Vendor & Currency

If the invoice is grouped per Vendor & Currency with multiple invoices to pay, it is required to capture all the invoice references in the payment file. This is required as this will serve as the reference to the Beneficiary when the Account statement is received.

Tr. Code:OBPM2:As per standard format, Note to Payee lines in XML tag can take only 4 reference Atoms that are available (32 * 4 = 128 characters separated by “/”) under <Ustrd> XML node. Hence for each vendor, four invoice numbers can only be accommodated in the unstructured field which may not be sufficient for vendors in getting remittance information details in their Account statement. It takes the details based on the above Note to payee text format (Typ 1) line: &FPAYP-XBLNR&

Tr.Code:  OBPM1

This change is called in the following node in the DMEE file:

4.2.1.2  Reference to be transferred without grouping

If grouping is not done, data is transferred with individual invoice references. Hence note to payee length is not a challenge as it is enough to accommodate 18 character length as the invoice reference.

4.3  Country specific changes                                                            

4.3.1 Spain

Non-resident vendors can be determined based on first three characters from their VAT Reg. No. "ESN" or Tax number contains pattern “N*” in vendor master control segment. Conditions can be maintained in Regulatory reporting XML tag where amount is greater than 50,000 Euros and Vendor Tax or VAT registration number contains pattern N* or ESN*. Hence the following condition.

4.3.2  Belgium

Initiating party ID needs to be mentioned as constant “KBO-BCE” for Belgium

4.3.3  France

·         For French beneficiaries, there is no sort code (it does not exist & sort code is just for UK domestic payments and on 6 digits – Explained below). The details as below:

Sample as follows:

<FinInstnId>
  <BIC>CCFRFRPPXXX</BIC>

</FinInstnId>

·         Regulatory Reporting code needs to be mentioned as constant “152” for France where Payer is in France and Payee is outside France

Structure in the DMEE output file will appear as

Note: Null tags and empty tags are not allowed even on the address field => This involves the rejection of the whole file. Such Tags have to be removed (or fill in) from the file.

5. XML SEPA extension as Global format

5.1 General Considerations

XML pain.001.001.02 for SEPA EURO payments and xml iso pain.001.001.03 for Non EURO payments. Thus to facilitate the XML format as Global, it is required to have the header as follows :

     Sample output at Header

     <?xml version="1.0" encoding="utf-8" ?>

            -<Document xmlns="urn:iso:std:iso:20022:tech:xsd:pain.001.001.03" xmlns:xsi="http://www.w3.org/2001 /XMLSchema-instance">f

To sum-up:
       - with pain.001.001.03, it is possible to send SEPA and non SEPA payments
       - with pain.001.001.02, you can only send SEPA payments

5.2 If Beneficiary Bank has ‘IBAN’

If IBAN is found in the Beneficiary bank account, the IBAN is printed via the structure in the Payment file. If not, BBAN (Basic Bank Account Number) is generated via the user exit

Output is:

5.3  If Beneficiary has ‘No IBAN’– User exit

Conditions are put in place to check IBAN, and if blank under segment: Othr, User Exit is triggered. It is required to concatenate Bank Key and account number of the beneficiary under segment Id. 

Further, display the above generated numbers as the values are related to BBAN (Basic Bank Account Number)

under the SchemeNm as shown:

Also, Beneficiaries without IBAN number outside Europe, but with BIC code and / Beneficiary Bank country same as Postal address country structure should appear as:

If the Beneficiary Bank country same as Postal address country but without IBAN and without BIC code, the structure should appear as:

Note:  The tag   <Ctry> for french regulatory reporting is mandatory to show in DMEE file

It is required to note that, the country of the beneficiary bank is included in the swift BIC code.  In case the swift BIC code of the bank is not included, you will have to include the name and address of the bank of the beneficiary. Hence, the structure should appear as follows:

If the Beneficiary is in EURO zone and needs to be paid by multiple currencies, the challenge is to segregate and group the EURO (SEPA Relevant) and NON-EURO payments.

SAP provides with the option to control the structure and group in relation to the currency. Under the segment in Header node, we can control via the Key field as Transaction currency. Screen shot below shows what needs to be maintained under DMEE tree.

5.4DKK Payments in Denmark

Payment type Information section for Denmark should be updated with segment Prtry (proprietary code) with ‘DO’ as follows.

This is a proprietary code which is mentioned to indicate that it is a specific domestic payment. It allows to identify that the payment is a FIK/GIRO payment.

Sample as follows:

  <PmtTpInf>
    <InstrPrty>NORM</InstrPrty>
    <SvcLvl>
     <Cd>NURG</Cd>
    </SvcLvl>     <LclInstrm>
    <Prtry>DO</Prtry>
    </LclInstrm>
   </PmtTpInf>

5.5SEK Payments in Sweden

For SEK Payments, OCR – Reference text is mandatory. This reference should appear in TAG remittance info unstructured . It is important to populate ONLY with the OCR reference.
Sample as follows:

     <RmtInf>                              
      <Ustrd>/OCR/ reference text</Ustrd>
</RmtInf>  

·    The Regulatory reporting for Sweden is applied for all cross-border payment and when the beneficiary is a non-resident and for amount over 150,000 SEK (or equivalent) and has to be structure as the following one. You have to change as below

Sample as follows:

</CdtrAcct>

<RgltryRptg>

       <Dtls>

            <Cd>101</Cd> where 14 is the value of the reason code.

      </Dtls>

</RgltryRptg>

<RmtInf>

And the country of residence of the beneficiary has to be populated in the address section fo the beneficiary as below

<Cdtr>

            <Nm>LABORATORIOS ABC QUIMICA,</Nm>

            <PstlAdr>

                        <Ctry>CO</Ctry>

                        <AdrLine>Apdo. 11111</AdrLine>

                        <AdrLine>11123 BOGOTA Colombie</AdrLine>

            </PstlAdr>

            <CtryOfRes>CO</CtryOfRes>

</Cdtr>

5.6   NOK Payments in Norway

·    KID Number in Norway

Domestic standard KID number is maintained during invoice posting. This should be populated during payment file creation to send the reference of the invoice against each payment.

It is important to populate only with /KID/ + KID reference

Sample as follows:

<RmtInf>                             

<Ustrd>/KID/2023128155</Ustrd>

</RmtInf>       

·    The Regulatory reporting for Norway is applied for all cross-border payment and has to be structure as the following.

Sample as follows:

5.7  GBP Payments in UK

The Clearing code for UK domestic payments has to be populated. It concerns only domestic payment and then it is to apply on the payments of the first instruction (PmtInf) only. You have to change as below

Sample as follows:

<CdtrAgt>

                <FinInstnId>

                                <BIC>YORKGB21568</BIC>

                                <ClrSysMmbId>

                                    <ClrSysId>

                                                <Cd>GBDSC</Cd>

                                    </ClrSysId>

                                    <MmbId>050568</MmbId>

                                </ClrSysMmbId>

                </FinInstnId>

</CdtrAgt>

the value (050568) is a part of the IBAN (position from character 9 on 6 characters)

5.8  USD Payments in US

·       It is necessary to understand the types of USD payment based on the beneficiary country and bank country.

                                                  ** CCD: Corporate Payments, PPD: Personal payments

Type of transfer should appear under tag Cd as follows:

• For any USD local payments, service level code is NURG as follows

<PmtTpInf>

          <ScvLvl>

                   <Cd>NURG</Cd>

          </SvcLvl>

• For any USD foreign payments, service level code is URGP as follows

Sample as follows:

<PmtInfId>1000457118</PmtInfId>

<PmtMtd>TRF</PmtMtd>

<BtchBookg>false</BtchBookg>

<NbOfTxs>3</NbOfTxs>

<CtrlSum>950.00</CtrlSum>

   <PmtTpInf>

          <ScvLvl>

                   <Cd>URGP</Cd>

          </SvcLvl>

<ReqdExctnDt>2014-07-06</ReqdExctnDt>

Also, theformatting for the debtor account tag should be

Sample as follows:

<DbtrAcct>

<Id>

- <Othr>

-<Id>30XXXX84</Id>

   -<SchmeNm>

           <Cd>BBAN</Cd>

     </SchmeNm>

</Othr>

</Id>

<Ccy>USD</Ccy>

</DbtrAcct>

6.  Related Content

For more information for DMEE payment structure and configuration details, visit SAP help: http://help.sap.com/saphelp_46c/helpdata/en/cb/d82f3885b6097ae10000009b38f889/frameset.htm

7. Disclaimer and Liability Notice

This document may discuss sample coding or other information that does not include SAP official interfaces and therefore is not supported by SAP. Changes made based on this information are not supported and can be overwritten during an upgrade.

Introduction:

Material ledger (ML) is functionality in SAP, which helps to calculate Actual Cost for materials and also provide the facility of multiple parallel valuations in multiple currencies. ML has two major functionalities, first to calculate actual cost of materials, semi/finished goods, and second provide an opportunity to calculate actual cost on multiple valuation such as Legal, Group, & Profit center valuation. In this document we will see fundamental concept of material ledger, how the actual cost is calculated for different business scenarios.     

Actual Costing in SAP

Actual Costing has a purpose of calculating actual cost for goods manufactured in-house and materials procured from outside. Calculation of actual cost for finished goods, raw materials is very difficult as we don’t know many of actual costs when business transactions are performed. Business transactions are performed throughout the months and at that time we don’t know the actual cost of our production activities, expenses for full months, total activities performed in month, overhead cost etc., so it’s become difficult to calculate actual cost for finished goods, raw material purchased from outside. The situation becomes more difficult when we talk about a Multinational organization having manufacturing plants in different countries and transfer of goods is happening between groups. 

Material ledger works on a concept on first recording the material movement in Standard Cost and then accumulating the Variance to calculate the Actual cost.

In Material ledger the benefit of standard cost is retained as all the materials movements are initially recorded at Standard Cost and variances are collected to come to actual cost. Actual cost is calculated at the end as part of Period End Closing, and the actual cost is termed as Periodic Unit Price (PUP).  

Periodic Unit Price (PUP)

Periodic Unit Price refers to the average actual cost of materials in material ledger.

Ø  For material procured from outside, PUP represent Standard Cost plus Capitalized Purchasing variances (like, purchase price variance, exchange rate variance etc.)

Ø  For in-house produced material, PUP represents Standard Cost plus manufacturing variances (like quantity variances from raw material & activity, purchase price variance, multi-level variances coming from raw materials etc.)

Ø  For calculating the PUP, only opening stock and receipt is consider, but not the consumption.

Ø  Consumption is revalued at closing cost. First the consumption is booked at standard cost and then it’s revalued during ML period end closing, with the difference of New PUP and Standard Cost.

Ø  PUP is updated in Accounting View 1 of material master data.        

Pre requisite for Material ledger

a.       Material price determination should be 3 (i.e. Single/Multilevel price determination)

b.      All procurement cost should be linked to purchase order

c.       All manufacturing cost, overhead expenses should be part of activity cost (i.e. product cost value flow)

Different Scenarios:

Scenario 1: External Procurement of Raw Materials

Step 1: Purchase requisition: No journal entries, as it’s a pre-commitment. 

Step 2: Purchase order:  No journal entries, it’s a commitment for Budget

Step 3: Goods receipt: when we receipt the raw material, at that time we are not aware of our actual cost of material then the initial recognition happened at Standard cost.  

            Stock of Raw material A/c ………….. Debit               (Std. Cost * Actual Qty.)

                        To, GR/IR A/c…  (Credit)                             (Std. Cost * Actual Qty.)       

The value posted at GR is equals to (Std. Cost of raw material multiplied by Actual Quantity receipt)

Material ledger: at the time of good receipt, in material ledger there is an entry happened for receipt under purchase, where entry happened for stock quantity & value is recognized as standard price.  

Step 4: Invoice Receipt:

            GR/IR A/c ……………………………………. Dr.    (Std. Cost * Actual Qty.)

Exchange rate difference A/c …………Dr.     (Exchange rate variance) 

            Purchase Price Variance A/c ………… Dr.    (Balancing figure)

                        To Vendor A/c                                  (Invoice Value)

Material ledger: at the time of invoice receipt the purchase price variance is recognized in material ledger under zero quantity receipt, which increases the actual price of cumulative inventory. In some of cases we can also see exchange rate variances at time of invoice receipt. Exchange rate variance generally arises when the transaction currency is different than legal currency and average actual exchange rate is different than budgeted exchange rate.  

Scenario 2: In-house production of Finished goods

Step 1: Goods Issue to Production/ Process Order

            Raw Material Consumption A/c ……………… Dr.        (Std. Cost * Actual Qty)

                        To, Stock of Raw material A/c …..  Cr                     (Std. Cost * Actual Qty)

In Controlling, Order should be debited with raw material consumption with a value equals to (Std. Cost * Actual Qty).  

In Material Ledger, consumption entries will happen for raw material with Consumption of Raw material quantity as Actual quantity issue to order and value of consumption as (Std. Cost * Actual Qty).

Step 2: Activity Confirmation for completion of production activity 

When production/ process order activities are confirm, then order is debited/charged with the cost of activity (Plan Activity rate * Actual Activity), and the production cost is credited. This entry is passed in Controlling, but no entries happened in FI.

Step 3: Goods receipt, finished goods receipt as part of order completion.

            Stock of Finished Goods A/c ………………… Dr.       (Std Cost * Actual Qty)          BSX

                        To, Finished Goods manufacture A/c                     (Std Cost * Actual Qty) GBB

In Controlling, order is credited with cost of finished goods manufactured i.e. (Std Cost of FG * Actual Qty produced).

In Material Ledger, there will be entry in the receipt for finished goods. Inventory/volume in KG will increased by quantity receipt during goods receipt and value will increased by (Standard cost of FG * Actual Quantity receipt) 

Step 4: Variance Calculation & Settlement

Once we do the variance calculation then variance represents the difference between Total cost charged to process/production order and Cost of Finished good receipt. These variances basically represent quantity variance of raw material and activity. i.e. (Actual Quantity less Plan Quantity)* Standard rate.

Variance calculated at this step gets posted in Material ledger to adjust the actual cost of finished goods produced.    

Scenario 3: Sales of Finished goods (FG)

Step 1: Sales order; no accounting entries are created in FI. No impact in material ledger.

Step 2: Goods Issue to Customer; when goods issued to customer, in financial accounting the entries are recorded for actual quantity sold @ Standard cost of finished goods.

Cost of Goods Sold A/c ………………………….. Dr.      (Std. cost of FG * Actual Quantity)

            To, Finished goods Inventory A/c                          (Std. cost of FG * Actual Quantity)

In Material ledger:goods issue to customer is recorded in material ledger as consumption of raw material. The Actual quantity is recognized at standard cost.    

Step 3: Billing document released

            Customer A/c ……………………………………..DR                     

                        To, Sales Revenue A/c                                 

Step 4: Payment receipt,

Bank A/c …………………………………………DR

                        To, Customer A/c

Step 5: Period end closing: when we do period end closing activity in ML, the consumption is revaluated with the different between actual cost (periodic unit price) and standard cost of finished goods. The price difference & exchange rate difference are proportionately adjusted between consumption & closing inventory. 

Illustration:

To illustrate the scenario in more details, assume that we are manufacturing finished goods FGA, which is made of raw material RM1 & RM2, and two activity X & Y are performed to convert raw material in finished goods. In below table represent Plan standard cost of finished goods.  

Table 1

Assume that we have created a production order to manufacture 10 kg of finished goods FGA. The details of value which will be posted at different task like Goods issue, Activity confirmation & goods receipt are given below. I have assumed actual quantity as different then plan quantity so that we can check variances.  

Table 2

Here we can see the total variance of 140 USD, basically represent quantity variance. 

Table 3

Assumed, actual rate different than plan rate. Here we can see the calculation of lower level variance.

PUP Calculation for finished goods FGA

PUP is calculated on the ratio of total cumulative cost with total cumulative quantity. The formula is given below.

In the below table the calculation of average actual cost is shown 

Ø  Assuming the opening stock is zero in table 4.

Ø  Goods receipt from order is actual quantity @ standard cost. Details can be verified from Table 2. 

Ø  Variance from order of 140 USD is basically the difference between total debit cost & total credit cost to production order, which is quantity variance. (Table 2)

Ø  Lower level variance of 95 USD is price variance (Table 3)

Ø  PUP is {(630+235)/10} = 86.50 USD/Kg

Ø  Goods issue to sales order is initial recorded at Std. cost

Ø  Revaluation of consumption {(PUP – Std Cost)*Actual Qty} i.e. {(86.5 – 63.0)*5} = 117.5 USD

Ø  Closing inventory is also revaluated with PUP.   

Table 4

Conclusion:

With the help of this document I have tried to focus on basic functioning of material ledger with concept. It will help to understand how the variances are moved from raw material, activity to finished goods & to closing inventory and consumption. 

This document is in continuation of my second document http://scn.sap.com/docs/DOC-49167 -Basics of SAP Standard Cost estimate- understanding costing variant-Part 2 and 3rd in the series

This document explains the Cost Component Structure (CCS) and components assigned to CCS.  Explaining various settings in background as previous part.

Cost Component Structure (CCS)

The cost component structure determines how the results of material costing are updated. The cost component structure groups the costs for each material according to cost component (such as material costs, internal activities, external activities, and overhead). If the material is used in the production of another material, the cost component split (which breaks down the costs according to material costs, internal activities, external activities, overhead, and so forth) remains in the system when the costs are rolled up.

In the cost component split, you also define the following for material costing:

• Which part of the costs are fixed costs
• Which costs are costs of goods manufactured and what are sales and administration costs
• Which costs are relevant for stock valuation, commercial inventory valuation and tax inventory valuation
• When the cost component structure is assigned to the organizational units, you can specify that two cost component splits are created:

Main cost component split
This is the principal cost component split, meaning that it is used in the standard cost estimate, which can be used to update the material master. The main cost component split can be a cost component split for cost of goods manufactured or a primary cost component split.

Auxiliary cost component split
this can exist in addition to the main cost component split, and is not used in the standard cost estimate. It can be used for analysis purposes, in that it can be displayed with the cost estimate and passed on to Profitability Analysis.

.

Step 1 - T Code OKTZ

Screenshot 1

I have created Z1 and Z2 CCS for our analysis purpose. You can use two cost comp structure for reporting purpose and different reporting need.

Material cost estimates are created in the Product Cost Planning component. Sales order cost estimates and order BOM cost estimates are created in Product Cost by Sales Order component. The cost components separate the results of a cost estimate into raw materials, material overhead, external activities, setup costs, machine costs, labor costs, production costs, and other costs.

• Display the cost components in the cost estimate

  T code ck13- view of Cost estimate Cost element and cost component like Mat, Labor, OH etc.

                         Screenshot 2

The above screen shows the distribution of cost as per the Cost component structure

T-code OKTZ

In Cost Center Accounting, the cost component structure determines how the results of the activity price calculation are updated. The cost component structure groups the costs for each activity type of the cost center according to cost components (such as material costs and labor costs). If an internal activity allocation is carried out, the cost component split (which breaks down the costs according to material, labor costs, and so forth) is retained at cost rollup.

If the cost component split is not to be retained, you can create a switching structure for the cost component structure for Cost Center Accounting. In the switching structure, you specify which sender cost component goes into which receiver cost component

See below

     Screenshot 3

From screenshot 2 you will notice there is a Column called cost element. We get those from settings in Cost component structure setting by assigning cost elements for respective cost component.

     Screenshot 4

Different Settings in Cost component Structure in see below.

Control

Cost Share- which includes Variable, Fixed and variable Cost

Indicator for Roll up Cost Component

This indicator determines whether the costing results of a cost component are rolled up into the next-highest costing level (cost roll up).

You can specify which cost components are rolled up into the next-highest costing level according to the criteria specific to your organization.

Example

If the sales and administration costs and the cost of goods manufactured are to be costed simultaneously in a costing level, you can proceed as follows:

• You set this indicator for the cost components identified as the cost of goods manufactured. These costs are rolled up into the next-highest costing level.
• You do not set this indicator for the cost components identified as sales and administration costs. These costs remain on the costing level on which they were originally calculated.

     Screenshot 5

Also the filter criteria for itemization are important for example anything which we wanted for statistically analysis purpose we can check not relevant for inventory valuation.Some examples below shows based on the settings how the result will affect. Below screen you will see the cost element separated by the Material, Labor and Overhead as we defined in CCS.

Cost estimate itemization view (T CODE-CK13n)

     Screenshot 6

Target/Actual Comparison: Cumulative report (T CODE- KKO0), there is additional configuration required in OKKN. You can build your own report using report painter too.The cost components we defined in CCS will flow into these reports based on our section in Report painter.

Screenshot 7

In this document i tried to explain in a simple manner the use of cost component structure. This is a basic and beginners understanding of cost component structure. In my Next series of documents i will try explaining Costing Sheet,Activity Planning,and Summary of Standard Costing and its integration with production Planning.

Refer next document here-

http://scn.sap.com/docs/DOC-49880- Basics of Standard Costing-Understanding Overhead cost Flow.

Refer to previous Document here-

http://scn.sap.com/docs/DOC-49167 -Basics of SAP Standard Cost estimate- understanding costing variant-Part 2

http://scn.sap.com/docs/DOC-48908- Basics of SAP Standard Cost estimate- Understanding the flow of cost settings-Part 1

Best Regards

Hrusikesh Dalai

This is in continuous of my other document of understanding Standard Costing and its flows.

Basics of Standard Costing - Understanding the Cost Component Structure-Part 3

Overhead costs are costs which can only indirectly be attributed to the product, such as electricity or general storage costs. We can allocate these overhead costs in various ways: Here I have discussed about overhead calculation through costing sheet. This is a beginner's guide to understand the costing Sheet.

Overhead application

In the conventional method, overhead is applied to the reference object as a percentage rate or a quantity-based rate. The overhead is applied by means of costing sheets. The very purpose of using a cost sheet is that we want to apply indirect costs to the final cost of the product or process. Costs that cannot be assigned to the product cost collector directly can be allocated by determining the overhead expenses and applying them to the cost collector. Overhead costing is the means by which we allocate indirect costs to the appropriate objects.

The costing sheet links all the functions of overhead calculation. The direct costs to which overhead is applied (calculation base),The conditions under which overhead is applied (dependency),Whether overhead is allocated on a percentage basis or on a quantity basis, The amount of the overhead percentage, or the amount of overhead for each unit of measure (overhead), The validity period for the overhead, Which object (cost center, process, or order) is credited, and under which cost element in the case of actual postings (credit key)

Define Costing Sheet- T CODE KZS2

Screenshot 1- AAAAA costing sheet has been created for Example

Costing Sheet has 3 important components within it.

-Base

-Overhead rate

-Credit

Defining Base- T CODE KZB2

The calculation base consists of a group of cost elements to which overhead is to be applied according to the same conditions. This process involves assigning individual cost elements or cost element intervals for each controlling area to a calculation base.

We can apply different overhead amounts to the fixed and variable portions of the same base cost element. We can also make the amount of the overhead dependent on not only the direct costs, but also on the material itself. We can define material-specific calculation bases by entering the origin groups in the material master record and by specifying them in the calculation bases.

Screenshot 2 Example ZV01 base

The calculation base determines to which cost elements overhead is applied together.

For each controlling area, we assign individual cost elements or cost element intervals, or origins or origin intervals, to the calculation bases.

For production overhead costs, we can differentiate between fixed and variable costs for the calculation base. In this way, we can charge the fixed and variable portions of the activity price differently for activity types.

For material overhead costs, we can differentiate the materials used. If we want to define different material overhead costs for particular raw materials, we can define origin groups and define where own calculation bases for particular origin groups. (Origin group need to be defined)

If we do not specify any origins for a cost element interval, the SAP System considers all the origins in the relevant interval.

-Overhead rate here we can define Quantity or percent base overhead rate

Percent based Overhead rate T CODE KZZ2

Screenshot 3 Percent based overhead rate

Quantity based Overhead rate- T CODE KZM2

Screenshot 4 Quantity based overhead rate.

-Define Credit T CODE-KZE2

Cost allocation is part of the process of determining overhead rates. If this leads to an object being debited with actual costs, another object in Cost Accounting must be credited at the same time. This can be either a cost center, order or a business process. This type of posting is recorded under a secondary cost element of cost element category 41 (overhead rates) in the SAP System.

When you define credits, you also specify which credit object is to be credited under which cost element when overhead is to be applied to an object in the actual.

You can also define what percentage of the overhead is to be allocated as fixed costs.

Screenshot 5 Defining credit (Cost center being credited in the example)

Define Origin Groups T CODE OKZ1

Here you can create origin groups. These groups serve to subdivide the material costs further. For controlling purposes, materials assigned to the same cost element by automatic account determination can be separated into origin groups. You enter the origin group in the costing view of the material master record. Account determination assigns each material to a G/L account and thus also to a primary cost element.

Screenshot 6

Screenshot 7

If an origin group is entered in the costing view of the material master record, the combination of origin group and cost element is updated in the Controlling module.

If the Material origin indicator in the costing view of the material master record is specified in addition to the origin group, the costs are updated under the combination of material number and cost element in the Controlling component.

You can do the following for each cost element and origin group:

Calculate overhead

If you have maintained origin groups for the raw materials, you can define a calculation base in the costing sheet for each group of raw materials. This enables you to define different overhead surcharges for each group of raw materials.

Screenshot 8

Make assignments to cost components

If you have maintained origin groups for the raw materials, you can create separate cost components for important materials or groups of materials.

Screenshot 9

Calculate variances

Variances are calculated for each cost element. If you have maintained origin groups for the materials used, the variances (such as input price variances and input quantity variances) will be calculated not only for the relevant material cost element but also for each origin group assigned to that cost element.

Calculate work in process or results analysis data

For each cost element, you can specify whether the work in process for those costs can be capitalized in the balance sheet. If you have maintained origin groups for the materials used, you can specify this separately for each origin group.

There is other way around to calculate and overhead cost which is not part of this explaination

Template allocation

Here, cost drivers are used to assign overhead to the reference object on a source-related basis according to usage. The overhead is applied by means of templates. Sender objects can be business processes or cost centers/activity types.

Integration of business processes into the routing

Assigning process costs to routing operations is particularly suitable for direct production processes. On the other hand, indirect processes should be assigned using templates.

I will continue to edit this document for enhancing the quality of document.In my Next document i will explain about Costing Run and different other aspect of material setting that affect costing.

Document Level- Beginners

Refer to previous Document here-

Basics of Standard Costing - Understanding the Cost Component Structure-Part 3

Basics of SAP Standard Cost estimate- understanding costing variant-Part 2

Basics of SAP Standard Cost estimate- Understanding the flow of cost settings-Part 1

Thank You

Hrusikesh Dalai

Special stock valuated materials with the standard price price control
are valuated as per the following strategy is HARDCODED in the system.:

1. looks into EBEW/QBEW if any GR/IR has already taken place.
2. runs user Exit COPCP002 / EXIT_SAPLCK36_001 which is designed
   exclusively for valuated sales order stock.
3. looks for a marked sales order cost estimate.
4. looks for planned costs of a production order (preliminary costing).
5. CU50 if configurable material (only for project stock)
6. standard price from MBEW (standard cost estimate)

The first time a goods movement is carried out the system will go
through this strategies until it can find a valid price, and then will
write an entry in EBEW/QBEW. The successful strategy number is also
written to field LBWST.
From then on, the price from these tables will be used for valuating the
special stock in every other goods movement.

You can find this part of the coding in:

Function Module CK36_STANDARD_PRICE_GET > Form PRICE_STRATEGY_NEW

Please also have a close look to note 520000 which provides more
information about this logic.

If you want to Revaluate:

First of all, these are produced for special customer requirement
and not for anonymous stock. So there shouldn't normally be much stock
available. Then, as these are produced specifically, they have a
certain price (cost of goods manufactured) which will not be influenced
by changing activity prices or by changing raw material prices.
The requirement of revaluating special stock should therefore rather
be an exception and therefore manual postings via MR21 is the
standard process to change the price.

Incentive pay has the potential to increase worker productivity if properly designed and maintained.

Wage incentive plans may be of two types :

(1) Individual Incentive Plans and

  (2) Group Incentive Plans.

In our discussion let us take the group incentive plan.

Here for convenience, let us take each cost center as a group.    Each cost center will have its own plan
cost / budget.

LABOUR COST VARIANCE  = Target costs for labour - Actual Costs for labour

TARGET COSTS   = target labour activity qty * activity price   ( mainatained in KP26 tras. )

ACTUAL COSTS   = labour activty booked * activity price      (mainatained in KP26 trans )

Regarding the labour Cost variance calculation,

Assume the price is the same -  defined  in KP26 for both plan and actual.

So its only the labour hours that contribute to the variance.

Variance = ( Planned labour hrs - Actual Labour Hrs ) * price from KP26

Now let us create a GL account in the Chart of Accounts  say

Incentive to employees ( GL A/C.560001)

If the variance is positive it is favourable and a portion of that may be transferred to the above account  560001.     Then this account can be reposted to
employee wise in the subsidiary book ( employee vendor subisidary book )

By avoiding a cost element for this account this will not reflect in the cost center.

The portion of variance to  be transferred to the incentive account should be decided by the management accordingly.

By transferring this  positive variance to incentive account , the incentive calculation can be atomized by the system itself.

I foresee some difficulties may arise in deciding the planning data which may not be workable in cost centers.   Usually all the cost center may not have
plan data.  I invite the experts comments to improve this idea workable in proper way.    

Best regards      

N.Selvakumar.

Applies to

SAP ERP 5.0 / 6.0 with the focus of One XML format for global payments including SEPA

Summary

The purpose of this document is:

• To provide possible country specific requirements (Europe and Americas) used at Banks to extend the XML format
• Development highlights to extend XML format as Global format

It is necessary the consultant is aware of all the basic settings of the Automatic payment process. This document is only focused on the creation of complete structure of payment file in XML format with the use of SAP standard template SEPA_CT.

Table of Contents

1       Introduction.

2       Benefits of using XML format as Global format

3       General Configuration.

4       XML SEPA Country specific Configuration.

4.1        Rules to determine a SEPA Payment

4.2        General Considerations: All EU – SEPA countries.

4.2.1         Invoice reference in Payment file.

4.3        Country specific changes.

4.3.1         Spain.

4.3.2         Belgium.

4.3.3         France.

5       XML SEPA extension as Global format

5.1        General Considerations.

5.2        If Beneficiary Bank has ‘IBAN’

5.3        If Beneficiary has ‘No IBAN’ – User exit

5.4        DKK Payments in Denmark.

5.5        SEK Payments in Sweden.

5.6        NOK Payments in Norway.

5.7        GBP Payments in UK.

5.8        USD Payments in US.

6       Related Content

7       Disclaimer and Liability Notice.

1  Introduction

This document aims to understand and to use the XML format as Global format including SEPA requirements / Transactions.

To start, SAP’s standard template SEPA_CT for Credit Transfer is used. The basic requirements and technicalities to generate the payment file takes into consideration the requirement of EPC (European Payments Council)

The EPC rulebooks contain the business requirements and rules for the operation of the SEPA. The implementation guidelines specify the SEPA core requirements that apply to the UNIFI (ISO20022) XML

standards and cover mandatory bank-to-bank messages and optional recommended customer-to-bank messages.

2  Benefits of using XML format as Global format

• Converging to SEPA requirements, hence in line with the legal requirements
• Less maintenance cost for the company
• Adaptability and flexible to accommodate any future changes  either by Financial institutions or by business
• Highly Secured

3  General Configuration

Standard SEPA_CT for credit transfer cannot be used unless changes are adopted as per the bank and country specific requirements. It also depends on the Beneficiary Bank details, Currency of payment and Beneficiary bank country.

A new format can be created as there are no formats available for a specific bank/ country. This customization can be either done through modifying the standard function modules of an existing PMW  (Payment Medium Workbench) format or through developing via Data Medium Exchange Engine (DMEE). (However this document does not deal with customizing through DMEE).

4  XML SEPA Country specific Configuration ¨

4.1 Rules to determine a SEPA Payment

·      Data Format

• Ordering and beneficiary accounts have to be in IBAN format
• BIC is required for both ordering and beneficiary parties
  

       How recognize a payment elligible for SEPA

·      The following are few of the rules to make SEPA Credit Transfer:

• The transactions have to be in Euro
• The Debtor and Creditor must each hold an account with a Participant located within the SEPA
• The transfers have to be in the SEPA area.

The SEPA area comprises the following countries:
     o   EU : Euro-zone countries:

          Austria, Belgium, Cyprus, Estonia, France, Finland, Germany, Greece, Ireland, Italy, Luxemburg, Malta, Netherlands, Portugal, Slovakia, Slovenia

          and Spain

     o   Non-EU : non-Euro-Zone countries Bulgaria, Croatia, Czech Republic, Denmark, Great Britain, Hungary, Latvia, Lithuania, Monaco, Poland,

          Romania and Sweden

4.2 General Considerations: All EU – SEPA countries

SAP Standard template SEPA_CT to be copied as a base template with the necessary naming convention.

Path: SPRO      IMG      Financial Accounting (New)     Accounts Receivable and Accounts Payable Business Transactions       Outgoing Payments     Automatic Outgoing Payments      Payment Media    Make Settings for Payment Medium Formats from Payment Medium Workbench

The above path can also be accessed through the T. Codes OBPM1 / OBPM2 / OBPM3 / OBPM4.

The steps in implementing PMW:

• Create/ change payment medium formats
• Assign variant to the format
• Assign the format to payment method

Tr. Code: DMEE: To Copy (highlighted below) the Standard template – Fig 1. This will copy all the standard segments of XML format used in payment file. 

The output structure of standard DMEE file is as shown below - Fig 2

Important Considerations

• In the Payment file, a swift BIC code can be on 8 or 11 characters. i.e., for example you can indicate in files as BNPAGB22 or BNPAGB22XXX. The four first characters have to be Letters & the 5 - 6 characters is the ISO country code.
• In the payment file, Charges always set-up to SLEV for SEPA payments. This indicates to Bank that default charges set-up will be applied and is born by the debtor. Other charges available for NON SEPA payments are : CRED, DEBT and SHAR.
• For example, in Denmark, default charges are shared. You can force charges to what you want by specifying one of the following values: SHAR or DEBT or CRED. This depends on the Business agreement with Beneficiaries.
• If the Payment is SEPA relevant, it is always mandatory to have the Payment type information as follows:

<PmtTpInf>

    <SvcLvl>

          <Cd>SEPA</Cd>

               </SvcLvl>

</PmtTpInf>

• Batch booking option.

§  If batch booking= true. The bank statement will mention a global debit of the instruction.

§  If batch booking= false. The bank statement will mention the details of all transactions within the instruction.

Sample as follows:

4.2.1 Invoice reference in Payment file

Based on the Business requirements, either the payment can be executed by grouping the invoices per vendor & currency or can be separated per invoice.  Thus with the following changes in SAP, invoice references can be transferred in the Payment file

4.2.1.1 Group of invoices paid per Vendor & Currency

If the invoice is grouped per Vendor & Currency with multiple invoices to pay, it is required to capture all the invoice references in the payment file. This is required as this will serve as the reference to the Beneficiary when the Account statement is received.

Tr. Code:OBPM2:As per standard format, Note to Payee lines in XML tag can take only 4 reference Atoms that are available (32 * 4 = 128 characters separated by “/”) under <Ustrd> XML node. Hence for each vendor, four invoice numbers can only be accommodated in the unstructured field which may not be sufficient for vendors in getting remittance information details in their Account statement. It takes the details based on the above Note to payee text format (Typ 1) line: &FPAYP-XBLNR&

Tr.Code:  OBPM1

This change is called in the following node in the DMEE file:

4.2.1.2  Reference to be transferred without grouping

If grouping is not done, data is transferred with individual invoice references. Hence note to payee length is not a challenge as it is enough to accommodate 18 character length as the invoice reference.

4.3  Country specific changes                                                            

4.3.1 Spain

Non-resident vendors can be determined based on first three characters from their VAT Reg. No. "ESN" or Tax number contains pattern “N*” in vendor master control segment. Conditions can be maintained in Regulatory reporting XML tag where amount is greater than 50,000 Euros and Vendor Tax or VAT registration number contains pattern N* or ESN*. Hence the following condition.

4.3.2  Belgium

Initiating party ID needs to be mentioned as constant “KBO-BCE” for Belgium

4.3.3  France

·         For French beneficiaries, there is no sort code (it does not exist & sort code is just for UK domestic payments and on 6 digits – Explained below). The details as below:

Sample as follows:

<FinInstnId>
  <BIC>CCFRFRPPXXX</BIC>

</FinInstnId>

·         Regulatory Reporting code needs to be mentioned as constant “152” for France where Payer is in France and Payee is outside France

Structure in the DMEE output file will appear as

Note: Null tags and empty tags are not allowed even on the address field => This involves the rejection of the whole file. Such Tags have to be removed (or fill in) from the file.

5. XML SEPA extension as Global format

5.1 General Considerations

XML pain.001.001.02 for SEPA EURO payments and xml iso pain.001.001.03 for Non EURO payments. Thus to facilitate the XML format as Global, it is required to have the header as follows :

     Sample output at Header

     <?xml version="1.0" encoding="utf-8" ?>

            -<Document xmlns="urn:iso:std:iso:20022:tech:xsd:pain.001.001.03" xmlns:xsi="http://www.w3.org/2001 /XMLSchema-instance">f

To sum-up:
       - with pain.001.001.03, it is possible to send SEPA and non SEPA payments
       - with pain.001.001.02, you can only send SEPA payments

5.2 If Beneficiary Bank has ‘IBAN’

If IBAN is found in the Beneficiary bank account, the IBAN is printed via the structure in the Payment file. If not, BBAN (Basic Bank Account Number) is generated via the user exit

Output is:

5.3  If Beneficiary has ‘No IBAN’– User exit

Conditions are put in place to check IBAN, and if blank under segment: Othr, User Exit is triggered. It is required to concatenate Bank Key and account number of the beneficiary under segment Id. 

Further, display the above generated numbers as the values are related to BBAN (Basic Bank Account Number)

under the SchemeNm as shown:

Also, Beneficiaries without IBAN number outside Europe, but with BIC code and / Beneficiary Bank country same as Postal address country structure should appear as:

If the Beneficiary Bank country same as Postal address country but without IBAN and without BIC code, the structure should appear as:

Note:  The tag   <Ctry> for french regulatory reporting is mandatory to show in DMEE file

It is required to note that, the country of the beneficiary bank is included in the swift BIC code.  In case the swift BIC code of the bank is not included, you will have to include the name and address of the bank of the beneficiary. Hence, the structure should appear as follows:

If the Beneficiary is in EURO zone and needs to be paid by multiple currencies, the challenge is to segregate and group the EURO (SEPA Relevant) and NON-EURO payments.

SAP provides with the option to control the structure and group in relation to the currency. Under the segment in Header node, we can control via the Key field as Transaction currency. Screen shot below shows what needs to be maintained under DMEE tree.

5.4DKK Payments in Denmark

Payment type Information section for Denmark should be updated with segment Prtry (proprietary code) with ‘DO’ as follows.

This is a proprietary code which is mentioned to indicate that it is a specific domestic payment. It allows to identify that the payment is a FIK/GIRO payment.

Sample as follows:

  <PmtTpInf>
    <InstrPrty>NORM</InstrPrty>
    <SvcLvl>
     <Cd>NURG</Cd>
    </SvcLvl>     <LclInstrm>
    <Prtry>DO</Prtry>
    </LclInstrm>
   </PmtTpInf>

5.5SEK Payments in Sweden

For SEK Payments, OCR – Reference text is mandatory. This reference should appear in TAG remittance info unstructured . It is important to populate ONLY with the OCR reference.
Sample as follows:

     <RmtInf>                              
      <Ustrd>/OCR/ reference text</Ustrd>
</RmtInf>  

·    The Regulatory reporting for Sweden is applied for all cross-border payment and when the beneficiary is a non-resident and for amount over 150,000 SEK (or equivalent) and has to be structure as the following one. You have to change as below

Sample as follows:

</CdtrAcct>

<RgltryRptg>

       <Dtls>

            <Cd>101</Cd> where 14 is the value of the reason code.

      </Dtls>

</RgltryRptg>

<RmtInf>

And the country of residence of the beneficiary has to be populated in the address section fo the beneficiary as below

<Cdtr>

            <Nm>LABORATORIOS ABC QUIMICA,</Nm>

            <PstlAdr>

                        <Ctry>CO</Ctry>

                        <AdrLine>Apdo. 11111</AdrLine>

                        <AdrLine>11123 BOGOTA Colombie</AdrLine>

            </PstlAdr>

            <CtryOfRes>CO</CtryOfRes>

</Cdtr>

5.6   NOK Payments in Norway

·    KID Number in Norway

Domestic standard KID number is maintained during invoice posting. This should be populated during payment file creation to send the reference of the invoice against each payment.

It is important to populate only with /KID/ + KID reference

Sample as follows:

<RmtInf>                             

<Ustrd>/KID/2023128155</Ustrd>

</RmtInf>       

·    The Regulatory reporting for Norway is applied for all cross-border payment and has to be structure as the following.

Sample as follows:

5.7  GBP Payments in UK

The Clearing code for UK domestic payments has to be populated. It concerns only domestic payment and then it is to apply on the payments of the first instruction (PmtInf) only. You have to change as below

Sample as follows:

<CdtrAgt>

                <FinInstnId>

                                <BIC>YORKGB21568</BIC>

                                <ClrSysMmbId>

                                    <ClrSysId>

                                                <Cd>GBDSC</Cd>

                                    </ClrSysId>

                                    <MmbId>050568</MmbId>

                                </ClrSysMmbId>

                </FinInstnId>

</CdtrAgt>

the value (050568) is a part of the IBAN (position from character 9 on 6 characters)

5.8  USD Payments in US

·       It is necessary to understand the types of USD payment based on the beneficiary country and bank country.

                                                  ** CCD: Corporate Payments, PPD: Personal payments

Type of transfer should appear under tag Cd as follows:

• For any USD local payments, service level code is NURG as follows

<PmtTpInf>

          <ScvLvl>

                   <Cd>NURG</Cd>

          </SvcLvl>

• For any USD foreign payments, service level code is URGP as follows

Sample as follows:

<PmtInfId>1000457118</PmtInfId>

<PmtMtd>TRF</PmtMtd>

<BtchBookg>false</BtchBookg>

<NbOfTxs>3</NbOfTxs>

<CtrlSum>950.00</CtrlSum>

   <PmtTpInf>

          <ScvLvl>

                   <Cd>URGP</Cd>

          </SvcLvl>

<ReqdExctnDt>2014-07-06</ReqdExctnDt>

Also, theformatting for the debtor account tag should be

Sample as follows:

<DbtrAcct>

<Id>

- <Othr>

-<Id>30XXXX84</Id>

   -<SchmeNm>

           <Cd>BBAN</Cd>

     </SchmeNm>

</Othr>

</Id>

<Ccy>USD</Ccy>

</DbtrAcct>

6.  Related Content

For more information for DMEE payment structure and configuration details, visit SAP help: http://help.sap.com/saphelp_46c/helpdata/en/cb/d82f3885b6097ae10000009b38f889/frameset.htm

7. Disclaimer and Liability Notice

This document may discuss sample coding or other information that does not include SAP official interfaces and therefore is not supported by SAP. Changes made based on this information are not supported and can be overwritten during an upgrade.

Introduction:

Material ledger (ML) is functionality in SAP, which helps to calculate Actual Cost for materials and also provide the facility of multiple parallel valuations in multiple currencies. ML has two major functionalities, first to calculate actual cost of materials, semi/finished goods, and second provide an opportunity to calculate actual cost on multiple valuation such as Legal, Group, & Profit center valuation. In this document we will see fundamental concept of material ledger, how the actual cost is calculated for different business scenarios.     

Actual Costing in SAP

Actual Costing has a purpose of calculating actual cost for goods manufactured in-house and materials procured from outside. Calculation of actual cost for finished goods, raw materials is very difficult as we don’t know many of actual costs when business transactions are performed. Business transactions are performed throughout the months and at that time we don’t know the actual cost of our production activities, expenses for full months, total activities performed in month, overhead cost etc., so it’s become difficult to calculate actual cost for finished goods, raw material purchased from outside. The situation becomes more difficult when we talk about a Multinational organization having manufacturing plants in different countries and transfer of goods is happening between groups. 

Material ledger works on a concept on first recording the material movement in Standard Cost and then accumulating the Variance to calculate the Actual cost.

In Material ledger the benefit of standard cost is retained as all the materials movements are initially recorded at Standard Cost and variances are collected to come to actual cost. Actual cost is calculated at the end as part of Period End Closing, and the actual cost is termed as Periodic Unit Price (PUP).  

Periodic Unit Price (PUP)

Periodic Unit Price refers to the average actual cost of materials in material ledger.

Ø  For material procured from outside, PUP represent Standard Cost plus Capitalized Purchasing variances (like, purchase price variance, exchange rate variance etc.)

Ø  For in-house produced material, PUP represents Standard Cost plus manufacturing variances (like quantity variances from raw material & activity, purchase price variance, multi-level variances coming from raw materials etc.)

Ø  For calculating the PUP, only opening stock and receipt is consider, but not the consumption.

Ø  Consumption is revalued at closing cost. First the consumption is booked at standard cost and then it’s revalued during ML period end closing, with the difference of New PUP and Standard Cost.

Ø  PUP is updated in Accounting View 1 of material master data.        

Pre requisite for Material ledger

a.       Material price determination should be 3 (i.e. Single/Multilevel price determination)

b.      All procurement cost should be linked to purchase order

c.       All manufacturing cost, overhead expenses should be part of activity cost (i.e. product cost value flow)

Different Scenarios:

Scenario 1: External Procurement of Raw Materials

Step 1: Purchase requisition: No journal entries, as it’s a pre-commitment. 

Step 2: Purchase order:  No journal entries, it’s a commitment for Budget

Step 3: Goods receipt: when we receipt the raw material, at that time we are not aware of our actual cost of material then the initial recognition happened at Standard cost.  

            Stock of Raw material A/c ………….. Debit               (Std. Cost * Actual Qty.)

                        To, GR/IR A/c…  (Credit)                             (Std. Cost * Actual Qty.)       

The value posted at GR is equals to (Std. Cost of raw material multiplied by Actual Quantity receipt)

Material ledger: at the time of good receipt, in material ledger there is an entry happened for receipt under purchase, where entry happened for stock quantity & value is recognized as standard price.  

Step 4: Invoice Receipt:

            GR/IR A/c ……………………………………. Dr.    (Std. Cost * Actual Qty.)

Exchange rate difference A/c …………Dr.     (Exchange rate variance) 

            Purchase Price Variance A/c ………… Dr.    (Balancing figure)

                        To Vendor A/c                                  (Invoice Value)

Material ledger: at the time of invoice receipt the purchase price variance is recognized in material ledger under zero quantity receipt, which increases the actual price of cumulative inventory. In some of cases we can also see exchange rate variances at time of invoice receipt. Exchange rate variance generally arises when the transaction currency is different than legal currency and average actual exchange rate is different than budgeted exchange rate.  

Scenario 2: In-house production of Finished goods

Step 1: Goods Issue to Production/ Process Order

            Raw Material Consumption A/c ……………… Dr.        (Std. Cost * Actual Qty)

                        To, Stock of Raw material A/c …..  Cr                     (Std. Cost * Actual Qty)

In Controlling, Order should be debited with raw material consumption with a value equals to (Std. Cost * Actual Qty).  

In Material Ledger, consumption entries will happen for raw material with Consumption of Raw material quantity as Actual quantity issue to order and value of consumption as (Std. Cost * Actual Qty).

Step 2: Activity Confirmation for completion of production activity 

When production/ process order activities are confirm, then order is debited/charged with the cost of activity (Plan Activity rate * Actual Activity), and the production cost is credited. This entry is passed in Controlling, but no entries happened in FI.

Step 3: Goods receipt, finished goods receipt as part of order completion.

            Stock of Finished Goods A/c ………………… Dr.       (Std Cost * Actual Qty)          BSX

                        To, Finished Goods manufacture A/c                     (Std Cost * Actual Qty) GBB

In Controlling, order is credited with cost of finished goods manufactured i.e. (Std Cost of FG * Actual Qty produced).

In Material Ledger, there will be entry in the receipt for finished goods. Inventory/volume in KG will increased by quantity receipt during goods receipt and value will increased by (Standard cost of FG * Actual Quantity receipt) 

Step 4: Variance Calculation & Settlement

Once we do the variance calculation then variance represents the difference between Total cost charged to process/production order and Cost of Finished good receipt. These variances basically represent quantity variance of raw material and activity. i.e. (Actual Quantity less Plan Quantity)* Standard rate.

Variance calculated at this step gets posted in Material ledger to adjust the actual cost of finished goods produced.    

Scenario 3: Sales of Finished goods (FG)

Step 1: Sales order; no accounting entries are created in FI. No impact in material ledger.

Step 2: Goods Issue to Customer; when goods issued to customer, in financial accounting the entries are recorded for actual quantity sold @ Standard cost of finished goods.

Cost of Goods Sold A/c ………………………….. Dr.      (Std. cost of FG * Actual Quantity)

            To, Finished goods Inventory A/c                          (Std. cost of FG * Actual Quantity)

In Material ledger:goods issue to customer is recorded in material ledger as consumption of raw material. The Actual quantity is recognized at standard cost.    

Step 3: Billing document released

            Customer A/c ……………………………………..DR                     

                        To, Sales Revenue A/c                                 

Step 4: Payment receipt,

Bank A/c …………………………………………DR

                        To, Customer A/c

Step 5: Period end closing: when we do period end closing activity in ML, the consumption is revaluated with the different between actual cost (periodic unit price) and standard cost of finished goods. The price difference & exchange rate difference are proportionately adjusted between consumption & closing inventory. 

Illustration:

To illustrate the scenario in more details, assume that we are manufacturing finished goods FGA, which is made of raw material RM1 & RM2, and two activity X & Y are performed to convert raw material in finished goods. In below table represent Plan standard cost of finished goods.  

Table 1

Assume that we have created a production order to manufacture 10 kg of finished goods FGA. The details of value which will be posted at different task like Goods issue, Activity confirmation & goods receipt are given below. I have assumed actual quantity as different then plan quantity so that we can check variances.  

Table 2

Here we can see the total variance of 140 USD, basically represent quantity variance. 

Table 3

Assumed, actual rate different than plan rate. Here we can see the calculation of lower level variance.

PUP Calculation for finished goods FGA

PUP is calculated on the ratio of total cumulative cost with total cumulative quantity. The formula is given below.

In the below table the calculation of average actual cost is shown 

Ø  Assuming the opening stock is zero in table 4.

Ø  Goods receipt from order is actual quantity @ standard cost. Details can be verified from Table 2. 

Ø  Variance from order of 140 USD is basically the difference between total debit cost & total credit cost to production order, which is quantity variance. (Table 2)

Ø  Lower level variance of 95 USD is price variance (Table 3)

Ø  PUP is {(630+235)/10} = 86.50 USD/Kg

Ø  Goods issue to sales order is initial recorded at Std. cost

Ø  Revaluation of consumption {(PUP – Std Cost)*Actual Qty} i.e. {(86.5 – 63.0)*5} = 117.5 USD

Ø  Closing inventory is also revaluated with PUP.   

Table 4

Conclusion:

With the help of this document I have tried to focus on basic functioning of material ledger with concept. It will help to understand how the variances are moved from raw material, activity to finished goods & to closing inventory and consumption.