COST OBJECT CONTROLLING

PRODUCT COST BY ORDER

Make to Stock.

1) Define Costing Sheets

SPRO>Sap Ref IMG>Controlling>Product Cost Controlling>Cost Object Controlling>

Product Cost by order>Basic Setting>Overhead>Define Costing Sheet.

You can copy the Costing Sheet which is defined during product cost planning.
2) Check Valuation Variant for Manufacturing Orders(OPN2)

A key, in Product Cost Planning, that determines the prices that the SAP System
selects to evaluate the quantity structure of a material cost estimate or order. The
valuation variant controls how the materials and activities in the cost estimate are
valuated. A global valuation variant is valid for all plants. A local valuation variant is
valid only for a specific plant.

 You use the valuation variant for preliminary costing to determine the following:

o Which price is used to valuate materials, external activities and

subcontracting and which activity price is used to valuate activity
types and business processes in preliminary costing?

o Which costing sheet in the master data of the

manufacturing order is defaulted.

This costing sheet is used for overhead calculation in

preliminary costing and period-end closing.

 You use the valuation variant for simultaneous costing to determine

which activity price is used to valuate the actual activity type and
business process postings
 The different valuation strategies for materials, internal activities,
external activities, and subcontracting are stored as strategy sequences.
 In order to use the valuation variant, you must assign it to a costing variant.
3) Check Costing Variants for Manufacturing Order(OPL1)

A tool that contains all control parameters for costing, including parameters
that control how cost estimates are executed and the material prices or
activity prices that are used to valuate the costing items.

The costing variant contains the control parameters for the cost estimate.

In this step you check the costing variants that are used for the following in
Product Cost by Order:

 For the preliminary costing of manufacturing orders

 For the simultaneous costing and final costing of manufacturing orders

 4) Check Order Type (KOT2)

The order type contains information which is necessary for managing orders.
Order types are client-specific. The same order type can be used in all controlling
areas in one client.

Here an important thing we need to check is the settlement profile.

Settlement Profile PP01 is attached to the production order type.
PP CONFIGURATION

1) Define Production Scheduling Profile(OPKP)

In this step, you can create production scheduling profiles for

specific plants. In a production scheduling profile, you can:

 Specify that certain business transactions or processes are to be

carried out in a production or process order
2) Define Production Scheduler or Supervisor(OPJ9)
 The purpose of this activity is to define production schedulers for
your plants. In addition to this, you can assign a control profile to
each production scheduler.

 By assigning production schedulers to materials within the

application, you can define responsibilities for a material within
production activity control.Group responsible for controlling the
production of a material.
3) Define Checking Control (OPJK)
The purpose of this activity is to define parameters for the confirmation of
operations. The operation can have the following characteristics:

o order created

o release(d) order
3) Define Scheduling Margin Key(OPJZ)
 In this menu option, you specify time floats for order scheduling as well as the
release period for order release.

The following floats are defined:

 float before production

This is the time between the order start date and the scheduled start date.

 float after production

This is the time between the order finish date and the scheduled finish date.
4) Define Reduction Strategy (OPJS)

You can specify a reduction strategy in every operation.

 Reduction strategies

You use the reduction strategies to determine how the operation lead
time can be reduced step by step. You can enter a reduction strategy
in every operation.

 Reduction levels

You can define up to six reduction levels for each reduction strategy.
For every reduction level you can enter what is to be reduced and by
how much.
5) Define Scheduling Parameters for Production Orders(OPU3)

In this step you define for each plant, order type and production scheduler the
parameters for scheduling production orders. This comprises maintaining

 scheduling levels (detailed, production-rate and rough-cut scheduling)

 date adjustment when dates are exceeded

 date control for detailed scheduling

 reduction
6) Define Confirmation Parameters(OPK4)

The purpose of this activity is to define parameters for the confirmation of operations.
 7) Define MRP Controller
Up to Production Same path-Material Requirement Planning-Master Data-Define
MRP Controller.
The MRP controller is a person or a group of persons responsible for monitoring
material availability. Every material that is relevant to the planning run must be
assigned an MRP controller number in the material master record.
We have defined it, just check this step.

8) Define order types (OPJH)

Up to Production same path-Shop Floor Control- Master Data-Order-Define Order
type Dependency Parameters.

In this step you define order types. An order type contains control
information that you need for managing orders. You have to assign every
order to an order type.
WIP CONFIGURATION
1) GL Master (FS00)

I) 420200-WIP Material Cost (P)

II) 420201-WIP Conversion Cost (P)

III) 420202-WIP Overhead Cost (P)

IV) 230000-WIP Material Cost (B)

V) 230001-WIP Conversion Cost (B)

VI) 230002-WIP Overhead Cost (B)

DO THE SAME PROCESS FOR

II) 420201-WIP Conversion Cost (P)

III) 420202-WIP Overhead Cost (P)

DO THE SAME PROCESS FOR

V) 230001-WIP Conversion Cost (B)

VI) 230002-WIP Overhead Cost (B)

3) Create Secondary cost element (KA06)

1) 9310100-WIP Material Cost
2) 9310110-WIP Conversion Cost
3) 9310120-WIP Overhead Cost
DO THE SAME PROCESS FOR
1) 9310110-WIP Conversion Cost
2) 9310120-WIP Overhead Cost
3) Define Result Analysis Key(OKG1)
Each order for which you want to create work in process (WIP) must
receive a Results analysis key. The presence of a results analysis
key in the order Means that the order is included in WIP calculation
during period-end closing.
 4) Secondary Cost Element for WIP calculation(KA06)
In this step we create cost elements under which the work in process and the
reserves are updated on the order.

1) 9310200-Technical RA cost element

5) Define Result Analysis Version(OKG9)
The results analysis version enables you to perform multiple valuations for
objects with the same results analysis key in parallel, allowing you to meet the
legal requirements of different countries, or for different business objectives.
 Transfer to FI is mandatory. If it shows any error then deactivate it. But it has to be
activated during settlement.

6) Define Valuation Method Actual Cost(OKG3)

In this step we define a valuation method for the calculation of work in process. This
creates the link between the controlling area, the result analysis key, the result
analysis version and the system status.
When you create a new valuation method, you specify whether the work in process
should be evaluated at target cost or actual cost. In the product cost by order
component the work in process is normally valuated at actual costs.
The value of the work in process is the difference between the debit and the credit of
an order as long as the order has the status PREL OR REL.
The valuation method of WIP calculation is linked to a system status. The following
status code is relevant for WIP calculation in this component.
>PREL- The order is partially released
>REL- The order is released
>DLV- The order has been completely delivered
 > TECO- The order is technically completed
>CLSD- Close production order

I) if the status is PREL OR REL, The system creates the work in process in the amount
of actual cost with which the order is debited.

ii) If the status is DLV OR TECO, The system cancels the work in process.
7) Define Line IDs
Up to product cost by order same path>Period end closing> work in process>
Define line ids.
The line IDs serve to group the work in process and reserves for
unrealized Costs according to the requirements of Financial
Accounting.

Reserves for unrealized cost means a production order has a

partial Goods receipt, but the actual issues (material and
activities) to the Production order is less than standard and the
system expect the se Issues to be made, therefore reserves for
unrealized cost can be created If required for these costs which
are debited short.

The work in process or reserves for unrealized costs are calculated

as a total For each order and apportioned to the line IDs. You can
define separately for Each line ID whether the work in process for
that line ID must be capitalized. To pass the data on to Financial
Accounting, you must define posting rules that link this data to G/L
accounts.
8) Define Assignments(OKGB)
In this step, we assign the cost elements to line ids under which an order is
debited or credited. In the assignment we can also define the work in
process that must be capitalized and in what amount. We can specify that:
100% of the work in process calculated from the material
costs can be Capitalized
80% of the work in process calculated from the indirect
costs can be Capitalized

We assign the cost elements combined in line ids to one of the following groups.

WIPR-Work in process with requirement to capitalize

cost WIPO- Work in process with option to capitalize cost
WIPP- Work in process with prohibition to capitalize cost (can’t be capitalize)
9) Define Update(OKGA)(OKG4)

In the earlier step define assignment we have assigned the cost elements of
Material beginning with 4 to line id BMC, internal activities beginning with 9 to
The line id BSC.
Now here we assign for Line ID ZMA to a results analysis (ra) cost element
931001 and to a category K (costs), ZSC to a RA cost element 931002.

Thus all material withdrawals, internal activities, external activities, and

Overhead are assigned to line IDs of category K (costs).
The system creates work in process for each debit posting that is updated
Under one of these cost elements. These values are updated under the
Results analysis cost elements (cost element category 31) that you specify
Here.

We must assign all credits, such as for material issues and order settlement to
Line IDs of category A (settled costs). For each credit posting that is updated
Under one of these cost elements, the system reduces the work in process.
10) Define Posting Rules for Settling WIP(OKG8)

IMG >controlling > Product Cost Controlling >Cost Object

Controlling > Product Cost by Order >Period-End Closing >
Work in Process >Define Posting Rules for Settling Work in
Process
In this step we specify the G/L accounts in Financial Accounting to which the
work in process is settled. We assign a results analysis cost element or group of
results analysis cost elements to two G/L accounts. A FI is generated on the basis
of the settlement of work in process:-
Entry passed:-
WIP account Debit (Balance sheet)
Change in WIP Credit (Profit & loss account)

We can assign the results analysis data to the G/L accounts at the
following Levels:
•Results analysis categories

The results analysis categories are created on the

basis of the Assignment of the costs to line IDs:

WIPR - Work in process with requirement to

capitalize costs WIPO - Work in process with option
to capitalize costs WIPP - Work in process with
prohibition to capitalize costs

We normally define a posting rule that assigns the work in

process with Requirement to capitalize costs to the G/L
accounts for unfinished Products (balance sheet) and stock
changes (P/L).

Before doing this step deactivate Transfer to FI indicator in OKG9.

After doing this step goto OKG9, and activate Transfer to FI Indicator.

11) Define No. Ranges(OKG6)

IMG > Controlling > Product Cost Controlling >Cost Object Controlling
>Product Cost by Order > Period-End Closing > Work in Process >Define
Posting Rules for Settling Work in Process

When work in process is calculated, the following business

transactions are Carried out:

KABG Automatic results analysis

KSWP Calc. primary target costs (WIP)
KSWS Calc. secondary target costs (WIP)

CO documents are created when these transactions are carried out. The
 System assigns numbers to these documents.
We must maintain number ranges to restrict the areas for the
numbers Assigned or to categorize according to certain
criteria.
The number range is already defined or copied while maintaining
the Controlling area.

VARIANCE CONFIGURATION
1) Define Variance Keys(OKV1)

IMG >Controlling > Product Cost Controlling >Cost Object Controlling

>Product Cost by Order > Period-End Closing > Variance Calculation>Define
Variance Keys

In this step we define variance keys. Production orders can only be selected
for variance calculation if a variance key is entered in the order. Variance
calculation requires that the orders have the status DLV OR TECO.
1) Define Default Variance Keys for Plants(OKVW)
IMG >Controlling >Product Cost Controlling >Cost Object
Controlling>Product Cost by Order >Period-End Closing >Variance
Calculation>Define Default Variance Keys for Plants
We assign a variance key to the plant in this step.
Variances are calculated on the basis of the variance key shown in the
order Master record. This entry is defaulted as follows:
 When we create a material master record, the system proposes
default variance key for that material master through the plant.
 When we create a production order, process order for this material,
the System proposes a default variance key through the entry in the
Material master record.
 2) Check Variance Variants (OKVG)

IMG>Controlling>Product Cost Controlling> Cost Object

Controlling>Product Cost by Order > Period-End Closing >Variance
Calculation>Check Variance Variants

Variance variant determine what variance categories are calculated.

3) Define Valuation Variant for WIP & Scrap Cost(Target Cost)

IMG >Controlling> Product Cost Controlling >Cost Object Controlling >Product Cost
by Order > Period-End Closing >Variance Calculation>Define Valuation Variant for
WIP and Scrap (Target Costs)
 Skip this step. This step will be applicable at the time of product cost by period.

4) Define Target Cost Version(OKV6)

IMG > Controlling >Product Cost Controlling > Cost Object Controlling >
Product Cost by Order > Period-End Closing> Variance Calculation>Define
Target Cost Versions

Target cost means the costs expected to be incurred when a specific quantity is
produced. The target costs are calculated on the basis of the planned values of
a service unit (such as planned cost of a production order)

Target costs can be used to determine variances, valuate WIP, and valuate
unplanned scrap. The target cost version specifies which data is to be
compared. The target cost version also specifies which variance variant is used
and therefore which variance categories are calculated. Only in target cost
version 0, we specify a valuation variant for the valuation of scrap and work in
process. Rest all other target cost version are for information purpose.
5) Define No. Ranges for Variance Document(KANK)
IMG >Controlling >Product Cost Controlling >Cost Object Controlling>Product Cost
by Order >Period-End Closing>Variance Calculation> Define Number Ranges for
Variance Documents

When variances are calculated various controlling business transactions

are Carried out. When these business transactions are carried out, CO
documents are created containing the target costs, variances, scrap,
and distributed actual costs. Numbers are assigned for these
documents. We have to maintain number Ranges for these
transactions.

USER PART

COST OBJECT CONTROLLING

PRODUCT COST BY ORDER
 PRODUCTION ORDER PROCESS CHAIN

CREATE PRODUCTION ORDER

RELEASE PRODUCTION ORDER

ISSUE GOODS TO PRODUCTION ORDER

CONFIRM PRODUCTION ORDER

GOODS RECEIPT FROM PRODUCTION TO INVENTORY

OVERHEAD CALCULATION

WIP CALCULATION USING ACTUAL COST

VARIANCE CALCULATION

SETTLING THE ORDER TO THE MATERIAL

COMPLETE/CLOSE PRODUCTION ORDER

SETTLEMENT
Step (1) Create Settlement Profile (OK07)

Step (2) Check Order Types (KOT2)

Step (3) Define Cost Accounting Relevant Default Values for Order type (OKZ3)

Step (4) Changes in Material Master (MM02)

Step (5) Create Production Order (CO01)

Step (6) Release Production Order (CO02)

Step (7) Initial Stock Posting (MB1C)

Step (8) Create Purchase Order (ME21N)

Step (9) Goods Receipt (MIGO)

Step (10) MM02-Check

Step (11) MMBE-Stock Overview

Step (12) Issue Raw Material to Production (MB1A)

Step (13) MB03-Check Accounting Entry

Step (14) Product Cost Report (KKBC_ORD Or CO03)

Target Cost=Planned Qty * Standard Price

Planned Cost=Planned Qty*Actual Price

Actual Cost=Actual Qty*Actual Price

Step (15) Activity Confirmation for Production Order (CO11N)

SAP Menu-Logistics-Production-Shop Floor Control-Confirmation-Enter-Operations-Time Ticket

Step (16) Overhead Calculation (KGI2) (CO43)

SAP Menu-Accounting-Controlling-Product Cost Controlling-Cost Object Controlling-Product Cost

by Order-Period End Closing-Single Function-Overhead-Individual Processing
Step (17) Production Receipts (MB31)

Error-Define Goods Received Valuation for Order

SPRO-Controlling-Period Cost Controlling Cost Object Controlling-Product Cost by Order-Define

Goods Received Valuation for Order

Step (18) CO03

Step (19) Work-In-Process Calculation (KKAX)

SAP Menu-Accounting-Controlling-Prod. Cost Controlling-Cost Object Controlling-Prod. Cost by

Order-Period End Closing-Single Functions-WIP-Individual-KKAX

Error-Code KKA0, OKG5

Step (20) Variance Calculation (KKS2) (KKS1)

SAP Menu-Accounting-Controlling Product Cost Controlling-Cost Object Controlling-Product Cost

By Order-Period End Closing-Single Function-Individual Processing

Error as Order Status is not Delivery or TECO.

Step (21) Settlement (KO88)

Up to Single function same path-Settlement-Individual Processing-KO88

Error-OKG9-Financial Accounting

Step (22) Balance Qty Receipt (MB31)

Step (23) WIP Calculation-KKAX

Even though 0, we have to run WIP.Ignore warning Message.

Step (24) CO02-Testing

Order status is changed to Delivery

Step (25) Variance Calculation KKS2

Step (26) CO02 (Full list)-Testing

Step (27) Settlement (KO88)

Step (28) TECO Production Order (CO02)

Step (29) Close Production Order (CO02)

 1) Create Settlement Profile (OKO7)

In the settlement profile, we define a range of control parameters for Settlement. We

must define the settlement profile before we can enter a settlement rule for a sender.

If we want to settle variances to Profitability Analysis, we must also set the Variances
indicator and allow settlement to a profitability segment.

Let us create a settlement profile for the production order, after that it must be
Saved in the order type.
1) Check Order Type (KOT2)

In this step we will assign settlement profile to order type.

2) Define Cost Accounting relevant Default Value for order type(okz3)

In this step we will assign RA Key and prod order Actual and Plan.
3) Change Material Master (MM02)
4) I) Create Production Order(CO01)
II) Release production order (CO02)
5) Initial Stock Posting (MB1C)

This is the process of uploading the opening initial stocks in to the system at
appropriate storage location.
5) Create Purchase Order(ME21N)
8) Goods Receipt (MIGO)

9) Check Material Master (MM02)

After Receipts of goods go to MM02 and check, you will see that Moving avg price
will be updated.

10) Stock Overview (MMBE)

11) Issue Raw Material to the Production (MB1A)

Goods issue is the process of issuing material from stores. Inventory is reduced
from the stock when making the goods issue.
12) Check Accounting Entry (MB03)
II) Product Cost Report (KKBC_ORD OR COO3)

Target Cost=Planned Qty * Standard Price

Planned Cost=Planned Qty*Actual Price

Actual Cost=Actual Qty*Actual Price

13) Activity Confirmation for Production Order (CO11N)

Do the same process for operation 0010, 0040, and 0050
13) Actual Overhead Calculation (KGI2)(CO43)
14) Production Receipt (MB31)
15) Work in Process Calculation (KKAX)
 This transaction code is used to calculate WIP for an individual production
order. In the product cost by order component, the work in process is valued
at actual cost. Work in process is the difference between the debit and credit
of an order that has not been completely delivered. This method determines
the work in process for each production order by calculating the difference
between the actual cost incurred and the actual cost settled( that is , the
difference between the debit for goods issues, internal activity allocations, and
overhead on the one hand, and the credits for goods receipt on the other)

The status of the order determines whether WIP calculations creates or

cancels the work in process. If the order has the status REL (released) the
system can calculate work in process. Once the order receive the status DLV
or TECO, the work in process calculated in a previous period is cancelled.

Here system will calculate work in process only; it will not post to FI. It will be
posted at the time of settlement.
16) VARIANCE CALCULATION (KKS2)(KKS1)

SAP Menu-Accounting-Controlling Product Cost Controlling-Cost Object Controlling-

Product Cost By Order-Period End Closing-Single Function-Individual Processing
Error as Order Status is not Delivery or TECO.

17) SETTELEMENT- (KO88)

Production order needs to be settled at the month end. This transaction is used to
settle individual production order.

During production order settlement, either work in process (if incomplete

delivery) or variance (if complete delivery) is posted. If variance is posted,
any WIP posted before will be reversed.

ERROR-OKG9 –Activate transfer to FI Indicator

18) Balance Qty Receipt (MB31)

Note: - Follow the same process as done before

19) WIP Calculation (KKAX)

Here the value of WIP is zero, because there is nothing under process, and we have
already received 100 qty, Even though 0, we have to run WIP, Ignore warning
Message.

20) Testing (CO02)

Here you will see the production order has delivery status.

21) Variance Calculation (KKS2)

This transaction is used to calculate variance on an individual production order.

Variance is 0 if only partial Goods Receipts have been performed.

Variances are posted if only complete Goods Receipts have been performed.

22) Final Settlement (KO88)

23) TESTING (KOB1)
After Settlement of production order, the value of production order will be zero
24) COMPLETE PRODUCTION ORDER (CO02)
24) CLOSE PRODUCTION ORDER (CO02)
THANK YOU
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