Product Costing Accounting in SAP FI/CO

Product costing is used to calculate the cost of goods sold and manufactured for each unit of goods manufactured.
It is used to keep the track of cost at each and every point of production.

Costing sheet , cost component, Activity types and cost elements are used for product costing.

Costing sheet is used for the overheads purposes.
Cost Component is used for the breaking of expenses into various cost elements for more transparency of the cost structure.
Activity types are defined as per cost center.

The cost component split will give the transparency on the cost incurred on different levels such as machinery set up cost, labor costetc.

BOM is used to know the quantity of the material used for the production. Routing is used to define the sequence of steps required to perform certain operations. For Eg How many labor hours will be required for a finished product etc.

The entries which flow for product costing are as follows:

For Material issue

Raw Material Inventory(Credit)
To Raw Material Consumption (Debit)

Activities Performed

Respective cost center (Credit)
To Set Up cost (Debit)
Machining Cost (Debit)

Good Receipt

Cost of Production (Credit)
To Inventory of Finished Goods (Debit)

Please note that this entry will come from MM module and at Standard Price.

Settlement Of Production Order

Cost of Production( Variance)
To Price Difference Account

Post goods Issued

Inventory of Finished Goods (Credit)
To Cost of goods Sold (Debit)

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SAP CO Consultant Certification

Certification Test
SAP Consultant Certification Solution Consultant Financials -
Management Accounting with my SAP ERP 2005

Software
* Software components: SAP ERP Central Component 6.0

Number of Questions
80

Duration
180 minutes

Notes

* Please note that you are not allowed to use any reference
materials during the certification test (no access to online
documentation or to any SAP system).
* The certification test Solution Consultant Financials -
Management Accounting with my SAP ERP 2005 verifies the knowledge in
the area of the mySAP ERP Financials for the consultant profile
Management Accounting. This certificate proves that the candidate has
a basic understanding within this consultant profile, and can
implement this knowledge practically in projects.

Competency Areas
The following list helps you to identify the competency areas covered
in this test. The percentage indicates the portion of the test
dedicated to a particular competency area.

Competency

Material Cost Estimate With Quantity Structure
Analyses and error handling TFIN20 AC505
BOM TFIN20 AC505
BOM and task list determination TFIN20 AC505
Cost component split TFIN20 AC505
Costing variant TFIN20 AC505
Create costing run TFIN20 AC505
Overhead costing sheet TFIN20 AC505
Price update TFIN20 AC505
Routing TFIN20 AC505

Cost Center Accounting / Profit Center Accounting
Account assignment help TFIN20 AC405
Accrual calculation TFIN20 AC405
Adjustment postings TFIN20 AC405
Assessment TFIN20 AC405
Direct activity allocation TFIN20 AC405
Distribution TFIN20 AC405
Integrated plan allocation cycle TFIN20 AC405 AC040
Introduction to planning in Management Accounting TFIN20 AC405 AC040
Master data cost elements, cost centers, activity types and stat
TFIN20 AC405
Organizational units TFIN20 AC405 AC040
Periodic reposting TFIN20 AC405 AC040
Planning methods in cost center planning TFIN20 AC405
Profit center assignment TFIN20 AC610
Profit center master data TFIN20 AC610
Reconciliation ledger TFIN20 AC405
Recording primary postings TFIN20 AC405

Cost Object Accounting: Make-to-Stock Production with Periodic C
Decoupling scenarios TFIN22 AC520
Period-end closing for periodic Controlling TFIN22 AC520
Preliminary costing on cost object TFIN22 AC520
Product cost collector TFIN22 AC520
Simultaneous costing on cost object TFIN22 AC520
Cost Object Controlling: Make-to-Stock Production with Order Con
11-20%
Cost objects with order view TFIN22 AC520
Period-end closing with order Controlling TFIN22 AC520
Preliminary costing of cost objects TFIN22 AC520
Simultaneous costing TFIN22 AC520


Cost Object Controlling: Sales-Order-Related Production
Delivery and billing documents TFIN22 AC520
Period-end closed with product cost by sales order TFIN22 AC520
Preliminary costing of sales order TFIN22 AC520
Sales order as cost object TFIN22 AC520
Simultaneous costing of sales order TFIN22 AC520


Material Cost Estimate Without Quantity Structure
Base object costing and simulation costing TFIN20 AC505
Material master - fields relevant to costing TFIN20 AC505
Multiple-level unit costing TFIN20 AC505
Single-level unit costing TFIN20 AC505

Overhead Cost Orders
Billing for overhead cost orders TFIN20 AC405
Budgeting and availability control TFIN20 AC405
Commitments management TFIN20 AC405
Master data maintenance TFIN20 AC405
Overhead rates on overhead cost orders TFIN20 AC405



Source:
http://www.sap.com/services/education/certification/

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Controlling Terms in SAP CO

Controlling Area: An organizational unit within a company, used to represent a closed system for cost accounting purposes. A controlling area may include single or multiple company codes that may use different currencies. These company codes must use the same operative chart of accounts.

Cost center std Hierarchy : Indicated hierarchy of cost center groups in which all cost centers in a controlling area are gathered together.

Cost element : A cost element classifies the organization's valuated consumption of production factors within a controlling area. A cost element corresponds to a cost-relevant item in the chart of accounts.

Primary cost element: A cost element whose costs originate outside of CO and accrual costs that are used only for controlling purposes

Secondary cost element: A cost element that is used to allocate costs for internal activities. Secondary cost elements do not correspond to any G/L account in Financial Accounting. They are used only in Controlling and consequently cannot be defined in FI as an account.

Cost element category: The classification of cost elements according to their usage or origin.

Examples of cost element categories are:

• Material cost elements
• Settlement cost elements for orders

Cost elements for allocating internal activities

Reconciliation ledger: A ledger used for summarized display of values that appear in more detailed form in the transaction data.

The reconciliation ledger has the following functions:

• Reconciles Controlling with Financial Accounting: The reconciliation ledger provides reports for monitoring the reconciliation of Controlling with Financial Accounting by account.

• It can identify and display value flows in Controlling across company code, functional area, or business area boundaries

• Provides an overview of all costs incurred : Reconciliation ledger reports provide an overview of the costs and are therefore a useful starting point for cost analysis. For example, an item in the profit and loss statement from the Financial Information System (FIS) can be examined in the reconciliation ledger reports with respect to the relevant costs. For more detailed analysis, reports from other components within Controlling can be accessed from the reconciliation ledger reports.

Cost Center: An organizational unit within a controlling area that represents a defined location of cost incurrence.

The definition can be based on:

• Functional requirements

• Allocation criteria

• Physical location

• Responsibility for costs

Cost center category: An attribute that determines the type of cost center.

Example

• F - Production cost center
• H - Service cost center

Controlling area: An organizational unit within a company, used to represent a closed system for cost accounting purposes.

A controlling area may include single or multiple company codes that may use different currencies. These company codes must use the same operative chart of accounts.

All internal allocations refer exclusively to objects in the same controlling area.

Statistical key figure: The statistical values describing:

• Cost centers
• Orders
• Business processes
• Profit centers

There are the following types of statistical key figures:

• Fixed value - Fixed values are carried forward from the current posting period to all subsequent periods.
• Total value -

Totals values are posted in the current posting period only

Activity type: A unit in a controlling area that classifies the activities performed in a cost center.

Example

Activity types in production cost centers are machine hours or finished units.

Allocation cost element : A cost element used to illustrate activity allocation in terms of values. The allocation cost element is a secondary cost element , under which the activity type or business process is allocated.

The allocation cost element is the central characteristic used in all CO postings. It is therefore also an important criterion for reporting - for example, many reports are structured according to the posted cost elements.

Assessment cost element: A secondary cost element for costs that are assessed between Controlling objects.

Reposting: A posting aid in which primary costs are posted to a receiver object under the original cost element (the cost element of the sender object).

Repostings are used to rectify incorrect postings. The following methods are available:

• Transaction-based reposting -

Each posting is made in real time during the current period.

• Periodic reposting -

Produces the same results as transaction-based reposting. The costs being transferred are collected on a clearing cost center and then transferred at the end of the period according to allocation bases defined by the user.

Distribution: A business transaction that allocates primary costs.

• The original cost element is retained in the receiver cost center.
• Information about the sender and the receiver is documented in the Controlling document.

Assessment: A method of internal cost allocation by which you allocate the costs of a sender cost center to receiver CO objects (such as orders and other cost centers) using an assessment cost element.

The SAP System supports the following:

• Hierarchical method (where the user determines the assessment sequence)
• Iterative method (where the SAP System determines the sequence of assessment using iteration).

Example:

The costs from the cafeteria cost center could be assessed based on the statistical key figure "employee", which was set up on the receiver cost center.

Receiver cost center I has 10 employees, receiver cost center II has 90. The costs of the cafeteria cost center would be transferred (assessed) to receiver cost center I (10%) and receiver cost center II (90%). The credit on the cafeteria cost center and the debit of the two receiver cost centers are posted using an assessment cost element. Depending on the system setting, the total costs or some of the costs for the cafeteria cost center would be

Internal order: An instrument used to monitor costs and, in some instances, the revenues of an organization.

Internal orders can be used for the following purposes:

• Monitoring the costs of short-term jobs
• Monitoring the costs and revenues of a specific service
• Ongoing cost control

Internal orders are divided into the following categories:

• Overhead orders - For short-term monitoring of the indirect costs arising from jobs. They can also be used for continuous monitoring of subareas of indirect costs. Overhead orders can collect plan and actual costs independently of organizational cost center structures and business processes, enabling continuous cost control in the enterprise.

• Investment orders - Monitor investment costs that can be capitalized and settled to fixed assets.

• Accrual orders - Monitor period-based accrual between expenses posted in Financial Accounting and accrual costs in Controlling.

• Orders with revenues - Monitor the costs and revenues arising from activities for partners outside the organization, or from activities not belonging to the core business of the organization.

Order type: A tool that categorizes orders according to purpose.

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.

Example

• Production orders
• Maintenance orders
• Capital investment orders
• Marketing orders

•  

Cost of sales accounting: A type of profit and loss statement that matches the sales revenues to the costs or expenses involved in making the revenue (cost of sales).

The expenses are listed in functional areas such as:

• Manufacturing
• Management
• Sales and distribution
• Research and development

Cost of sales accounting displays how the costs were incurred. It represents the economic outflow of resources.

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