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74665885 Product Costing

74665885 Product Costing

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Published by Haritha Ananthula

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Published by: Haritha Ananthula on Nov 17, 2012
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This is used for valuation of inventories i.e. Finished goods and Work in progressPP ModuleMM Module|FI Module|
Product costingCO Module| Note: SAP lab :Product costing made easy BPB publication –Not covered product costingCrate a cost estimate with quantity structureCost element with quantity structureAt standard cost In the month end we get actual costVariable will be settled to accounts
How standard cost will be arrived at :
Sales budget for next month
Production budget
Material requirement Planning||(Make to orders (confirmed orders)(This is same men budget) +And make to stock (expected orders))Overhead planning =Standard costCost sheet for the product BILFG1Raw materials xxRaw material overheadsxxProduction costs xxCost of goods manufactured (COGM) xxAdministration ExpensesxxSales & Distribution exp.xx----Cost of goods sold (COGS)xxTo check with client at what level he wants to value stocksAt COGM level or At COGM +Admin level
Raw material standard cost
For each product –we find out materials requiredFor BILFG1 We required BILRM1BILRM2MM Module :Material Master Accounting view –moving average priceBIL RM175BILRM2125
PP Module:
Bill of Material (BOM)To produce BILFG1 what materials are required and how much quantity
BILRM11KgBILRM21KgRaw material standard cost =Quantityfrom BOM (PP)*Rate from Material Master (MM)(1*75)+1*125)=200
Raw material overheads
Overheads like freight charges :At the time of receipt it will be added to material –At the timeof consumption the material cost includes freight also.Overhead like loading and unloading normal amounts change directly to P & L accountclients will tell us-how much percentage can be taken on raw material cost (consumption.)5% of raw material costsEg: 250*5%=12.5
Production costs:
Cost centers in PP Module :Work centersDept ADept B Dept CDept DDept ADept B Dept CDept DRaw material IssueIssue Issue finished productAll products need not go through all the DepartmentsProcess flow for each product in PP module we call as routing.PP Module: Routing (Process flow)Dept ADept BDept DRaw material IssueIssue Finished productWages300000Salaries 100000Power320000-------Planned cost720000=====Planned hours availableMachines 100 working for 3 shifts (24 Hours ) No.of days 30 Days100*30*24=72000Machine hour rate720000/72000=10 Rs(Activity type)To ProduceBILFG1Hours required 5HrsProduction cost 10*5=50
Production cost : (Hours required in Dept A * Machine hour rate)+(Hours required in DeptB* Machine hour rate )+ (Hours required in Dept D * Machine hour rate)Example :Why can’t we allocate based on productionProduction QtyHrs ReqCostBILFG1999 Kgs1BILFG21 Kg999-----------10001000720000If we allocate cost based on productionBILFG1720000*999/1000=719280BILFG2720000*1/1000=720--------720000======If we allocate cost based on hours requiredBILFG1720000*1/1000=720BILFG2720000*999/1000=719280-----------720000========
1.Creation of 2 secondary cost elements (Use Tr.code is KA06)
A)RM overhead rateB)Activity allocationGive the cost element 1200000Valid from 01.04.2008 to 31.12.9999Enter Give the name and description :RM Overhead rateCost element category : Select 41 overhead ratesSaveCost element :1200001Enter  Name and description :Activity allocationCost element category :select 43 Interval activity allocation

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