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Understanding Results Analysis for WIP

Understanding Results Analysis Key for Calculating WIP

Introduction and Configuration Guide
Work in process (WIP) inventory forms a part of te !orking capital or current assets of a firm
appearing in teir "alance seet# Work in process or progress are partially completed goods$
parts$ or su"assem"lies tat are no longer part of te ra! materials inventory and not yet part of
te finised products inventory# %undamental Principle of International Accounting &tandard '
states tat Inventories are re(uired to "e stated at te lo!er of cost and net realisa"le value
+e guidance on measurement of cost of inventories is tat$ cost sould include all,
a) costs of purcase (including ta-es$ transport$ and andling) net of trade discounts received
") costs of conversion (including fi-ed and varia"le manufacturing overeads) and
c) oter costs incurred in "ringing te inventories to teir present location and condition
Wit &AP$ te ra! materials gets transferred to finised goods via production orders or process
order# In tis process$ typically$ te production order is created to !ic ra! materials are issued$
all activities performed in te process are carged along !it any overeads tat is apporopriate
te production order# Production is ongoing$ and it is (uite natural tat at mont end$ !e end up
!it some open production orders# &AP in its product costing functionality$ provides te feature to
calculate te value of WIP# +is !ill "e derived "ased on te careful definition of .ine I/s in line
!it te cost components# +e WIP sall "e te total de"its cost in te order as reduced "y te
credits for goods receipt#
Key elements of WIP Results Analysis Configuration#
&tep 0 /efine Results Analysis Key 1KG0#
2ere you 3ust give a name$ four letter key !it its description#
&tep ' Create cost elements of type 40 te follo!ing minimum
*aluated Actual cost$ say for eg# 556660#
Calculated Costs$ say 55666'#
WIP account 556664
WIP Reserve 556667
WIP Reserve 556668
&tep 4 /efine RA version$ 1KG5$ 9na"le +ransfer to %inancial Accounting (ceck"o-)
Under e-tended control$ you may ena"le ceck"o-es relating to

Generate line items
Update : RAkey9nter te cutoff period for actual RA:WIP$ te effective date "efore !ic any WIP
data if e-isted$ !ill not "e altered#
&tep 7 In 1KGC$ define te valuation metod for WIP#
2ere$ you specify tat WIP calculation mode is one !en te order as te staus R9.#
+e calculated WIP sall "e cancelled !en te order status canges to /.* or +9C1# ;ou
maintain tis data for C1 area$ RA version and RA key com"ination#
&tep 8 &PR1<Controlling<Product Cost Controlling<Cost 1"3ect Controlling<Product cost "y
order<Period 9nd Closing<Work in process</efine .ine I/s#
+e line I/s are similar to cost component$ tat you create during cost estimates like a) 606 for
=aterial ") 6'6 for .a"or and c) 646 for 1veread to say te least#
>esides tese$ create one more line I/ say 555 for te &ettled Cost$ !ic appear as credit !en
you make a goods receipt#

Create additional WIP type 40 cost elements and teir corresponding Reserve account for te
a"ove???? WIP =aterial 55666@
WIP =aterial Reserve 55666A
WIP .a"or 55666B
WIP .a"or Reserve 556665
WIP 1veread 556606
WIP 1veread Reserve 556600
&tep @ )o! you assign te source cost elements 1KG>$ tat are e-pected in te production
order to various line I/ as created a"ove#
;ou maintain tis data for C1 area$ RA version and RA key com"ination# ;ou use masking !en
you mention !ic cost element to "e assigned to various I/s# ;ou can also direct various cost
element$ if it comes !it a com"ination of particular cost center and activity type to a particular
.ine I/# If you need to keep it simple$ 3ust enter CCCCCCC for cost centers$ activity types and
>usiness processes# Cost elements can "e masked as follo!sD for eg# All cost primray cost
elements for materials$ if tey start from '06660 to '05555$ te you can mask tem like 666'0CC
CCC# Give te line I/ in te column Re(uired to CapitailEe#
&tep A /efine te update# 1KGA ;ou maintain tis data for C1 area$ RA version and RA key
2ere you specify !ic line I/s are to "e grouped under !ic cost elements and teir reserve
account# ;ou connect te cost elements created in step 8 to te line I/s# +e category for te line
I/s for material$ la"or and overead sall "e K$ tat stand for cost# +e line I/ 555 settled cost
sall "e maintained as category A$ (settled cost)# Wen you assign A$ you !onFt ave to maintain
any cost elements for WIP and reserve creation#
&tep B /efine posting rules for WIP calculation 1KGB
;ou do tis for Controlling area$ company code$ RA version# =aintain tis for RA category WIPR
(WIP cost$ Re(uired to "e capitaliEed) and RUCR (Reserve for unrealiEed cost)# ;ou maintain
te PG . account (canges to stock) and te "alance seet (WIP)account#+ese G:. accounts
are posted in %inancial Accounting#
&tep 5 9nsure num"er range assignment for te WIP transactions under appropriate ead
KA>G Automat# WIP:results analysis
KA>= =anual WIP:results analysis
K&WP Prim# +arget Cost Calc# (WIP)
K&W& &ec# +arget Cost Calc# (WIP)
Period end WIP calculation Process
+e process of running WIP is te tHcode KKAI for individual order processing and KKA1 for
collective order processing# +e system de"its te WIP account and credits Inventory Cange
account# +is entire WIP is reversed and a ne! entry is passed te follo!ing mont# Wen te
order is fully delivered no additional WIP entries are passed#
+e RA Key sall "e entered in te production order$ under te control ta"# +is can "e defaulted
troug order type#