3 - Basics of SAP Standard Cost Estimate - Understanding Costing Variant-Part 2 - SAP Blogs

8/24/2018 Basics of SAP Standard Cost estimate- understanding costing variant-Part 2 | SAP Blogs
Products
Products Industries
Industries Support
Support Training
Training Community
Community Developer
Developer Partner
Partner
About
About
 
Home / Community / Blogs + Actions
Basics of SAP Standard Cost estimate-

understanding costing variant-Part 2
November 19, 2013 | 26,024 Views |
Hrusikesh Dalai
more by this author
FIN Controlling
FIN (Finance) | MAN Production Planning (PP) | SAP Business Process Management | SAP
ERP | accelerator | accounting | alv | available | bapi | beginner | bp
share
0 share tweet share
Follow RSS
https://blogs.sap.com/2013/11/19/basics-of-sap-standard-cost-estimate-understanding-costing-variant-part-2/ 1/26
This document is in continuation of my rst document Basics of SAP

Standard Cost estimate- Understanding the ow of cost settings-Part 1
http://scn.sap.com/docs/DOC-48908. This is basic and structural way of
documenting the steps involved in de ning Costing Variant.
This document explains the costing Variant con guration 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 ows to a standard
cost estimate. Explaining various settings in background as previous part.
Costing Variant
T CODE OKKN- De ne Costing variant and name it. For analysis purpose we
are taking PPC1.
Screenshot 1
Then double click on PPC1 and con gure 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 de ne 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 con guration, We will understand the

importance of Di erent tabs.
For Material valuation,Internal Activity,Sub-Contracting, Overhead and

Misc.
Screenshot 5
If you want to use di erent valuation strategies or di erent overhead rates

in plants that belong to the same company code, you can de ne plant-
speci c 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 de ne how do we wanted our Material to be valuated Strategy

Sequence. The one above used is most commonly used however it can be
modi ed according to Business requirement.
For material valuation, you can choose up to ve (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 rst.
-In case the system did not nd 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 de ne 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 de ne 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 de ne 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 de nition 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 speci c overhead conditions for raw
materials.
If you want to di erentiate overhead application according to material

groups, you must have de ned overhead groups (T CODE OKZ2) and made
the necessary settings for the costing sheet in the step De ne 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 speci c 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 xed 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 de ne 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 de ne the quantity structure control in Customizing for Product Cost

Planning. The quantity structure control can apply to either a speci c 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

de ne 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 rst by using a selection ID.
The priority of an alternative BOM for a speci c multiple BOM, You can
control which alternative BOM the system selects as of a certain date for a
speci c material, taking into account the plant and the BOM usage. You can
use the application to determine whether the system takes this

speci cation 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 de ne automatic

selection, A PP functionality)
Screenshot 13
The routing selection ID determines how the system selects a routing. You
can de ne 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 de ne 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

de ne 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 semi nished materials are converted to
the lot size of the nished material to calculate the material costs for the
nished 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 Speci es 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 Pro tability 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 con guration 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 ow 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 ow of cost
settings-Part 1
Best Regards
Hrusikesh Dalai
Alert Moderator
35 Comments

3 - Basics of SAP Standard Cost Estimate - Understanding Costing Variant-Part 2 - SAP Blogs

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

3 - Basics of SAP Standard Cost Estimate - Understanding Costing Variant-Part 2 - SAP Blogs

Uploaded by

Copyright:

Available Formats

8/24/2018 Basics of SAP Standard Cost estimate- understanding costing variant-Part 2 | SAP Blogs

Basics of SAP Standard Cost estimate-

This document is in continuation of my rst document Basics of SAP

Then double click on PPC1 and con gure other parameters.

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

Click on create Costing type n existing or create a new one, or de ne it

2-Valuation variant– T CODE OKK4

This is most important part of con guration, We will understand the

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

If you want to use di erent valuation strategies or di erent overhead rates

Here we de ne how do we wanted our Material to be valuated Strategy

-Planned price-According Planned price in Costing 2 tab of Material master

Internal Activity Here you de ne the sequence in which the system

Subcontracting Here you de ne the sequence in which the system

External Processing-Here you de ne the sequence in which the system

If you want to di erentiate overhead application according to material

You can also specify whether overhead is calculated for subcontracted

Specify whether the factors of the relevancy to costing indicator should be

Key that controls the dates for material cost estimates.

4-Qty Structure Control-

You de ne the quantity structure control in Customizing for Product Cost

I have selected BOM application PC01 and selection ID 05 (TCODE OS30

The BOM application controls the following:

use the application to determine whether the system takes this

An alternative BOM is only exploded if the BOM status contains the

I have selected Routing 01 ( TCODE OPEB can be used to de ne automatic

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

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

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

Strategy Sequences for Single-Plant and Cross-Plant Transfer-You can

1) Do not pass on lot size

2) Pass on lot size only with individual requirement

3) Always pass on lot size

Ignore Product Cost Estimate without Quantity Structure-

Determines whether a cost estimate with quantity structure can access

As a rule, costing calculates the costs of a material on the basis of the

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

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

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

Assignments-We will know more about Cost Component Structure in

MISC.-Parameters for Error Management

Controls how messages (information messages, warning messages, and

This is a long Document i tried to capture each and every aspects of

Intention of creating this document is to reach out to the newbies and

Refer to next Document here-http://scn.sap.com/docs/DOC-49425-Basics

Refer to previous document here-http://scn.sap.com/docs/DOC-48908–

You might also like