SAP Business One Notes

2328690 - Actual Production Cost calculation

Component: SBO-PP-PRO (Production Order), Version: 2, Released On: 20.06.2017

Symptom
Actual Production Cost is displayed in the Production Order window, Summary tab. Its the total value of all received product
quantity (qty) from the production order. Actual product cost = cost per component * expected component usage quantity.

The calculation of the expected component usage quantity is based on the completed products that may be equal to or
different from the component issued quantity for the product order. When the two quantities differ, a variance appears.
Expected component usage quantity = planned component quantity * (actual parent completed quantity / planned parent
quantity).
Actual Production Cost calculation for a product item managed by a non-standard valuation method will differ according to
the valuation method used for component items in different scenarios.

Reproducing the issue

The calculation of non-standard Actual Production Cost is mostly covered by the following scenarios:
Scenario 1:
If no component quantity has been issued when creating Receipt from Production, system will use the current component
cost for MAP or Standard component, the successive layer cost for FIFO component, and zero cost for Serial/Batch valuated
component for the Actual Product Cost calculation.
1. Create and release production order:
production item P1, planned qty 4
component item C1, planned qty 10, issue method "manual"
2. Add Receipt from Production, with qty 1 of production item P1.
System will first calculate the expected component usage quantity as 2.5 for component C1. (= planned component
quantity * (actual parent completed quantity / planned parent quantity) = 10*(1/4) = 2.5)
Based on the component valuation method and cost, the Actual Product Cost is calculated:
Cost Valua Component cost Calculation Actual Prod
tion Metho uct Cost
d

Standard 10 = cost_per_component*expected_component_usage 25
_quantity
= 10*2.5

Moving Av cumulative value 10, cum =component_cumulative_value /component_cumulat 12.5

erage ulative qty 2 ive_quantity * expected_component_usage_quantity
= 10/2*2.5

FIFO layer #1 qty 1, cost 10, System will use the successive open layer’s cost to calc 40
layer #2 qty 2, cost 20, ulate Actual Product Cost as 45.
layer #3 qty 3, cost 30. (= 1 quantity from 1st layer +1.5 quantity from 2nd lay
er = 1*10+1.5*20 = 40)

Serial/Bat No matter what cost System will calculate zero Actual Product Cost. 0
ch
Scenario 2:
If issued a sufficient amount or more component qty than the expected component usage qty corresponding to the product
qty in the Receipt from Production, system will find the cost of the components that were issued and not used for earlier
completed production. Thus, it uses them in the calculation of the product cost.
1. Create and release production order:
production item P1, planned qty 4
component item C1, planned qty 10, issue method "manual"
2. Add Issue for Production to issue qty 6 of component C1.
3. Add Receipt from Production, qty 2 of product P1.
System will first calculate required qty 5 of component C1. (= planned component quantity * (actual parent
completed quantity / planned parent quantity) = 10*(2/4) = 5)
Regardless of the current component cost, the Actual Product Cost is calculated using the total cost of the expected
component usage quantity of the component that was issued:
Note: Between the Issue for Production and the Receipt from Production, some other transactions were done
with the component, therefore the component cost at the time of issue and its current cost at the time of
receipt can differ.
Cost Valua Component cost Calculation: total cost of the required qty of co Actual Prod
tion Metho mponent uct Cost
d

Standard 6 qty issued with cost 10, = cost_per_component*expected_component_usage 50

current cost is 20 _quantity = 10*5

Moving Av 2 qty issued with cost 10, system will use the total issued cost of the 5 required q 80
erage other 4 qty issued with co ty
st 20, = 10*2+20*3
current cost is 30

FIFO issued 6 qty were in 3 FI = 1 quantity from 1st layer +2quantity from 2nd layer 110
FO Layers: + 2 quantity from 3rd layer
= 10*1+20*2+30*2 = 110
layer #1 qty 1, cost 10,
layer #2 qty 2, cost 20,
layer #3 qty 3, cost 30.

Serial/Bat In this example the comp System will calculate the total issued cost of the first 5 75
ch onent is Serial Number qty component as Actual Product Cost = 5+10+15+20
managed item. +25

Issued qty 6, i.e. 6 serial

numbers:
S1 with cost 5,
S2 with cost 10,
S3 with cost 15,
S4 with cost 20,
S5 with cost 25,
S6 with cost 30

Scenario 3:
If the component item has been partially issued of the expected component usage quantity in the Receipt from Production,
system will sum up the total issued component cost and further required component cost as Actual Production Cost.
1. Create and release production order:
production item P1, planned qty 4
component item C1, planned qty 10, issue method Manual
2. Add Issue for Production to issue qty 3 of component.
3. Add Receipt from Production, qty 2 production item P1.
 System will first calculate expected component usage quantity as 5 of component C1. (= planned component
quantity * (actual parent completed quantity / planned parent quantity) = 10*(2/4) = 5)
Based on the component valuation method and cost, the Actual Product Cost is calculated:
Cost Valua Component cost Calculation: Actual Prod
tion Metho uct Cost
d

Standard Qty 3 issued with cost 10, = issued component cost + further required componen 70
later Material Revaluatio t cost
n document changed the = 10*3+20*2
item cost to 20.

Moving Av Qty 3 issued with cost 10, = issued component cost. + further required compone 90
erage later some transactions c nt cost
hanged the item cost to 3 = 10*3+30*2
0

FIFO Issued qty 3 from 2 FIFO = issued component cost + further required componen 120
Layers: t cost
layer #1 qty 1, cost 10, = (10*1+20*2) + (30*1+40*1)= 50+70
layer #2 qty 2, cost 20.

Current open layers:

layer #3 qty 1, cost 30,
layer #4 qty 2, cost 40.

Serial/Bat Issued 3 qty: = total issued component cost / issued component qty 50
ch S1 with cost 5, * expected_component_usage_quantity
S2 with cost 10, = (5+10+15)/3*5 =50
S3 with cost 15.
* System only considers the issued component cost, n
Other open qty cost: o matter what cost the current open qty is.
S4 with cost 20,
S5 with cost 25,
S6 with cost 30.

Note: In all of the above scenarios, if you issue (additional) components later, while closing the production order, the Actual
Production Cost will be updated according to the Actual Component Cost.

Solution
This is to provide examples of Actual Production Cost calculation for better understanding of the system behavior for different
valuation methods in various scenarios.

Other terms
Actual Production Cost, variance, valuation method, cost calculation, costing, manufacturing

Attributes
Key Value

Other Components SBO-MM (Inventory)

 Products
Products

SAP B1 VERSION FOR SAP HANA all versions

SAP BUSINESS ONE all versions

This document is referenced by

SAP Note/KBA Component Title

2962133 Variance Calculation and Variance Report in Production Order

2727909 SBO-PP FAQs Related to Production Costing and Production Process