Cost Component Splits

Cost Component Splits

Definition

A user-defined grouping of costs that divides the costs of the materials into cost components and reflects all the production levels.

The amount of cost components is the same for each material, thus providing a valuable comparison of the cost estimates. The cost component split provides the basis for an analysis of the value added at each stage of the production process.

Use

The cost component split enables you to do the following:

Analyze the cost origin over more than one production level
Display costs in accordance with the requirements of other areas of the R/3 System (such as material valuation or profitability analysis)

To this end, cost component views are created that display, for instance, cost components relating to stock valuation, or the cost of goods sold.

Costing enables you to analyze the value added within a multilevel production structure. You break down the costs for each material with a BOM according to the upper level and lower level.

You display the cost component split by choosing Costs ® Display cost components. You can break down the costs for each material according to the upper level and lower level. You can make this setting by choosing Settings ® Display variant ® Current… ® Characteristics. You can create your own report using a wide range of selection parameters.

If you display the costs for the

Upper level, you see the production costs, the overhead costs and external labor costs that are expected for this production level.

Lower level, you see the costs of all the material components that are processed at this production level.

In both cases, the costs are broken down into cost components. The total costs for the upper level and the lower level equals the total costs for the production level concerned.

When the costs are broken down into cost components, the origin of the costs, such as material costs or fixed and variable production costs, remains at each manufacturing level. At each manufacturing level, the cost component split separates the value added of that level from the costs of the lower level.

Furthermore, the cost components can be viewed in various forms, as in the cost of goods sold or cost components relating to stock valuation. You can also specify that the costs are to be updated as an itemization.

You can display the costs as a cost component split for the cost of goods manufactured, and/or a primary cost component split.

Cost components splits for the cost of goods manufactured and primary costs can be calculated in parallel. If you choose Settings ® Type of cost component split, you can switch between both structures. However, you can only generate either a cost component split for cost of goods manufactured, or a primary cost component split.

If you want to calculate both cost component splits in parallel, you must define in Customizing for Product Cost Controlling which cost component split is the upper level. At the same time, you can create a further cost component split as an auxiliary cost component split, in order to compare one with the other.

The update of the standard price in the material master is carried out with the upper level.

An itemization is created for the leading cost component split only.

When you save a material cost estimate or a costing run, the system automatically updates a cost component split for every material that was costed.

When you save a material cost estimate, a dialog box appears in which you can specify which costing results you want to save.

This dialog box is suppressed if the Defaults can be changed by user indicator was not set in the costing variant in Customizing for Product Cost Planning. In this case, the system automatically saves the costing results that were flagged to be saved in the costing variant.

When you create a costing run, you enter update parameters that specify which costing results you want to save.

You can find further information about saving the costing results under Saving the Costing Results.

If you want to generate a cost component split for raw materials and purchased parts, you can create additive cost components for these costs for each material. You can then group these cost components in an external procurement cost component structure that contains only such costs. You can find further information under Additive Costs.

For more information about costing results, see the R/3 Library in the Product Cost Controlling Information System under Cost Components.