You can use the Product Cost Planning functions to calculate the cost of goods manufactured (COGM) and cost of goods sold (COGS) for products such as materials and services. The costs may then be analyzed and business decisions (such as "make or buy" decisions) made.

The cost of goods manufactured is composed of material and production costs, process costs and overhead (such as material and production overhead). The cost of goods sold consists of the cost of goods manufactured together with sales and administration overhead costs.

The following graphic shows how the COGM and COGS are calculated using Product Cost Planning:

To calculate the COGM and COGS for materials, you can execute a material cost estimate (with or without quantity structure). For further information, see the following:

To calculate the COGM and COGS for products that do not have any master data (such as services or materials at the planning stage), you can avail yourself of the Reference and Simulation Costing functions. For further information, see the following:

Before costing, check all the settings in Customizing for Product Cost Planning that apply to the calculation of costs. For further information, see the following:

You can use the following reports in the Product Cost Controlling Information System to analyze the costs: