Product Cost by Period
The application component Product Cost by Period enables periodic analysis of costs at the product level.
In contrast to Product Cost by Order in which you analyze costs by lot, in Product Cost by Period you analyze costs by period. This means that you collect the costs on a cost object over an extended period of time, and analyze the debits and credits in each period.
You can use the following cost objects in Product Cost by Period:
Product cost collectors enable you to collect costs at the product level independently of the production type. Regardless of whether the production environment is order-related production, process manufacturing, or repetitive manufacturing, you collect the production costs for the product on a product cost collector and analyze the costs in each period.
- Cost object hierarchies with their cost object nodes and assigned objects (such as materials)
You can use cost object hierarchies in addition to product cost collectors. Costs that cannot be assigned directly to particular orders (usually product cost collectors) can be collected at higher levels by means of a cost object hierarchy. In this case, the costs are collected on cost object nodes in the cost object hierarchy. You can structure cost object hierarchies in different ways, for example according to product group or area of responsibility. This enables you to collect costs according to how closely the costs are related to the product. All orders assigned to a cost object hierarchy must be settled in each period.
You can also periodically analyze and settle costs for manufacturing orders. However, it is recommended that you settle manufacturing orders by lot rather than by period. If you want to settle costs by period, you should use a product cost collector. If you want to collect and analyze costs directly on manufacturing orders, read the information under Product Cost by Order.
You can use the Product Cost by Period component for the following purposes:
- Create a preliminary cost estimate for product cost collectors
- Calculate and analyze target costs and actual costs for product cost collectors and cost object hierarchies
- Calculate or update the work-in-process inventory and the finished goods inventory
- Calculate and analyze variances for each period
- Transfer data to Financial Accounting (FI)
- Transfer data to Profitability Analysis (CO-PA)
- Transfer data to Profit Center Accounting (EC-PCA)
- Transfer data to Actual Costing/Material Ledger (CO-PC-ACT)
You can use the Product Cost by Period component in the following production environments:
- Make-to-stock production Mass production based on sales orders if you are using a valuated sales order stock and the production environment is repetitive manufacturing
You normally use the Product Cost by Period component in the following situations:
- Repetitive manufacturing environments
In repetitive manufacturing environments, you always collect and analyze your costs on product cost collectors.
- Make-to-order or process manufacturing when you are not interested in managing your costs at the order level In this case, instead of using the manufacturing orders as the basis for Cost Object Controlling, you create a product cost collector.
- When you have costs that you cannot (or do not want to) assign to particular orders
You then assign these costs to the cost object nodes in a cost object hierarchy.
For general information on Cost Object Controlling, refer to the sectionCost Object Controlling.
You can use both the Product Cost by Period component and the Product Cost by Order component in conjunction with theProduct Cost by Sales Order component.
When production orders or process orders are assigned to a cost object hierarchy, you use theProduct Cost by Order component in conjunction with the Product Cost by Period component.
You can see the costs in the Product Cost Controlling Information System (see also:Information System for Product Cost by Period).
You analyze the costs of product cost collectors in the Product Cost by Period component. Product cost collectors enable realization of lean cost management scenarios that are not integrated with the logistics components.
The use of product cost collectors does not prevent you from performing logistical functions on the manufacturing order or production version (such as goods issues, confirmations, and goods receipts). The costs incurred from the logistical transactions are updated directly on the product cost collector.
- You enter reporting point backflushes in repetitive manufacturing. The product cost collector is charged with actual costs.
- You create a goods receipt in repetitive manufacturing. The product cost collector is credited.
If you are in a sales-order-related production environment and are using a valuated sales order stock in repetitive manufacturing, you can collect the costs for individual requirements materials on product cost collectors. (See also:Product Cost Collectors in Sales-Order-Related Production)
You can use cost object hierarchies in addition to collecting costs at the level of product cost collectors. You can distribute the costs assigned to the cost object nodes to the orders on the basis of keys. You can then calculate and analyze the variances on the orders. It is also possible to calculate the variances on the cost object nodes instead of distributing the costs.
In the Product Cost by Period component you always calculate the work in process at target costs. All orders used in the Product Cost by Period component have the settlement type PER (periodic).
You can do the following at the end of the period:
- Allocate process costs to product cost collectors and to the cost object hierarchy.
- Revaluate activities and business processes at actual prices
- Allocate overhead
- Distribute the actual costs if you are using a cost object hierarchy
- Calculate work in process for the product cost collector
- Calculate variances for the cost object hierarchy or for the product cost collector
- Transfer data to other application components such as FI, EC-PCA, CO-PA, and CO-PC-ACT
Period-based cost analysis at the level of manufacturing orders is not recommended. At the level of manufacturing orders, you should analyze lot-based costs in the Product Cost by Order component.
In sales-order-related production, product cost collectors are possible if you are using a valuated sales order stock and the production environment is repetitive manufacturing. If you are manufacturing on the basis of production orders and process orders in sales-order-related production, you cannot use product cost collectors as cost objects.
You cannot use the Product Cost by Period component together with the Product Cost by Sales Order component in sales-order-related production environments when you are using anonvaluated sales order stock. The reason for this is that all orders in which the sales order item is the settlement receiver have the settlement type FUL (full settlement).
Recommendations for repetitive manufacturing environments are provided in the following section:Recommendations and Notes for Repetitive Manufacturing Environments
For detailed information on the Product Cost Controlling Information System, see the documentationProduct Cost Controlling Information System.
For detailed information on Profitability Analysis (CO-PA), see the document CO Profitability Analysis.
For detailed information on Profit Center Accounting (EC-PCA), see the document EC Enterprise Controlling.