The Cost Object Controlling component is designed to answer the question: "What costs have been incurred for which objects?" To answer this question, the component assigns the costs incurred in the company to the company’s output. The output of a company can consist of materials manufactured in-house, individual orders, or intangible goods.

This component offers real-time cost management functions that determine the cost of goods manufactured in all plants.

The Cost Object Controlling component enables you to determine the cost of goods manufactured or the cost of goods sold for the manufacturing or service output of the company.

You can:

• Establish planned costs (budgeted costs)
• Record actual costs for the cost objects
• Compare actual costs with target costs and with planned costs, and analyze variances
• Determine price floors for products or individual orders

You can use the functions of Cost Object Controlling by lot or by period.

Cost Object Controlling supplies basic information for the following business functions:

• Price setting and general price policy
• Inventory valuation
• Cost of goods manufactured
• Profitability analysis
• Profit Center Accounting

Here are some of the ways you can utilize the Cost Object Controlling component:

• To determine whether the actual cost of an order matched or exceeded the planned cost
• To determine the production variances between actual costs and target costs, and why these occurred
• To decide whether to accept a particular sales order (whether the sales order will be profitable or not)
• To determine where your company has particularly low costs and therefore which cost objects it should concentrate on
• To decide whether it would be more profitable to manufacture a cost object in-house or to outsource it

• To determine whether and how the cost of goods manufactured can be optimized

Cost Object Controlling also can provide special information on:

• The cost of unplanned scrap
• Cost savings resulting from new production methods
• Cost behavior during capacity bottlenecks

The cost of goods manufactured for finished products and the work in process calculated for orders can be used to capitalize the inventories in your balance sheet.

Before you use the Cost Object Controlling (CO-PC-OBJ) component in the R/3 System, you establish the planned (budgeted) costs for each product in a cost estimate. You can use various costing methods in Product Cost Planning (CO-PC-PCP) for this purpose.

Cost Object Controlling accesses master data and transaction data in Production Planning (PP), Production Planning - Process Industries (PP-PI), Materials Management (MM), Sales and Distribution (SD), and Overhead Cost Controlling (CO-OM).

You can view the data of Cost Object Controlling in the Product Cost Controlling Information System (CO-PC-IS).

When you settle, you can transfer the data of Cost Object Controlling to other components in the system:

• Actual Costing / Material Ledger (CO-PC-ACT)
• Financial Accounting (FI) for purposes such as capitalizing unfinished and finished products and automatically creating reserves
• Profitability Analysis (CO-PA) to analyze the costs by market segment
• Profit Center Accounting (EC-PCA) to analyze the results by profit center

All postings of actual data that refer to a cost object result in an immediate debit of the cost object.

The closing activities at the end of the period allow you to do the following:

• Revaluate activities at actual prices
• Allocate overhead using template allocation and by defining overhead rates for cost objects
• Determine the work in process (the value of unfinished goods)
• Determine the variances between target costs and actual costs
• Transfer the calculated data to other objects and application components
• Compile periodic reports on a regular basis

In the R/3 System, you can analyze planned costs, target costs, actual costs, and quantity information at various levels, such as that of the plant, product group, or individual cost objects. The data are always available in real time.

Drilldown capabilities enable you to access detailed information.

The sections following this one tell you:

• Which cost objects you can use in the R/3 System

• The relationship between Product Cost Planning and Cost Object Controlling
• Which master data you use
• The different forms of Cost Object Controlling available

This documentation also provides detailed background information on the functions provided in Cost Object Controlling and the different scenarios available.

Cost Object Controlling in the R/3 System is divided into the following subcomponents:

For detailed information on creating material cost estimates, such as for the purpose of calculating the standard costs of your materials, see the document Product Cost Planning.

For detailed information on evaluating data in the information system, see the document Product Cost Controlling Information System.

The present documentation does not contain detailed information on cost accounting for projects. For information on cost accounting in engineer-to-order environments, refer to the document Project System.