Actual Costs in Cost Object Controlling

In Cost Object Controlling, actual costs for cost objects are captured during simultaneous costing.

The Product Cost by Period component records actual costs for the following objects:

Product cost collectors
Cost object hierarchies
You can record costs for the individual cost object nodes in a cost object hierarchy that you do not want to record for the manufacturing orders or product cost collectors assigned to the cost object hierarchy.

The Product Cost by Order component records actual costs for manufacturing orders (production orders or process orders).

The Product Cost by Sales Order component records actual costs for sales order items that carry costs and revenues.

The Costs for Intangible Goods and Services component records actual costs for general cost objects or for internal orders that carry revenue.

You can see the actual costs in the information system at any time, and compare them with the planned costs.

Integration

Primary costs can be allocated to cost objects in the following ways:

Through postings in Financial Accounting (FI)
Through postings in Materials Management (MM)
Through postings in Human Resources (HR)

Secondary costs can be allocated to cost objects in the following ways:

Through postings in Controlling (CO)
Through the use of time sheets (CATS)

Cost objects can also receive actual costs through confirmations in Logistics (LO). Confirmations allocate the following costs to cost objects:

Secondary costs, through internal activity allocations that are generated automatically by the confirmation
Primary costs, through material withdrawals that are generated automatically by the confirmation

This graphic is explained in the accompanying text.

Example: Allocation of Material and Production Costs to a Production Order

Prerequisites

To be able to allocate actual costs to product cost collectors and manufacturing orders (production orders and process orders), you must go into Customizing for General Controlling under Start of the navigation path Organization Next navigation step Maintain Controlling Area End of the navigation path and activate order management.

To be able to allocate actual costs to cost object hierarchies and general cost objects, go into Customizing for General Controlling under Start of the navigation path Organization Next navigation step Maintain Controlling Area End of the navigation path and set the Cost objects indicator.

To be able to allocate actual costs to sales order items, go into Customizing for General Controlling under Start of the navigation path Organization Next navigation step Maintain Controlling Area End of the navigation path and set the Sales orders indicator.

Manufacturing orders, product cost collectors, and sales order items must have the status REL (released) before they can receive actual costs (see also: Releasing Manufacturing Orders).

Check the costing variant that you have specified as a default value in Customizing for Product Cost by Period or Product Cost by Order under Define Default Values for Order Types under Simultaneous Costing. Check the associated valuation variant.

If you collect actual costs for manufacturing orders that are linked to product cost collectors, the actual costs are assigned directly to the product cost collector.

Features

Postings in FI

Postings in FI (Financial Accounting) can be entered manually, or they can be generated automatically from the goods movements in MM.

If you enter a G/L account posting in FI, this generates a corresponding posting in CO (Controlling) under the primary cost element linked to the G/L account.

An accounting document is generated in FI for each posting.

Postings in MM

Actual costs can be debited to cost objects from the following business transactions in MM (Materials Management):

Goods issues
Goods receipts for purchase orders
Invoice receipts for purchase orders

Goods movements in MM generate postings in FI automatically.

Note Note

In repetitive manufacturing, all goods movements are entered in the Repetitive Manufacturing menu. In repetitive manufacturing, goods movements are not entered in the Materials Management menu.

End of the note.

Goods Issues

Goods issues are goods movements in inventory management with which materials are withdrawn to manufacture a product. The following events take place on the basis of the goods issue:

The warehouse inventory is reduced by the quantity withdrawn.
The cost object is debited under a primary cost element.
The value of the goods issue is determined from the quantity withdrawn and the price in the accounting view of the material master record.

The price control indicator in the material master record determines whether the costs are updated at standard price or moving price.
A line item is generated in CO.
In FI, the inventory change account is debited and the inventory account is credited.
An accounting document is generated in FI.
A material document is generated in MM.

The system can also generate goods issues automatically. You can specify in the system that goods issues are to be generated automatically when a confirmation (backflush) or goods receipt is entered.

Backflushing enables the realization of lean production scenarios. Backflushes are often used in repetitive manufacturing.

Goods Receipts and Invoice Receipts for Purchase Orders

A goods receipt is a goods movement in inventory management.

Goods receipts enable you to confirm the arrival of goods.
If you are using the Purchasing application component in Materials Management, you can manually create a purchase requisition (with reference to a cost object) for trading goods, purchased parts, or external activities. The purchase requisition results in a purchase order being sent to a vendor.

In sales-order-related production when you are using a valuated sales order stock with a sales order item that carries costs and revenues, this sales order item is debited with the costs for the purchased part or trading good at the time of the goods issue for delivery to the customer.

In sales-order-related production when you are using a nonvaluated sales order stock with a sales order item that carries costs and revenues, this sales order item is debited with the costs for the purchased part or trading good at the time of the goods receipt for the purchased part or trading good.

The sales order item that carries costs and revenues is always debited directly with the costs for external activities.

In Customizing for Materials Management or for Product Cost by Sales Order under Control of Sales-Order-Related Production Check Account Assignment Categories in Account Assignment Category you can specify whether the externally procured materials are valuated at the time of the goods receipt or at the time of the invoice receipt. If the goods are received before the invoice and you have specified that valuation is to take place at the time of the goods receipt, the value of the goods receipt is calculated from the delivered quantity and the net order price. The cost object (usually the sales order item that carries costs and revenues) is debited with this amount. When the invoice is received, any difference between the order value and the invoice value is updated to the cost object.

See also: Selected Logistical Processes and Cost Objects.
Goods receipts record the transfer of materials manufactured in-house into the finished goods inventory.
When materials manufactured in-house are transferred into the finished goods inventory, the manufacturing order or the product cost collector is credited. An inventory posting is made in FI.

Note
In repetitive manufacturing, you can use reporting point backflushes, goods receipts with backflushes, and automatic activity allocations to set up a lean production environment.

You must specify in the repetitive manufacturing profile that you want to use reporting points. You do this in Customizing for Product Cost by Period under Simultaneous Costing Check Control Data for Repetitive Manufacturing Profiles .

Make sure that you have specified a control key with milestone confirmation for at least one operation. If only one operation has been defined as a milestone, it should normally be the last operation in the routing.

The reporting points can be mandatory or optional.

In sales-order-related production, you cannot enter reporting point backflushes in repetitive manufacturing.

End of the note.

Postings in PP

Confirmations

When you enter a confirmation, the system displays the default values for the quantities to be confirmed. You can overwrite these default values. The default values for the quantities to be confirmed are transferred from a quantity structure.

In repetitive manufacturing you normally use reporting point backflushes. When you confirm a reporting point, the system automatically confirms all operations before that reporting point that are larger than the previous reporting point.

You can use milestone confirmations in order-related production and process manufacturing. When you confirm a milestone, the system automatically confirms all operations before that milestone that are larger than the previous milestone.

If you are using reporting point backflushes and milestone confirmations, you must confirm the reporting points and milestones in the specified sequence. Operations that are neither a reporting point nor a milestone but have already been confirmed manually are not included in the reporting point backflush or milestone confirmation.

You can provide the last reporting point or milestone with an automatic goods receipt. You specify whether an operation is a reporting point or a milestone in the control key of the operation. You specify whether an automatic goods receipt is generated for the last operation:

In repetitive manufacturing in the repetitive manufacturing profile
In order-related production and in process manufacturing through the control key of the operation

The following quantity structures are used in the confirmation:

Selection of the routing relevant for the confirmation of activity quantities.

If you are using production orders, the routing copied into the manufacturing order is the basis for determining the default values of the quantities used.
If you are using process orders, the master recipe copied into the manufacturing order is the basis for determining the default values of the quantities used.
When activities are confirmed in repetitive manufacturing, the following routings can be included:
- The routing used in the preliminary cost estimate for the product cost collector
- The routing used in the standard cost estimate for the material
You control which routing is used for confirmations in repetitive manufacturing in Customizing for Product Cost by Period under Simultaneous Costing Check Control Data for Repetitive Manufacturing Profiles .

The system defaults the activity quantities to be confirmed on the basis of this routing.

Selection of the BOM relevant for the confirmation of material withdrawals:

The system posts a backflush (goods issue) on the basis of the following information:

In order-related production, the quantity of materials withdrawn for each operation is defaulted from the BOM in the production order.
In process manufacturing, the quantity of materials withdrawn for each phase is defaulted from the materials list in the process order.
In repetitive manufacturing, the quantity of materials withdrawn for each reporting point is defaulted from the current BOM (the BOM specified in the production version).

You can manually change the proposed activity quantities and material quantities. You can substitute other materials for the proposed materials. You can substitute other activities for the proposed activities.

In backflushes, the order is debited by a goods issue. The material quantities used are valuated with a price in the material master record selected in accordance with the price control indicator.

When activities and business processes are confirmed, the order is debited automatically by means of internal activity allocation. The price used to valuate the activities and business processes is determined by means of the valuation variant linked to the order through the costing variant for simultaneous costing. The system uses the valuation variant that is assigned to the costing variant specified in the Costing variant actual field in the manufacturing order or product cost collector. You can specify this costing variant as a default value in Customizing for Product Cost by Period or Product Cost by Order under Define Default Values for Order Types. If the receiving order is not linked to a costing variant for simultaneous costing (this is the case, for example, with production orders that do not have a quantity structure), the planned activity price of the period is used for valuation. The system uses the price in Cost Center Accounting (CO-OM-CCA) or Activity-Based Costing (CO-ABC).

Postings in CO

Overhead Cost Controlling (CO-OM) includes the application components Cost Center Accounting (CO-OM-CCA), Activity-Based Costing (CO-ABC) and Internal Orders (CO-OM-OPA). Secondary costs can be transferred to Cost Object Controlling from these application components.

Secondary costs can be caused by the following:

Internal activity allocations
Internal activity allocations reallocate costs from the cost center that generated the activity to the cost object that used the activity. The activity quantity is multiplied by the activity price and the cost object is debited under an allocation cost element.

The price used to valuate the activity is determined by means of the valuation variant linked to the order through the costing variant for simultaneous costing (see above under Confirmations). If the receiving order is not linked to a costing variant for simultaneous costing (this is the case, for example, with production orders that do not have a quantity structure), the planned activity price of the period is used for valuation.

The system can also generate activity allocations automatically. You can specify that an activity allocation is to be generated at the time of the confirmation. You can use manual activity allocations in addition to automatic activity allocations (see above under Confirmations).

Automatic activity allocations enable the realization of lean production scenarios. Automatic activity allocations with reporting point backflushes are frequently used in repetitive manufacturing.

Note
You cannot enter reporting point backflushes in repetitive manufacturing in sales-order-related production.

End of the note.
Repostings of internal activity allocations
Repostings of internal activity allocations
Template allocation
In template allocation, the activity prices are determined in the same way as with internal activity allocation.
Revaluation of activity types and business processes at actual prices
If the application component Actual Costing/Material Ledger is active and you perform actual costing, you can also debit the difference between the plan activity price and the actual activity price directly to the material. In this case you do not perform the function Revaluation at Actual Prices.

For more information, go into Customizing under Controlling Product Cost Controlling Actual Costing/Material Ledger Actual Costing Activate Actual Costing .
Calculation of overhead

You perform template allocation, revaluation at actual prices, and overhead allocation during the period-end closing process in the applicable subcomponent of Cost Object Controlling (such as Product Cost by Period).

Example Example

An incoming invoice for a purchased part is posted in FI. The cost object is debited with direct materials costs.
A material for a cost object is withdrawn from inventory. The cost object is debited with direct materials costs.
Internal activities are allocated to a cost object from a production cost center. These costs are debited to the cost object as direct costs of production.
At the end of the period, you determine the overhead expenses for the cost object. This calculates the material overhead on the basis of the direct material costs and production overhead on the basis of the direct production costs. The overhead expenses are updated as overhead.

End of the example.

Screen Variants

You can create screen variants for transaction-based posting of actual data in Customizing for Cost Center Accounting. In the screen variant, you specify which data the user can enter during list entry of documents.

User-specific screen variants enable a separate definition for each user of which screen variant the system proposes when the user accesses a particular transaction. For example, if you allocate internal activities from a cost center to a cost object on a regular basis, you can have the system always propose the screen variant for that transaction. You link a parameter value in the user parameters that identifies the screen variant to a parameter ID that identifies the transaction. To do this, choose Start of the navigation path System Next navigation step User Profile Own Data End of the navigation path .

Transaction Currency

If the All currencies indicator is selected in Customizing for the controlling area, you can set the transaction currency on the list screen or on the detail screen before you enter the first document item. Once the first document item has been entered, the transaction currency can no longer be changed. The system proposes the controlling area currency.

Use of Statistical Key Figures

You can assign actual costs to cost objects using statistical key figures.

Statistical key figures serve to characterize objects in the Controlling component. In Cost Object Controlling, statistical key figures are used for informational purposes and as a basis for distributing overhead costs. Statistical key figures can be used in Cost Object Controlling as a reposting aid.

You can choose the functions activity allocation, reposting, statistical key figures, and time sheet in the menus of Product Cost by Period, Product Cost by Order, Product Cost by Sales Order, and Costs for Intangible Goods and Services under Actual Postings.

Allocation of Processes with Template Allocation in Repetitive Manufacturing

If you are using template allocation in repetitive manufacturing, processes are always allocated in the form Actual = Target. The system always first attempts to calculate the target costs on the basis of the version-specific cost estimate (preliminary cost estimate for product cost collector with Controlling level Production Version). If no version-specific cost estimate exists, the target costs are calculated on the basis of the standard cost estimate for the material.

Update of Costs in Cost Object Controlling

Primary costs are written to the cost object as direct costs. Primary costs are written to the cost object under a primary cost element. Each primary cost element in CO is linked to a G/L account in FI.

Secondary cost postings are written to the cost object as direct costs or overhead costs, depending on how the costs were incurred. Secondary costs are written to the cost object under a secondary cost element. Secondary cost elements have no direct correspondence in FI.

In CO, the actual costs are updated as totals records and as line items:

Totals records
A totals record collects all costs posted to a particular cost object using a cost element.

Totals records enable you to compare the actual costs with the planned costs by cost element for any cost object.
Line items
A line item is written for each posting. A line item is a representation of postings on the basis of transactions and document numbers. Line items contain detailed information on the origin of the costs. You can go from the line item to other documents such as the material document or the accounting document for a posting.

In the case of errors in posting, you can enter repostings for:

Primary costs
Repostings of primary costs retain the original cost element.
Line items
Activity allocations

Special Requirements with Cost Object Hierarchies and General Cost Objects

You cannot perform the following business transactions for a cost object hierarchy:

Confirmation
Backflush
Goods receipt

You can only perform a G/L account posting for a cost object ID (cost object node in a cost object hierarchy or general cost object) if the G/L account under which the posting is to be made has a field status group that allows an additional account assignment to a cost object ID.

If you want to enter a goods receipt for a cost object ID, the movement type must also allow this account assignment.

More Information

Information on:	Is located in document / section:
G/L account postings	FI – Accounts Payable – Document Posting
Material movements	LO-MM Inventory Management
Internal activity allocations	CO Overhead Cost Controlling
Human resources	HR Human Resources
Product Cost Controlling Information System	CO-PC Information System
Confirming manufacturing orders Goods movements with confirmations (backflushes and automatic goods receipts)	LO-PP Production Orders - Confirmations LO-PP Repetitive Manufacturing - Backflushing
Special requirements in process manufacturing	LO-PP Process Industry

Information on:	Is located in the Implementation Guide for:
Screen variants	Cost Center Accounting

Information on:	Is located in the section:
Automatic activity allocations for reporting point backflushes	Reporting Point Backflushes
Goods receipts Backflushes with goods receipts	Goods Receipts in Cost Object Controlling
Functions that are available in the menu of Cost Object Controlling for entering actual costs	Reposting Costs and Revenues Manually Reposting Line Items Displaying Line Item Repostings Reversing Line Item Repostings Time Sheets in Cost Object Controlling Direct Activity Allocation Reposting Internal Activity Allocations Displaying Internal Activity Allocation Repostings Reversing Repostings for Internal Activity Allocation Entering Sender Activities Manual Actual Prices Entering Actual Prices Manually Manual Cost Allocation Entering Statistical Key Figures
Posting logic	Costing Object Controlling from an Accounting Point of View