Concept of Cost Rollup

Use

The purpose of cost rollup is to include the cost of goods manufactured of all the materials in a multilevel production structure within the costs of the material located at the top of the structure. The costs are rolled up automatically using the costing levels.

  1. The system first calculates the costs for the materials with the lowest costing level and assigns them to cost components.

  2. The materials in the next-highest costing level (such as semifinished materials) are then costed. The costs for the materials costed first are rolled up and become part of the costs of goods sold in the next-highest level.

This process is continued until the costing results of the highest material in the structure (such as the finished product) contain the cost of goods manufactured for every material in the structure.

For costing, you assign the costs in a cost estimate to cost components in Customizing for Product Cost Planning. The cost components split the costs of a material. In the cost rollup process, the data for these cost components is passed on to the costing results of the next-highest material (see graphic).

The data structure is called a cost component split . The results of the cost estimate ( with and without quantity structure) are always saved in the form of a cost component split. The structure of the cost component split (that is, the number of cost components) is the same for all materials in the cost estimate.

However, a multilevel production structure may also contain costs that should not be rolled up, such as sales and administration costs. In Customizing for Product Cost Planning you specify whether the assigned costing results should be rolled up for each cost component.

Features

The materials in a BOM are called BOM components . They can consist of a material without its own BOM (such as a material component, purchased part, or raw material), or a material with its own BOM (assembly). If the product has a multilevel BOM , the costs for the material components are calculated and taken into account when the next-highest assembly is costed.

The structure of the BOM determines the sequence in which the materials are costed. After exploding the BOM from top to bottom and assigning costing levels, the system then costs from the bottom up. The BOM components with the lowest costing level (or the highest low-level code) are costed first, then the BOM components (assemblies) with the next highest costing level, and so on up to the highest material. The resultant costs are, in the process, rolled up towards the top.

For each BOM component costed, a cost component split is created, which groups the costs into costs such as material costs, production costs, and costs for external procurement. The cost component Material costs for the finished product thus contains all the material input costs of the subordinate BOM components. You define the structure of this cost component split in Customizing for Product Cost Planning in a cost component structure .

Costing can also determine the cost of goods manufactured for materials produced in another plant if the two plants are assigned to the same controlling area, and the company codes of the plants use the same cost component structure. In this case, the structure of the cost component split must be the same in both plants. For more information, see Use of Existing Costing Data or Special Procurement in Costing .

If a cost estimate for the material already exists, the system can transfer the calculated costs (grouped in cost components) into the cost estimate of the next-highest material.

If the system cannot find a cost estimate for the material, it uses a price in the material master record according to the valuation variant (see also Raw Material Costing ).

You can add manually-entered costs to the material costs by means of an additive cost estimate that contains separate cost components. This enables you to include in the cost estimate costs that, although they actually exist, cannot be taken into account automatically by the system. Examples of such costs are freight charges, insurance costs, stock transfer costs, incomplete BOMs, and routings. You can also create a separate cost estimate for raw materials. For further information, see Raw Material Costing .

The manually entered (that is, additive) costs can only be used in the system for planning purposes.

Note Note

The cost component split is updated in the currency of the company code to which the material is assigned.

In addition, the costing results can be updated and displayed in the controlling area currency. The cost component split is then rolled up in both currencies. (See also: Currencies in Costing )

End of the note.

Note Note

Cost accounting in the system can be absorption costing or variable costing (also called direct costing ). When you use variable costs, make sure that when you define cost components , you indicate only the variable part of the activity types as being relevant to stock valuation . This ensures that, when allocating costs to internal activities, only the variable activity type prices are credited, even when you carry out confirmations. You can pass on the fixed portion for each assessment at period end directly to Profitability Analysis (CO-PA). The variable portion of the cost of goods manufactured of sales are passed to Profitability Analysis when you invoice.

End of the note.

See also: