Process Costs (SAP Library - Cost Object Controlling (CO-PC-OBJ))

Process Costs

Use

You can use Activity-Based Costing in Product Cost Controlling (CO-PC) in order to do the following:

Include costs for production resources/tools and in the actual data
Calculate overhead based on the output quantity

In traditional overhead costing, you can calculate quantity-based overhead based on the input quantities, but not on the output quantities. Through the use of Activity-Based Costing, you can, in non-order-related costing, assign overhead to a material dependent on the costing lot size.

In Cost Object Controlling (CO-PC-OBJ), you can calculate process costs as follows:

Dependent on the planned order quantity (for example, in a preliminary cost estimate for the manufacturing order)
Dependent on the quantity delivered to stock, in order to calculate the actual costs for a material
In Sales-Order-Related Production, dependent on the quantity ordered of a material produced in make-to-order production

In Sales-Order-Related Production, to allocate transportation costs to the sales order item matched with costs and revenue. For example, you may receive a collective invoice from your carrier with several amounts that are assigned to various sales orders.
To carry out statistical cost accounting in parallel. In such cases, the cost object is not debited.

Prerequisites

You have maintained the appropriate templates, environments, and function hierarchies in Customizing for Product Cost Controlling.

For more information about settings in Customizing, see the Implementation Guide for Product Cost Controlling (CO-PC). For more information about Activity-Based Costing, see Activity-Based Costing (CO-OM-ABC) and the Implementation Guides for Activity-Based Costing and for Product Cost Controlling.

Note

However, for the above-mentioned options, it is not imperative that you implement the complete version of Activity-Based Costing. You also do not have to carry out an all-embracing analysis of your process structure. You can use Activity-Based Costing in this context as an additional tool to assign your costs on a source-related basis.

Features

You can use the costs for business processes in a cost estimate as either a replacement for, or supplement to, the traditional method of allocating overhead.

In cost center accounting, the costs are structured according to organization and responsibility center. This means that although it is possible to pinpoint a company’s costs where they arise, this does not explain the purpose for which the resources are used.

The process-oriented approach, on the other hand, considers the costs of all the functions in accordance with the company’s process structure. A business process is debited with costs that are related to the usage of the resources. Overhead costs are traced back to the source and assigned through the valuation of the process quantities at the process price.

Overhead is assigned to the business processes according to the resources used. This allows costs to be applied to the cost objects on a source-related basis.

You can include process costs in a material cost estimate by means of the following:

Templates

The template determines which process costs are used and how these costs are further applied to the product. The template is determined through the costing sheet in the valuation variant. This form of cost application provides you with a highly flexible method of specifying the processes and of calculating the activities and processes used.

Note

Template allocations also enable you to use cost centers/activity types as senders.

Integrating business processes into the routing through the PP component

The business processes are linked to the operations of the routing. This enables the process to be more closely linked to a specific material or order. It also makes it possible to link a specific process to a particular quantity. Work centers and routings are given a process assignment. The business processes are transferred from the work center into the routing. You enter the formula to determine the process quantity in the work center. The activity price of the business process is used for the valuation. In the cost estimate, the process quantities are determined with this formula and then valuated with the activity price. A credit is applied to the process, while the confirmed reference object is debited. The formula is also used to determine the process quantities used at the time of order confirmation of the routing operations; these quantities can also be adjusted. The actual allocation is arrived at in Product Cost by Order or Product Cost by Period using the process quantities following the valuation process.

You can include process costs using planning data in:

Non-order-related costing

In the cost estimate with quantity structure, process costs are calculated automatically by the system.

In the cost estimate without a quantity structure, in additive costing and in Reference and Simulation Costing, the process costs are calculated when you save the cost estimate or when you choose the menu function Calculate overhead.

Preliminary costing for a cost object

Process costs are calculated automatically by the system when you carry out costing in preliminary cost estimates of manufacturing orders, process orders, and sales order cost estimates (using the product costing method).

When you carry out preliminary costing of manufacturing orders without a quantity structure, sales order costing (using the unit costing method), and plan general cost objects, the process costs are calculated when you save the cost estimate or when you choose the menu function Calculate overhead.

You can include process costs using actual data in order to allocate the process costs to cost objects. To do this, you carry out a dynamic process allocation at period-end closing of Cost Object Controlling. For further information, see the following:

Period-End Closing in Product Cost by Order

Period-End Closing in Product Cost by Period

Period-End Closing: General Cost Objects

Note

To manually measure the resources (tracing factors) and cost drivers would require excessive organizational effort. The required data is often already in the system in statistical form, and can be transferred from LO-LIS (Logistics Information System). For more information about transferring data from LO-LIS, see the SAP Library under Logistics General (LO).

See also:

Activity-Based Costing (CO-OM-ABC)

Use of Templates in the Standard Cost Estimate

Template-Allocation to Cost Objects

Quantity Input Methods (Pull)