Example for Valuated Sales Order Stock Without Product Cost by Sales Order: Quantity and Value Flow

Prerequisites

• In the following example, the sales order item does not carry costs and revenues. For this reason, no actual costs are allocated to the sales order item. That is, the functions of Product Cost by Sales Order are not used.
• A valuated sales order stock is used.

If you use a valuated sales order stock, in many cases you will not need a sales order item that carries costs and revenues.

Example

BOM of Individual Requirements Material FERT X

The above illustration shows the BOM of finished product FERT X. FERT X is an individual requirements material, which means that it is manufactured for a specific customer rather than for the normal make-to-stock inventory. FERT X consists of individual requirements material HALB Y and collective requirements material HALB Z. HALB Z, in turn, consists of two collective requirements raw materials ROH A and ROH B. HALB Z is manufactured on the basis of a production order created independently of sales orders. This production order delivers the material to the make-to-stock inventory.

Cost Estimates for Standard Price Calculation with Valuated Sales Order Stock: Valuation Basis

The above illustration shows the cost estimates for calculation of the standard prices of HALB Z, HALB Y, and FERT X.

The cost estimate of the collective requirements material HALB Z is a cost estimate with quantity structure that is created for the material. In this example, it is the basis for calculating the standard price of HALB Z.

For individual requirements materials, the standard price can be calculated in a sales order cost estimate or in a preliminary cost estimate for the manufacturing order, for example.

The cost estimate of the individual requirements material FERT X is a sales order cost estimate that is used to calculate the standard price for FERT X.

The cost estimate for the individual requirements material HALB Y is also a sales order cost estimate used to calculate the standard price for HALB Y.

The standard price calculated in this way serves the following purposes:

• To valuate the sales order stock at standard cost
• To calculate the variances for the production orders of the sales order item

Quantity and Value Flow

Starting Point

Your customer orders 10 units of finished product FERT X. You create sales order number 4815. Item 010 of the sales order is for 10 units of FERT X and is marked as a cost object. On the basis of the sales order item, the system generates production order number 01 for 10 units of FERT X. Since you are in an assembly processing environment, the production order is generated directly, and no requirements planning takes place nor are any planned orders generated. Since FERT X contains HALB Y which is also an individual requirements material, the system generates production order number 02 for 10 units of HALB Y through requirements planning.

Production order 4711 has no reference to the sales order. It was created to manufacture 20 units of collective requirements material HALB Z.

Business Transactions in the First Period

1. Production order 4711 transfers 20 units of HALB Z, valuated, to the make-to-stock inventory. The goods movement results in a corresponding inventory posting in Financial Accounting (FI) (the inventory account for HALB Z is debited and the inventory change account is credited).
2. Production order 02 produces 5 units of HALB Y and transfers them to the valuated sales order stock. The goods movement results in a corresponding inventory posting in FI.
3. Production order 01 withdraws 5 units of individual requirements material HALB Y from the valuated sales order stock. The production order is charged with actual costs. The goods movement results in a corresponding inventory posting in FI.
4. Production order 01 withdraws 5 units of collective requirements material HALB Z from the make-to-stock inventory. The production order is charged with actual costs. The goods movement results in a corresponding inventory posting in FI.
5. Production order 01 produces 5 units of FERT X and transfers them to the valuated sales order stock. The goods movement results in a corresponding inventory posting in FI. The production order is credited accordingly.
6. Assume you have arranged for partial delivery to the customer. Consequently, 3 units of FERT X from the valuated sales order stock are delivered to the customer (movement type 601).

The goods movement results in a corresponding inventory posting in FI. Inventory Change from Sale of Products is debited and Inventory is credited.

The sales order item is not charged with actual costs.

The inventory change account is found by the system through automatic account determination in Materials Management (MM). (Example: Account 893010 Inv. Change Cost of Goods Sold Without Cost Element.) No cost element exists for this account. The account is found through transaction GBB and account grouping code VAX. Account grouping code VAX is relevant when the sales order item does not carry costs and revenues. If the sales order item carries costs and revenues, account grouping code VAY is used (see also: Example for Product Cost by Sales Order: Quantity and Value Flow).

Note the following:

In sales order costing, there are a number of special processing requirements regarding the account grouping code. For information, see: Overhead in Sales-Order-Related Production.

No invoicing takes place in this period.

Explanations

Valuation of the Inventories

The inventories are valuated at standard price. In our example, the standard price is calculated in a sales order cost estimate.

Funds Commitment in Inventory (Statistical Actual)

The funds commitment in inventory cannot be shown because the sales order item does not carry costs and revenues.

Period-End Closing

• WIP calculation at the level of the production orders

In the Product Cost by Order component, work in process is calculated at the level of the production orders. The work in process is calculated during the period-end closing process and settled to the material stock accounts for unfinished goods.

Our example has no work in process on the production orders.

• Variance calculation

When you are using a valuated sales order stock, you can determine the variances at the level of the production orders. Variance calculation depends on the target cost version. Variances are the difference between the target costs and the control costs; for the total variance and the production variance, the control costs are the actual costs less the work in process and scrap.

• Settlement of work in process and variances

The variances calculated on the production orders are settled during the period-end closing process for the Product Cost by Order component.

No data has yet been transferred to Profitability Analysis (CO-PA) because the actual revenues and the cost of sales are both zero. The actual revenues and the (standard) cost of goods manufactured of sales are transferred to Profitability Analysis when you invoice. Settlement of the production order also transfers the variances to CO-PA.

Inventory Postings in Financial Accounting

IC = Inventory change

The goods issue postings and goods receipt postings for the valuated sales order stock automatically result in corresponding postings in Financial Accounting in real time.