Planning and Analysis of Campaign Costs (SAP Library - Production Campaign (PP-PI-PCM))

Planning and Analysis of Campaign Costs

Use

Campaigns enable you to group together material and production costs.

A typical production campaign consists of the following:

Manufacturing orders (process orders or production orders) with a material reference
Manufacturing orders without a material reference:

Setup orders, clean-out orders and teardown orders (setup/clean-out orders), the activities of which are included in every process order or production order in the campaign.

You can find additional information about campaign management in the SAP Library under Production Campaigns.

You can distribute the setup/clean-out costs (costs for setup, clean-out, and teardown) to the manufacturing orders by means of the following:

Business processes

Overhead calculation

Internal orders

This section describes how production campaigns are managed with business processes. The advantages of this method are as follows:

The costs can be passed on by period to the manufacturing orders for which the costs were incurred.
By using the template in Activity-Based Costing, keys can be created which assign the setup/clean-out costs to the cost objects according to how they were incurred.
There are no problems with follow-up costs.

Integration

Production campaigns can be managed based on business processes. The setup/clean-out orders provide activities for the manufacturing orders. The costs for these activities are assigned to the process orders of the campaign according to how they were incurred.

Those costs which cannot be assigned (from clean-out, setup, teardown, and so on) are settled to one or more business processes.

The costs of all the business process in the campaign are credited periodically and allocated to the process orders in accordance with the quantities used.

Prerequisites

If the campaign is managed using business processes, you must do the following in Customizing:

Maintain environments and function hierarchies
Maintain the templates

In the template, you enter a formula to enable you to determine the process quantities used.

Assign templates

To carry out the above steps, go into Customizing for Product Cost by Order under Basic Settings for Product Cost by Order,. then choose Process Costs. Read the documentation in the Implementation Guide (IMG) that you find there.

Plan the business processes

By planning the business processes, you calculate the planned activity prices with which the business processes are credited and which are allocated at period-end closing to the process orders that commenced in the current period. This enables you to allocate the fixed campaign costs, such as setup, clean-out, and teardown costs, to the source of the costs (plant materials in the campaign) via the business processes.

You can find additional information about business processes and templates in the SAP Library under Activity-based Costing.

Create a business process group for the business processes that you use in the production campaign. Enter the business process group in the campaign. By doing this, process costs involved in the campaign production are differentiated from other process costs. This avoids a duplication of the campaign process costs in the campaign reports. (See Reports for the Controlling of Production Campaigns). If you do not enter a business process group in the campaign, the process costs will appear in the reports for orders both with and without material reference.

In Customizing for Product Cost by Order under Manufacturing Orders ® Check Order Types for PP and CO Manufacturing Orders, enter a settlement profile allowing settlement to business processes in the order type of the non-material-based orders. You define the settlement profile in Customizing for Product Cost by Order under Period-End Closing ® Create Settlement Profile.

For more information, see Production Campaign Management.

For standard cost estimates for materials produced in campaigns, define a template. You can also represent setup/cleanout costs in the standard cost estimate by, for example, overhead calculation.

Features

General Information

You can represent single-product campaigns in the R/3 System. Single-product campaigns involve the production of a plant material in a product line. By contrast, multiproduct campaigns involve the production of multiple plant materials in an optimal sequence in a production plant. At present, multiproduct campaigns cannot be managed in the R/3 System. However, you can create a single-product campaign for a leading co-product (primary product) or for a process material (see Features of Joint Production).

Features in Cost Accounting

For production campaigns whose setup/clean-out costs are allocated with business processes, you can do the following:

In Product Cost by Order

Calculate the costs for the manufacturing orders (see Preliminary Costing for Manufacturing Orders)

Enter the actual costs for the manufacturing orders (see Actual Postings in Cost Object Controlling)

Carry out the period-end closing transactions of Product Cost by Order (such as calculating work in process and variances) for the manufacturing orders (process orders or production orders) and setup and clean-out orders. (See Period-End Closing in Product Cost by Order)

Note

In order to include setup/clean-out costs allocated by dynamic process allocation to the manufacturing orders in the calculation of work in process, you should calculate the work in process at actual costs. (See: Work in Process in Product Cost by Order and Example: Value Flow – Work in Process for Actual Costs).

To calculate work in process at target costs, the confirmed yield at the operation level is multiplied by the target costs. In this case, the process costs debited to the manufacturing order are not included in the work in process.

You should include the setup/clean-out orders in WIP calculation, because debiting them with costs has caused postings to expense accounts in Financial Accounting (FI), for which there is no corresponding posting affecting income.

If a business process is debited with costs that are so high that you cannot ignore the WIP posting in FI, make a manual posting in FI for the amount of the business process balance.

Display the planned, target, and actual costs for the manufacturing orders

In the Information System for Product Cost Controlling

Compare target costs to actual costs, and planned costs to actual costs, of the orders in a campaign
Summarize the orders of a campaign, in order to control and assess the costs with regard to the economic efficiency of the production campaign

Calculate variances for the business processes in Activity-Based Costing

This enables you to calculate process variances, and thus create more accurate planned activity prices for the business processes.

A business process can include the activities of more than one campaign, and the resources of more than one cost center.

Periodic Allocation of Setup/Clean-out Costs

If you create a production campaign using business processes, you can pass on setup, clean-out, and teardown costs by period to the production orders.

The costs of the setup/clean-out orders are debited by period to the business processes. This is carried out during settlement of the setup/clean-out orders to the business processes.
The business processes in the campaign are credited with the planned activity prices that were calculated when the business processes were planned. The credits, which are based on the process quantities used, are applied at period-end closing of Product Cost by Order through the Dynamic process allocation function. The manufacturing orders are debited with the costs for setup, clean-out, teardown, and so on, through Dynamic process allocation. By periodically debiting manufacturing orders with process costs, the problem of follow-up costs is removed.

Note

If you create production campaigns via internal orders, as opposed to business processes, you may want to debit the manufacturing orders in a period with the follow-up costs relating to setup, clean-out, and so on, for which

The deletion indicator for the manufacturing order has already been set.

If the deletion indicator has been set for a manufacturing order, you cannot calculate any more costs for the order.

The FI period has already been closed.

In such cases, you cannot pass on any more costs to FI for this period.

The manufacturing order has not used the corresponding activities.

These costs are not settled to FI in the period that produced the costs (such as settlement to stock, or price differences) or to CO-PA.

A balance is produced on the business process from the difference between the debit and credit.

The business process is debited with the actual costs from the setup/clean-out order and the actual costs settled to the business process in the period.

The business process is credited with the costs allocated to the manufacturing orders through the dynamic process allocation. The process quantities used are multiplied by the planned activity prices of the processes.

You can settle the balance of a business process resulting from the difference between the debit and credit to Profitability Analysis (CO-PA).

Reports for Production Campaigns

You can access the reports for production campaigns by choosing the following:

Logistics ® Production process ® Production campaign ® Environment

Information systems ® Accounting ® Product Cost Controlling ® Product Cost by Order ® More reports ® Production Campaigns

You can access the reports on the business processes involved from the report selection in Activity-Based Costing. Here, you can compare the planned, target, and actual costs of the business process from both the debit and credit sides.

Example

This graphic is explained in the accompanying text

You create a campaign. In this campaign you create:

a setup/clean-out order for cleanout
manufacturing orders for the production of material FERT 1.

You create a business process and a template. In the template, you enter a formula to enable you to determine the process quantities used in relation to the amount delivered. In Activity-Based Costing, you calculate the activity price for the business process. The plan price is USD 20.

Actual costs for the cleanout appear for the first time in period 2 amounting to USD 600.

You would like to allocate the cleanout costs (dependent on the quantity of materials produced in-house in period 1) to the relevant orders according to both how the costs were incurred and when.

Period 1

You have two manufacturing orders for the material to be produced in the campaign. In the first period, manufacturing order A produced 15 pieces of material FERT 1. Also in the first period, manufacturing order B produced 5 pieces of material FERT 1

Dynamic process allocation debits manufacturing orders A and B in period 1 as follows:

Manufacturing order A: 15 pieces output quantity multiplied by Planned price USD 20 = USD 300.

Manufacturing order B: 5 pieces output quantity multiplied by Planned price USD 20 = USD 100.

The business process is credited with USD 400.

The business process is debited during settlement. However, since there were no actual costs for the cleanout order in period 1, the business process is not debited in period 1.

The balance for the business process is USD -400. You transfer this balance to a profitability segment in CO-PA using the reposting function in the process costs allocation menu.

The process costs allocated to the manufacturing orders are passed on to Financial Accounting at settlement. However, there is as yet no expense involved. You can create a manual posting in FI, in order to carry reserves for unrealized costs as liabilities for the amount of USD 400.

Period 2

Actual costs of USD 600 are incurred on the cleanout order in period 2.

In the second period, manufacturing order A produced 4 pieces of material FERT 1. Also in the second period, manufacturing order B produced 1 piece of material FERT 1

Dynamic process allocation debits manufacturing orders A and B in period 2 as follows:

Manufacturing order A: 4 pieces output quantity multiplied by Planned price USD 20 = USD 80.

Manufacturing order B: 1 piece output quantity multiplied by Planned price USD 20 = USD 20.

The business process is credited with USD 100.

The business process is debited during settlement. Actual costs of USD 600 are incurred on the cleanout order. The costs are settled to the business process.

The balance for the business process is USD 500. You transfer this balance to a profitability segment in CO-PA using the reposting function in the process costs allocation menu.

The process costs allocated to the manufacturing orders are passed on to Financial Accounting at settlement. In this period, your expense is higher. You write off the reserves for unrealized costs that were carried as liabilities in FI in the previous period by a manual posting in FI.

You can create a manual posting in FI for work in process at USD 500.

Note

Through the manual activation of work in process or carrying of reserves for unrealized costs as liabilities, you can carry out accruals/deferrals by period of operations affecting revenue and expense in Financial Accounting.

See also:

For detailed information about production campaigns, see Production Planning for Process Industries (PP-PI) in the SAP Library under the following sections:

Production Campaign

Production Campaign Management

Creating Production Campaigns

Converting Production Campaigns

For general information about Cost Object Controlling for manufacturing orders, see Product Cost Order.