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The Cost Object Controlling component is designed to answer the question: What costs have been incurred for which objects? For this purpose, the component assigns costs to the output of the company. The output can be materials manufactured in-house, individual orders, or intangible goods.

This component provides real-time cost management functions that measure the cost of goods manufactured in all plants.

Cost Object Controlling enables you to determine the cost of goods manufactured and the cost of goods sold.

You can:

  • Establish planned costs (budgeted costs)

  • Record actual costs for the cost objects

  • Compare actual costs with target costs and with planned costs, and analyze variances

  • Determine price floors for products or individual orders

You can use the functions of Cost Object Controlling by lot or by period.

Cost Object Controlling supplies basic information for the following business functions:

  • Price setting and general price policy

  • Inventory valuation

  • Cost of goods manufactured

  • Profitability analysis

  • Profit center accounting

Implementation Considerations

Here are some of the ways you can utilize Cost Object Controlling:

  • Determine whether the actual costs of an order matched or exceeded the planned costs

  • Determine the production variances between actual costs and target costs, and why these occurred

  • Decide whether to accept a particular sales order (whether the sales order will be profitable)

  • Identify areas in your company where you have particularly low costs and therefore which cost objects you should concentrate on

  • Decide whether it would be more profitable to manufacture a cost object in-house or to outsource it

  • Determine whether and how the cost of goods manufactured can be reduced

Cost Object Controlling also can provide special information on:

  • The cost of unplanned scrap

  • Cost savings resulting from new production methods

  • Cost behavior during capacity bottlenecks

The cost of goods manufactured for finished products and the work in process for orders can be used to capitalize the inventories in your balance sheet.

Integration

Before you can use Cost Object Controlling, you calculate the planned costs for each product in a cost estimate. You can use different costing methods in Product Cost Planning (CO-PC-PCP) for this purpose.

Cost Object Controlling accesses master data and transaction data in Production Planning (PP), Production Planning - Process Industries (PP-PI), Materials Management (MM), Sales and Distribution (SD), and Overhead Cost Controlling (CO-OM).

You can view the data of Cost Object Controlling in the Product Cost Controlling Information System (CO-PC-IS).

When you settle, you can transfer the data of Cost Object Controlling to other components in the system:

  • Actual Costing/Material Ledger (CO-PC-ACT)

  • Financial Accounting (FI) for purposes such as capitalizing unfinished and finished products and automatically creating reserves

  • Profitability Analysis (CO-PA) to analyze the costs by market segment

  • Profit Center Accounting (EC-PCA) to analyze the results by profit center

See also Integration of Cost Object Controlling

Features

All postings of actual data that refer to a cost object result in an immediate debit of the cost object.

The closing activities at the end of the period allow you to do the following:

  • Revaluate activities at actual prices

  • Allocate overhead using template allocation and by defining overhead rates for cost objects

  • Determine the work in process (the value of unfinished goods)

  • Determine the variances between target costs and actual costs

  • Transfer the calculated data to other objects and application components

  • Compile periodic reports on a regular basis

    Analysis functions are supported by the Cost Object Controlling Information System.

You can analyze planned costs, target costs, actual costs, and quantity information at various levels such as the plant, product group, or individual cost object. The data is always available in real time.

Drilldown capabilities enable you to access detailed information.

Example Example

From the evaluations at plant level, you drill down to the product groups and from there down to materials/products or individual orders.

End of the example.

More Information

Cost Object Controlling is subdivided into the following application components:

For detailed information on creating material cost estimates, such as for the purpose of calculating the standard costs of your materials, see Product Cost Planning

For information on cost accounting in engineer-to-order, see Project System (PS)