Work in Process in Product Cost by Period 
The WIP calculation function valuates the work in process (unfinished products).
In the Product Cost by Period component, work in process is valuated at target costs. The operation quantities confirmed for the manufacturing orders or production versions (only in repetitive manufacturing) that are not scrap are valuated at target cost in accordance with the valuation variant for work in process and scrap.
You can calculate work in process at target costs for the following objects:
Product cost collectors
Production orders with quantity structure
Process orders
Integration
You can use the Schedule Manager to assist you in performing the period-end closing activities. For more information, refer to the following sections:
To be able to use the multilevel worklist to reprocess the objects that have errors, you must use the Schedule Manager with the flow definition. For more information, see the following section:
The difference between the work in process in the current period and the work in process in the pervious period corresponds to the inventory change to unfinished products. The difference between the work in process in the current period and the work in process in the pervious period corresponds to the inventory change of unfinished products. Settlement to FI capitalizes the inventories of unfinished products. The system debits the Unfinished Products account (balance sheet account) and credits the Inventory Change account (income statement account). If the work in process determined in a period is less than the amount determined in the previous period, the system cancels the inventory of unfinished products in the same amount when you settle. Settlement is performed in accordance with the posting rules defined in Customizing. The posting rules specify which FI accounts are posted during settlement. The number of the order for which work in process is transferred into financial accounting is displayed in the Assignment field in the financial accounting document. This ensures that the postings to financial accounting can be explained.
Note also the capabilities of User-Defined Error Management (see also below in this section).
Prerequisites
For product cost collectors, default rule STR (with strategy for tracing factor determination) is preset. For manufacturing orders that you want to settle by period, you must make sure that default rule PP2 (Production Material Periodic Settlement) is specified in the order type.
You must make sure of the following:
That the following steps have been carried out in Customizing for Product Cost Controlling under
Product Cost by Period 
Period-End Closing Work in Process 
:Define results analysis keys
In Product Cost by Period, use results analysis key 000003 (WIP calculation at target costs).
Define results analysis versions
Define valuation methods (target costs)
Define valuation variant for WIP and scrap (target costs) (optional)
In the valuation variant for WIP and scrap, you specify whether you want to calculate the target costs for the valuation of work in process on the basis of:
A preliminary cost estimate for the product cost collector or for the manufacturing order
An alternative material cost estimate
A standard cost estimate for the material (if a valuated sales order stock is being used, the system accesses the cost estimate on which the standard cost is based)
Assignment of valuation variant for WIP
Define line IDs
Define assignment
Define cost elements for WIP calculation
Define update
Define posting rules for the settlement of WIP
In the posting rules, you specify the G/L accounts to which you want to settle the work in process.
That reporting point backflushes (in repetitive manufacturing), operation confirmations (with production orders), or confirmations at the level of phases (with process orders) are used to confirm yields and scrap quantities
NoteIn repetitive manufacturing, you must specify in the repetitive manufacturing profile that you want to use reporting points. You do this in Customizing for Product Cost by Period under
Simultaneous Costing Check Control Data for Repetitive Manufacturing Profiles .Make sure that you have specified a control key with milestone confirmation for at least one operation. If only one operation has been defined as a milestone, it should normally be the last operation in the routing.
The reporting points can be mandatory or optional. For information on mandatory and optional reporting points, refer to the document Repetitive Manufacturing.
End of the note.That the reporting points or milestones are flagged as relevant to costing
That the reporting point structure or milestone structure that you are using in production matches the reporting point structure or milestone structure used to calculate the target costs.
For example, it may be problematic to valuate the work in process on the basis of the standard cost estimate for the material when the standard cost estimate is based on a different reporting point structure than that of the run schedule header.
In repetitive manufacturing, when you change the reporting point structure you can use flexible reporting points to convert the reporting point backflushes and update the preliminary cost estimate for the product cost collector.
SAP recommendations in repetitive manufacturing environments:
Create a separate product cost collector for each production version.
Create a preliminary cost estimate for the product cost collector.
Have the activity quantities that are to be confirmed defaulted on the basis of the routing used for the preliminary cost estimate.
Valuate the work in process and scrap variances on the basis of the preliminary cost estimate for the product cost collector.
If the reporting point structure is changed, use flexible reporting points and update the preliminary cost estimate
The task list type, task list group, and group counter of the routing on which the calculation of target costs for the valuation of work in process is based must match the task list type, task list group, and group counter of the routing for which actual data were entered. Note also the capabilities of user-defined error management.
For example, this means that for the valuation of work in process on the basis of a preliminary cost estimate for the product cost collector, the task list type, task list group, and group counter of the preliminary cost estimate must match the task list type, task list group, and group counter specified in the manufacturing order.
If you are using manufacturing orders as cost objects and analyze them by period, make sure that the work in process is valuated at target costs on the basis of the preliminary cost estimate for the manufacturing order. You make this setting with the valuation variant for work in process at target costs and scrap.
Make sure that the cost estimate used to calculate the target costs has an itemization. For this reason you may need to create the following:
The standard cost estimate for the material with an itemization
The alternative material cost estimate for the material with an itemization
In sales-order-related production with a valuated sales order stock, the sales order cost estimate with an itemization
NoteIf you want to valuate the work in process on the basis of a preliminary cost estimate for the production order or process order, the system generates an itemization dynamically when it calculates the WIP. This may adversely affect performance.
End of the note.
That the material components listed in the BOM are assigned to the operations in which they are used (optional)
That the Material origin indicator is selected in the costing view of the master records of the materials that are most important for cost accounting (optional)
That a cutoff period is defined to protect the data of the previous period from being overwritten
The cutoff period divides the life cycle of the production order into open and closed periods.
The work in process calculated up to the cutoff period is not changed the next time WIP is calculated.
The work in process calculated for later periods is overwritten by the current WIP calculation.
To prevent data that has already been posted from being changed, you usually define the cutoff period as the period preceding the results analysis period.
ExampleFor a product cost collector, work in process is calculated in May, June, and July. The valuation for July should not change the work in process for May and June.
You set the cutoff period to period 06 and calculate work in process for results analysis period 07.
End of the example.That the definition of the controlling area in Customizing for General Controlling was checked
The currency type of the controlling area (under Basic data) controls which currency is allowed as the controlling area currency and whether this currency can differ from the currency of the company codes assigned to that controlling area. You can use the All currencies indicator (under Control indicators) to specify whether the values are updated only in the controlling area currency or also in the transaction currency and the object currency.
WIP is always calculated in the controlling area currency and settled to Financial Accounting in the company code currency. If you are costing across company codes with different currencies, the WIP is also updated in the company code currency.
That settings are made in reporting that enable you to display the work in process
Definition of Work in Process with Requirement to Capitalize
In Customizing for Product Cost Planning, you define which values must be capitalized for inventory valuation, commercial-law physical inventory valuation, and tax-law physical inventory valuation under Basic Settings for Material Costing Define Cost Components . Cost components show the breakdown of the costs calculated in the cost estimate.
The line IDs for WIP calculation are normally grouped the same way as the cost components in Product Cost Planning. For example, the same cost element interval is usually assigned to the line ID raw materials as is assigned to the cost component raw materials.
Costs are only included in WIP calculation if they are assigned to a line ID.
In Customizing, you specify the following for each line ID:
That the work in process can be capitalized
That part of the work in process can be capitalized
That no work in process can be capitalized
Functions to Perform Before WIP Calculation
Before calculating the work in process, you should perform Template Allocation, Revaluation at Actual Prices, and Overhead Calculation if applicable.
If you have assigned actual costs to a cost object hierarchy, perform actual cost distribution before WIP calculation.
Status
Only those orders that have a valid results analysis key and that do not have the status DLFL (Deletion flag) or DLT (Deleted) are included in WIP calculation.
Note
You can significantly improve the performance of WIP calculation by setting the status DLFL for the following orders:
The order is delivered or technically completed
Variances have been calculated for the order
You do not anticipate any follow-up costs for the order
You can remove the deletion flag after it has been set, for example if follow-up costs are incurred for the order. The deletion indicator, however, cannot be removed.
See also: Reorganization of Product Cost Collectors
Features
Calculation of Work in Process at Target Costs: Example
This example calculates the WIP and the scrap variance.
Prerequisites
Operation scrap of 20% was planned for operations 10 and 20. At operation 10, 312 kilograms of scrap (actual scrap = planned scrap) was confirmed. At operation 20, 300 kilograms of scrap were confirmed. Since the target scrap quantity is 212.5 kilograms, this results in a scrap variance quantity at operation 20 of 87.5 kilograms. For information on scrap variances, refer to Scrap Variances
Determination of Reference Quantities for Work in Process at Target Costs
The quantities of WIP at the operations are determined as follows:
WIP quantity at operation 10 | |
|---|---|
Yield at operation 10 | 1250 |
Less yield at operation 20 | - 850 |
Less actual scrap quantity at operation 20 | - 300 |
WIP quantity at operation 10 | = 100 |
WIP quantity at operation 20 | |
|---|---|
Yield at operation 10 | 850 |
Less yield at subsequent operation | - 0 |
Less actual scrap quantity at subsequent operation | - 0 |
WIP quantity at operation 20 | = 850 |
Theoretically, it would be possible to determine the value of the work in process across all operations as follows:
100 × Target Costs at Operation 10 + 850 × (Target Costs at Operation 10 + Target Costs at Operation 20)
However, the system determines the value of the work in process on the basis of a reference quantity.
Reference quantity at operation 10 | |
|---|---|
Confirmed yield of operation 10 | 1250 |
Less actual scrap quantity of subsequent operations* | - 300 |
Less quantity of goods received | - 0 |
Reference quantity at operation 10 | = 950 |
*(cumulative scrap quantity across all operations)
Reference quantity at operation 20 | |
|---|---|
Confirmed yield of operation 20 | 850 |
Less actual scrap quantity of subsequent operations | - 0 |
Less quantity of goods received | - 0 |
Reference quantity at operation 20 | = 850 kg |
The system determines the value of the work in process across all operations as follows:
950 × Target Costs at Operation 10 + 850 ×Target Costs at Operation 20
Note
The valuation of WIP quantities leads to the same result as the valuation of reference quantities. The system calculates the work in process using the reference quantities. The quantities physically present at the operations are the WIP quantities.
Calculation Example
Operation | Target costs per unit produced | WIP quantity | Reference quantity |
|---|---|---|---|
10 | EUR 2 | 100 | 950 |
20 | EUR 2 | 850 | 850 |
Calculation on basis of WIP quantities:
100 × Target Costs at Operation 10 + 850 × (Target Costs at Operation 10 + Target Costs at Operation 20)
= 100 × 2 + 850 × (2+2)
= 100 × 2 + 850 × 4
= 400 + 3400
= 3600
Calculation on basis of reference quantities (method used by system):
950 × Target Costs at Operation 10 + 850 × Target Costs at Operation 20
= 950 × 2 + 850 × 2
= 1900 + 1700
= 3600
The target costs for the valuation of the work in process are calculated automatically when the WIP is calculated. The planned values (such as the standard costs) are converted to the yield of the operation.
The cost estimate used to valuate the work in process may contain costs that are not relevant for inventory valuation, such as sales and administration costs. In a product cost estimate with a quantity structure, these costs are shown in a separate cost component view. Costs that are not relevant to inventory valuation are not used for the valuation of the work in process.
Calculation of Target Costs on Basis of Standard Cost Estimate for Material
If you confirm on the basis of a standard cost estimate for the material and valuate work in process and scrap correspondingly, there are a number of different cases:
Case 1:
The current routing for the production version and the standard cost estimate for the material:
Access the same BOM
Have the same task list type
Have the same routing group
Have the same group counter
The work in process and scrap can be correctly valuated.
Case 2:
The current routing for the production version and the standard cost estimate for the material:
Access the same BOM
Have the same task list type
Have the same routing group
Have different group counters, but the reporting point structure is similar
You can use user-defined error management to ensure that work in process and scrap variances are calculated. Valuation of work in process and scrap produces meaningful values.
Case 3:
The current routing for the production version and the standard cost estimate for the material:
Access the same BOM
Have the same task list type
Have the same routing group
Have different group counters, and the reporting point structure is completely different
You can use user-defined error management to ensure that work in process and scrap variances are calculated. It is technically possible to valuate the work in process and scrap, but the result will not be meaningful.
Case 4:
The current routing for the production version and the standard cost estimate for the material:
Access the same BOM
Have different task list types, or
Have different routing groups
In this case it is not possible to valuate work in process or scrap at all.
Note
To avoid the problems of cases 3 and 4, SAP recommends confirming and valuating work in process and scrap on the basis of the preliminary cost estimate.
Update of Work in Process
The work in process is updated to the product cost collector or manufacturing order under secondary cost elements of cost element type 31. Secondary cost elements of cost element type 31 are results analysis cost elements.
Special Requirements
Production Orders Without Quantity Structure
The work in process for production orders in Controlling must be valuated with the actual costs. The settlement type must be Full settlement.
Production Orders with Quantity Structure, and Process Orders
WIP calculation at target costs for production orders and process orders is not recommended.
If you want to valuate work in process for production orders and process orders at target costs, remember that the routing or master recipe on which the production order or process order is based must be the same as the routing or master recipe that is used in the cost estimate on which WIP calculation is based. If these routings or master recipes are not the same, the system cannot calculate work in process or unplanned scrap. In this case, variance calculation would not produce meaningful results.
Special Requirements for WIP at Target Costs with a Valuated Sales Order Stock
In the Product Cost by Period component, you can only calculate work in process at target costs with a valuated sales order stock for production orders and process orders. If you are using product cost collectors in sales-order-related production (sales-order-related production with repetitive manufacturing), you cannot calculate work in process. This is because the system does not support reporting point backflushes in sales-order-related production in repetitive manufacturing. In addition, product cost collectors are always debited and credited at the same time (see also: Product Cost Collectors in Sales-Order-Related Production).
If you are using a valuated sales order stock and want to valuate work in process on the basis of production orders or process orders at target costs calculated using the standard cost estimate, remember that the system accesses the cost estimate used to calculate the standard cost. Read the sections Valuated Sales Order Stock: Valuation and Standard Price with Valuated Sales Order Stocks.
If the standard price was calculated in a sales order cost estimate, you can only calculate work in process if all of the following is true:
You have created a sales order cost estimate with the costing method product costing, or an order BOM cost estimate
An was generated for this cost estimate
The sales order cost estimate has been marked
NoteIf you are using a valuated sales order stock and calculate the target costs using a sales order cost estimate, valuation is made using only the operational currency.
End of the note.
If you have calculated the standard price in a production order cost estimate rather than in a sales order cost estimate, you can calculate work in process at the target costs calculated on the basis of planned prices because an itemization is generated dynamically by the system.
Note
Dynamic generation of itemizations for preliminary order cost estimates can adversely affect performance in WIP calculation.
If you have calculated the standard price in a standard cost estimate for the material because the material is also controlled by collective requirements, the work in process can be calculated at target costs on the basis of a standard cost estimate if both of the following requirements are met:
The standard cost estimate for the material is a cost estimate with quantity structure (product cost estimate) and it has an itemization
The standard cost estimate has been marked and released
If you are using a valuated sales order stock, work in process at target costs can only be valuated on the basis of standard costs if a goods receipt has been entered for the finished product, since the standard price for the customer stock segment is updated due to the first goods receipt. If no goods receipt has been entered for the customer stock segment and if you want to valuate the work in process at target costs on the basis of standard costs, you cannot calculate work in process. Instead, the balance of the manufacturing order goes into the variances and is passed on when you settle to a price difference account.
Analysis of Work in Process
To analyze the work in process, use the explanation facility in WIP calculation. This allows you to determine which operations had work in process and the values for the work in process.
WIP calculation only considers the yield; actual costs for scrap and variances are ignored.
Improving Performance
You can use parallel processing to reduce the runtime of the WIP calculation process.
If you perform WIP calculation outside the Schedule Manager, enter a server group for background processing.
If you perform WIP calculation using the Schedule Manager, set the Parallel processing indicator in the selection screen of the program when you create the job variant. An entry field then appears in which you enter the server group.
Schedule Manager: Multilevel Worklist
You can view and edit the objects with errors that were processed with the individual functions. You use the multilevel worklist for this purpose. The multilevel worklist enables you to edit the faulty objects of an individual processing step (that is, a single function) or of an entire processing step sequence.
A prerequisite for using the multilevel worklist is that you are using the Schedule Manager in conjunction with a flow definition.
See Integration in this section.
User-Defined Error Management
You can influence the messages output in the log of WIP calculation by using user-defined error management.
See Integration in this section.
Work in Process in the Information System
When the WIP is calculated, the system sets the status RESA (Results analysis carried out). The system uses this status to select the orders for which work in process has been calculated.
This data is included in summarization. You can create summarization hierarchies in the information system to be able to see cumulative variances by plant or controlling area, for example.
Constraints
If you have already entered an actual credit by means of a goods receipt posting for an order (product cost collector or manufacturing order) that is to be settled by period, but the order was not debited with actual costs, the balance of the order is not shown as negative work in process (reserves for unrealized costs). The balance of the order goes into variance calculation instead.
If a routing of a manufacturing order specifies a sequence of operations defined as a parallel sequence, the system cannot include the confirmed quantities in WIP calculation. Therefore no work in process at target costs can be calculated. If you are using reporting points in repetitive manufacturing, parallel sequences are not possible. This constraint is therefore irrelevant in repetitive manufacturing.
In joint production, you cannot calculate work in process at target costs.
You always calculate work in process at target costs in the operational valuation view. Transfer prices are not supported.
Product Cost Collectors in Sales-Order-Related Production
See above under Special Requirements for WIP at Target Costs with a Valuated Sales Order Stock
More Information
For more information on repetitive manufacturing, see the following section:
Recommendations and Notes for Repetitive Manufacturing Environments
For information on the default rule and the settlement type, refer to the following section:
Product Cost by Period or Product Cost by Order?
For information on the control parameters for Cost Object Controlling, see the following section:
Control Parameters in Cost Object Controlling
For information on deletion flags and deletion indicators, refer to following section:
Reorganization of Manufacturing Orders
For information on the valuation strategy with a valuated sales order stock, refer to the following section:
Valuated Sales Order Stock: Valuation
Standard Price with Valuated Sales Order Stocks
For information on calculating variances and scrap with valuated sales order inventories, see the following sections:
Variances and Scrap with a Valuated Sales Order Stock
For information on the valuation variant for work in process and scrap, refer to the following sections:
Target Cost Versions in Variance Calculation
For information on the Customizing settings for WIP calculation, see the IMG for Product Cost by Period under Period-End Closing Work in Process. .
For information on the information system and the Customizing activities, see the documentation Product Cost Controlling Information System and the Implementation Guide (IMG) for the Product Cost Controlling Information System.
For information on additional performance improvements in CO-PC, see the section Performance in Product Cost Controlling.