Work in Process (SAP Library - Product Cost Controlling)

Work in Process

The system calculates work in process (WIP) to determine the costs incurred for materials that have not yet been delivered to stock. This calculates the value of the unfinished goods.

In Product Cost by Period the work in process for product cost collectors is calculated at target costs on the basis of the quantities confirmed at the operations (at the reporting points in repetitive manufacturing).

In Product Cost by Order the work in process is calculated for the manufacturing order. The work in process for manufacturing orders is normally calculated at actual costs. Work in process at actual costs is calculated as the difference between the debits for material withdrawals, internal activity allocations, external activities, and overhead costs (that is, the actual costs assigned to the object) and the actual credits from goods receipts for delivery to stock.

The work in process can be transferred to Financial Accounting and Profit Center Accounting by period. Settlement to Financial Accounting ensures that the work in process is included in the balance sheet and the profit and loss statement.

The calculated work in process is upated to the order (product cost collector or manufacturing order) under the results analysis cost elements. You can view and analyze the work in process in the Product Cost Controlling Information System .

To define the control parameters for

WIP calculation , carry out the following steps:

Define results analysis keys

Results analysis keys contain control parameters for WIP calculation. The order (product cost collector or manufacturing order) is only included in WIP calculation, if it has a results analysis key.

Define results analysis versions

Results analysis versions contain information on whether a version is relevant for the balance sheet and the profit and loss statement or if it solely serves informational purposes.

Define a valuation method

This creates a link between the results analysis key and the system status . The system generates a valuation method for each status internally. The valuation method controls, for example, at what status of an object work in process is created and at what status it is cancelled.

Define valuation variant for WIP and scrap

This valuation variant controls which costs are used to valuate work in process and unplanned scrap. You can define a strategy sequence that allows you to valuate the work in process. The valuation variant for work in process is not used for the valuation of work in process at actual cost.

Assignment of valuation variant for WIP

You assign the valuation variant for work in process to a results analysis version.

Define a line ID

You define a line ID to be able to group the results analysis data (such as work in process) into source cost elements. For example, you could define a line ID for all direct costs of production.

Define assignment

You specify which source cost elements are assigned to which line ID. For example, you would assign to line ID "PC" all cost elements under which an order can be debited through the usage of activities. In the assignment, you define in the results analysis category whether line IDs are capitalized as a total or proportionally.

Define cost elements for WIP calculation

Here you create the results analysis cost elements under which the results analysis data is updated on the order.

Define the update

Here you specify the results analysis cost element under which the line ID is updated on the order.

Define posting rules

Here you specify which accounts in Financial Accounting you want the work in process to be transferred to. You specify this separately for each results analysis category or results analysis cost element.

Define number ranges

You can calculate work in process in up to three currencies in parallel.

Transfer prices are only included for work in process at actual costs. In this case you can use up to three valuation views.

Further Notes

WIP calculation determines the value of the unfinished products in the Product Cost by Period component and in the Product Cost by Order component. WIP calculation in Product Cost by Order or Period is used chiefly in make-to-stock production, with avaluated sales order stock, and engineer-to-order environments with a valuated project stock.

Nonvaluated Special Stock

If you are using a

nonvaluated sales order stock or a nonvaluated project stock , the work in process for orders that are assigned to a sales order item or project is normally calculated using results analysis for the sales order item or project.

However, you can use the indicator Calculate WIP for manufacturing orders in sales-order-related production or the indicator Calculate WIP for manufacturing orders in engineer-to-order in the results analysis version to specify that work in process can be calculated separately for the assigned orders. In this case the results analysis key in the order takes precedence:

If no results analysis key is specified in the order, the actual costs for the order are included in results analysis for the sales order or project. Settlement is through the sales order or project.

If a results analysis key is specified in the order, work in process is created and settled for the order in the amount of the actual costs incurred. These costs are not included in results analysis for the sales order or project. This method is particularly recommended when you are manufacturing across company codes.

You control whether a sales order stock or a project stock is valuated or nonvaluated in the requirements class.