When you create a standard cost estimate or a production order in the Production Planning component, the system accesses different types of master data to create the quantity structure for costing.
Production Planning normally contains the following data for each finished or semifinished product:
-Lists all material components that are required to manufacture the product.
-Can contain materials that have their own BOMs.
The BOM usage indicates whether the BOM is relevant to costing.
You specify the following for each BOM item:
-Whether the material component is included in costing
-Whether the material component is kept in stock or procured externally
-Whether the input quantity is independent of the lot size (that is, independent of the quantity produced)
-Whether the material should be treated as a co-product
The following illustration shows how the BOM is exploded and valuated in costing:
Explosion and Valuation of the BOM
The routing describes the sequence of the operations required to manufacture a product. It specifies such things as:
The routing contains standard values for the execution of the operation. The system calculates the planned costs for the internal activities in the operation by interpreting these standard values using the formula in the work center. In the routing, the base quantity (such as the piece quantity) is normally constant. The required times (such as the processing time for each operation) are maintained through the standard values.
You can also use rate routings instead of routings. Rate routings are employed mainly in repetitive manufacturing. They are used for quantity-based planning. The reference time is constant, while the production quantity is established separately for each article. You define one sequence of operations. You can use the production time and the associated units to specify a production rate for the operation. The production rate is calculated by dividing the production quantity by the production time.
In repetitive manufacturing, operations that are defined as milestones automatically become the basis for the definition of reporting points when the run schedule header is created.
A work center is an organizational unit at which an operation is performed. A work center can be a machine, a person, a production line, or a group of workers. The work center is assigned to a plant.
The master record of each work center specifies a cost center or business process. The cost center or business process is assigned to a controlling area. The work centers assigned to a cost center or business process can be in different plants. The plant is assigned to a single company code, which is in turn assigned to a controlling area.
In cost center planning, the activities performed at the work center are planned using activity types. This means that the activities performed at the work centers have corresponding activity types in Cost Center Accounting. The system calculates the amount of activity required using the formula in the work center and the standard values in the operation. The planned costs for the operation are calculated by valuating the activity types with the prices established in Cost Center Accounting.
The process quantities that will be used by the work center are planned in Activity-Based Costing. The system calculates the process quantities using the template. To establish the planned cost of the business process, the process quantities are valuated with the prices of the business processes.
The following illustration shows the link between the data in the work center and the data in the routing.
Quantity Determination Using the Work Center and Routing
In repetitive manufacturing you can use a production line instead of a work center. The production line must be defined as a work center in Production Planning. It provides information on the quantity that can be produced in a given time period.
A material master record contains all information necessary to manage a material. The following views are important in Cost Object Controlling:
The accounting view:
-Controls the valuation of the material and the assignment of the material to a G/L account and therefore to a primary cost element
-Shows the sum and the value of all valuated inventories of the material
-Contains prices that can be transferred from inventory cost estimates for the material (such as the tax price 1 and commercial price 1)
The costing view controls the following for Cost Object Controlling:
-Whether the material number (the Origin) is updated in the cost element itemization in the Controlling component
Here you ensure that the material number for material costs is displayed in the information system.
-Whether the consumption of the material is subdivided according to origin groups
This allows you to create groups of raw materials or trading goods for purposes such as calculating overhead uniformly for each group.
-The basis on which overhead costs for the material can be calculated (overhead group)
If you have entered an overhead group, you can link it to an overhead key and define conditions for selected groups of semifinished and finished products.
-Whether variances for orders are calculated through this material
The variance key in the material master record is transferred into the production order. It specifies that such orders are selected when the variances are calculated.
The costing view also controls the following:
-Whether the material is normally costed in product costing or unit costing
-The default lot size for costing
-How BOMs and routings are selected for cost estimates with quantity structure
-The status of the material
This information in this view comes from the following sources:
-The standard cost estimate for the material, when the standard cost estimate is marked and released (such as the future standard price, the current standard price, and the previous standard price)
-The modified standard cost estimate or the current cost estimate for the material (such as planned price 1)
The co-production extras contain an apportionment structure that determines the apportionment of the total costs for an order to the individual co-products.
For more information, refer to the document PP Production Planning.