Use
You can use the method Inventory Determination, Without Planned Costs, Without Milestone Billing for:
You can use the method Inventory Determination, Without Planned Costs, Without Milestone Billing to:
The inventory is canceled as soon as actual revenues are received.
Note the following:
As soon as revenue is received, the actual costs are considered cost of sales in full. In other words, the cost of sales is not proportional to actual revenues as with the revenue-based method, nor is it proportional to the quantity sold as with the quantity-based method.
Prerequisites
Choose a results analysis method in simplified Customizing for Product Cost by Sales Order under Period-End Closing
® Results Analysis ® Valuation Method.Features
If R(a) = 0 then C(PA) = 0 and C(z) = C(a)
If R(a) <> 0 then C(PA) = C(a) and C(z) = 0
R(PA) = R(a)
Example
Period 01
In period 01 you have actual costs of USD 20,000 but no revenues. In results analysis, the system calculates the following data:
You then settle the following:
The following values are reported in CO-PA:
Profitability Analysis
Actual revenues |
0 |
Calculated cost of sales |
0 |
Profit |
0 |
The income statement shows the following values:
Income Statement
Expense |
Revenue |
Actual costs 20,000 |
Inventory increase |
20,000 |
20,000 |
Period 02
In period 02 actual costs increase to USD 130,000. You deliver to your customer and send an invoice for USD 200,000. The order is now fully delivered and fully invoiced. In results analysis, the system calculates the following data:
You then settle the following:
The following values are reported in CO-PA:
Profitability Analysis
Revenues (actual revenues) |
200,000 |
Cost of sales (actual costs) |
130,000 |
Profit |
70,000 |
The income statement shows the following values:
Income Statement
Expense |
Revenue |
Actual costs 130,000 |
Actual revenues 200,000 |
Profit 70,000 |
|
200,000 |
200,000 |
The profit on your sales order is USD 70,000.