When you create a base planning object, it is always linked to a costing variant. This costing variant contains all the information needed to cost the object. You define and check costing variants in Customizing for Product Cost Planning.

The following graphic gives you an overview of Customizing for Reference and Simulation Costing:

You specify a valuation variant and a costing type in the costing variant for Reference and Simulation Costing.

• In the costing type, you specify the valuation view to be costed.
• In the valuation variant, you specify the following:

• The prices with which the materials are to be valuated
• The prices with which the internal activities, business processes, and external activities are to be valuated
• Which price is to be used for subcontracting

You also specify in the costing variant whether a cost element is required for each costing item.

For more information about the relevant settings in Customizing, see the Implementation Guide (IMG) for Product Cost Controlling.