Preliminary Costing of Manufacturing Orders

Use

You precost a manufacturing order (production order or process order) for the following purposes:

To determine the planned costs for the material being manufactured based on the planned lot size of the order
To calculate the planning variances and use them to decide what production versionto use
To be able to determine the production variances at a later time

In sales-order-related production, you can use the preliminary costing for the manufacturing order for the following purposes:

To calculate a standard price for individual requirements materials
In the Product Cost by Sales Order component, to use the planned costs calculated in this way to determine the planned costs for the sales order item
In the Product Cost by Sales Order component, to use the planned costs calculated in this way as the basis for results analysis

Integration

If you are using a manufacturing order with quantity structure, the system accesses the master data of PP or PP-PI and CO.

Prerequisites

Before performing preliminary costing for a production order, carry out the following steps in Customizing for Start of the navigation path Product Cost by Order Next navigation step Manufacturing Orders End of the navigation path :

Define Default Values for Order Types (PP and CO)

You enter the following default values for costing:
- The default costing variant for preliminary costing and simultaneous costing
- When the planned costs for the manufacturing order should be calculated
  
  The planned costs can be calculated at the following times:
  - Automatically when a new order is saved
    
    This setting is recommended when you want to calculate the planned costs for manufacturing orders when you convert the planned orders into manufacturing orders, for example.
  - Automatically when a released order is saved
    
    This setting is recommended when you want to make a large number of changes after creating orders but before releasing them. Calculating planned costs after orders are released improves system performance.
  - Not automatically
    
    You can still manually request calculation of the planned costs from within the order at any time.
    
    This setting is recommended when you want to calculate planned costs for manufacturing orders with the report PPSFCACT (see below).
- Whether the costs are collected on the manufacturing order or on a product cost collector
  
  If the costs are collected on a product cost collector, you can create a preliminary cost estimate for the manufacturing order but you cannot save it to the manufacturing order.
  
  You can change the default values in the order header (master data).
Check Costing Variants for Manufacturing Orders (PP)

To see which costing variant was used as the basis for cost planning, access the manufacturing order and go to the master data.You can define the costing variant as a default value in Customizing for Product Cost by Order under Preliminary Costing Production Orders or Process Orders Define Default Values for Order Types (PP and CO) .
Check Valuation Variants for Manufacturing Orders (PP)

The valuation variant is assigned to the costing variant. Also check the costing sheet specified in the valuation variant.

To see which costing sheet was used as the basis for cost planning, access the manufacturing order and go to the master data.

Features

The planned cost of the manufacturing order is calculated in accordance with the Customizing settings in the default values for the order types when you save the manufacturing order after creating it or after releasing it. The preliminary cost estimate for the manufacturing order normally uses a BOM and routing. If you have not specified a routing, the preliminary cost estimate uses the BOM. You can also include production costs in the preliminary cost estimate using a process template in Activity-Based Costing (CO-OM-ABC).

Note Note

Suggestions for improving the performance of your system:

If you cost the order when you create it, a cost estimate is created again each time you save after making a change. Since most changes are made before the order is released, you can improve system performance by not costing the order until you have released it.

You can also cost manufacturing orders with the report program PPSFCACT (see below). In this case you can specify in the order type that no planned costs are to be calculated automatically. You execute the report at regular intervals and set the Costing indicator. You can specify a status selection profile in the report so that only the manufacturing orders that have not been costed are included. If you calculate work in process at target costs, or if you calculate scrap on the basis of the preliminary cost estimate/planned costs, or if you want to calculate production variances on the basis of the preliminary cost estimate, you must always make sure that planned costs for the orders exist when you perform these period-end closing transactions.

End of the note.

Transfer Prices

If you are using transfer prices, you can distribute planned costs in multiple valuation views.

User-Defined Error Management

You can influence the messages output in the log of preliminary costing of manufacturing orders by using user-defined error management .

Preliminary costing of collective orders without automatic goods movements has a number of special requirements. For detailed information, see the following section:

Collective Orders Without Automatic Goods Movements

You can calculate the planning variances using the preliminary cost estimate for the order and the standard cost estimate for the material. For detailed information, see the following section:

Variance Calculation

For detailed information on viewing planned costs in the information system, see the documentation Product Cost Controlling Information System.

For information on updating data in multiple valuation views, refer to the following section:

Transfer Prices in Cost Object Controlling

For information on activity-based costing, see the document Activity-Based Costing .