Use

Preliminary costing in the Product Cost by Period component calculates costs for product cost collectors.

A preliminary cost estimate for a product cost collector can calculate the costs for the production process (that is, on the basis of a particular production version or for a particular combination of BOM and routing).In repetitive manufacturing, you can therefore create cost estimates for specific production versions.

If you are using a product cost collector with the controlling level Production Plant/Planning Plant , you cannot create a preliminary cost estimate for the product cost collector because the product cost collector does not have a quantity structure.In this case you compare the actual costs only with the standard cost estimate for the material.

You can do the following on the basis of the preliminary cost estimate:

Confirm actual activity quantities

In simultaneous costing in repetitive manufacturing, you can use the activity quantity structure of the preliminary cost estimate.This means that reporting point backflushes use the activity quantities that were used in the preliminary cost estimate for the product cost collector.However, the actual quantities confirmed are valuated using the valuation variant of simultaneous costing rather than the valuation variant of preliminary costing.You control whether the system uses the quantity structure of the preliminary cost estimate for reporting point backflushes in Customizing for Product Cost by Period under Simultaneous Costing → Check Control Data for Repetitive Manufacturing Profiles .

Valuate the work in process

The system calculates the target costs on the basis of the preliminary cost estimate for the product cost collector to valuate the confirmation quantities for the calculation of work in process.

Calculate the production variances in variance calculation

The system calculates the target costs on the basis of the preliminary cost estimate for the product cost collector, and compares these target costs against the actual costs.

Valuate the unplanned scrap in variance calculation

The system calculates the target costs on the basis of the preliminary cost estimate for the product cost collector to valuate the confirmation quantities for the calculation of scrap.

In repetitive manufacturing, SAP recommends that you valuate work in process and scrap using the target costs calculated in a preliminary cost estimate for the product cost collector.This enables you to calculate work in process and scrap variances even if changes have been made in the reporting point structure.You must update the preliminary cost estimate after the reporting points have been changed.

Read the following sections:

Reporting Point Backflush in Repetitive Manufacturing

Valuation with Reporting Point Backflushes

Flexible Reporting Points

Updating the Preliminary Cost Estimate

This function is available in the menu of Product Cost by Period and in the menu of Repetitive Manufacturing .It can also be used in kanban processing.

Integration

In preliminary costing, the system accesses the master data and transaction data of Production Planning (PP) and of Controlling (CO).

Prerequisites

Enter a costing lot size in the product cost collector (see also: Editing Product Cost Collectors ).

A costing variant for the preliminary cost estimate has been entered in the Costing variant planned field in the product cost collector.

To specify the Costing variant planned as a default value in the order type of the product cost collector, go into Customizing for Product Cost by Period under Product Cost Collectors → Define Default Values for Order Types and enter a costing variant in the Preliminary costing field.The costing variant for a preliminary cost estimate for the product cost collector must specify costing type 19 in which the indicator Preliminary costing for product cost collectors is selected.You do this in Customizing for Product Cost by Period under Product Cost Collectors → Check Costing Variants for Product Cost Collectors.In the dialog box, choose Costing variants to determine activity quantities .

The system selects the costing sheet for overhead calculation in preliminary costing through the valuation variant linked to the costing variant planned that is specified in the master data of the product cost collector.(The costing sheet specified in the product cost collector is used for overhead calculation in the period-end closing process.)

You can enter an overhead key in the product cost collector.You link an overhead key to an overhead group that you specify in the material master record.In the costing sheet, you specify a separate overhead rate for each overhead key.This enables you to define different overhead rates depending on the material being produced.

The use of overhead keys may adversely affect performance.

Check the setting in Customizing for Product Cost by Period under Product Cost Collectors → Check Costing Variants for Product Cost Collectors and go to Costing Variants for Determination of Activity Quantities .

You can include overhead costs in preliminary costing using the following functions:

Overhead calculation

Process cost planning

For overhead allocation, check the settings in Customizing for Product Cost by Period under Basic Settings for Product Cost by Period → Overhead

If you are using process costing (CO-OM-ABC), check the settings in Customizing for Product Cost by Period under Basic Settings for Product Cost by Period → Process Costs .

Features

In preliminary costing, the BOM components and activities are valuated in accordance with the valuation variant specified in the Costing variant planned .To calculate the overhead, the system uses the costing sheet specified in the valuation variant.

Preliminary costing of the product cost collector generates a cost component split and an itemization .

The cost component split displayed here is not a true cost component split. It is only a single-level cost component split.This means that the assemblies are not exploded.Instead, the total value of the assembly is shown under the cost component to which the cost element of the assembly is assigned.

If the controlling area currency is not the same as the company code currency, the costs are updated in both currencies.You can view both currencies in reports in the Information System .

Reports on preliminary costing of product cost collectors can be found in the information system of Product Cost Planning .The information system of Cost Object Controlling does not provide reports on the preliminary costing of product cost collectors.

If the reporting point structure of your routing has changed in repetitive manufacturing, you can update the preliminary cost estimate.

The cost calculated in the preliminary cost estimate is not updated to the product cost collector.

Activities

You can start preliminary costing for a product cost collector in the following ways:

When you create the product cost collector

Manually in the change mode of the product cost collector (see also: Editing Product Cost Collectors )

As a collective report specified in the menu of Product Cost by Period under Planning → Preliminary Costing for Product Cost Collector

See also:

Product Cost Collector

Creating Preliminary Cost Estimates for Product Cost Collectors

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