Group Costing: Scenario

Company and Product Structure:

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Two company codes are assigned to one controlling area. Company code 1 contains plants W1000 and W2000, and company code 2 contains plant W3000.

Product F is manufactured and costed in plant W1000. To manufacture F, materials from other plants are required. One of these plants, W3000, is in a different company code.

In addition, Profit Center Accounting is used; instead of all the materials being assigned to a single plant, they are each assigned to one of profit centers PC1, PC2, PC3 and PC4.

Costing F from Legal View

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For 1 F, the cost of goods manufactured is 14 per piece in plant W1000. The BOM is only exploded to the company code level; that is, to H". Although H'' originates in W3000 and is manufactured there from Y and P, costing considers H'' as a material component without its own BOM and valuates it with a price in accordance with the valuation strategy (10).

H'' is manufactured in W3000 from Y and P in a different company code. P, however, is manufactured from X, Z and A. A is delivered from W1000 for 5, although it only costs 1 in W1000. A goes into the costs for P at a price of 5.

Although it costs 8 to manufacture H'' from the legal view in W3000, it is delivered to W2000 for 10. F is now costed from the legal view with a price of 10. The cost of goods manufactured for F of 14 thus contains intercompany profits between company codes of 6: 4 for A and 2 for H''.

Costing from Profit Center View

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Transfer prices also apply between profit centers. If you create a profit center cost estimate for F, the BOM will only be exploded to the profit center level. A price of 18 is calculated for F from the profit center view.

Costing from Group View (Cross-Company Code)

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The actual cost of goods manufactured are now calculated for F from the group view without intercompany profits. This totals 8. Material A goes into plant W3000 with a price of 1, and H'' goes in with a price of 4.

The difference between the actual cost of goods manufactured and that from the legal view is the delta profit between company codes. The difference between the actual cost of goods manufactured and that from the profit center view is the delta profit between profit centers.

The actual cost of goods manufactured was calculated by exploding the BOM fully to the controlling area level and valuating the material components in accordance with the valuation strategy.