Settlement of Cost Object Hierarchies: Scenario 
Settlement of a Cost Object Hierarchy Without Actual Cost Distribution
You normally use a cost object hierarchy without distribution when you have assigned materials to the cost object hierarchy whose price control indicator in their master record is set to S .
You define a cost object hierarchy that contains a cost object node for each level to which actual costs can be assigned.
You assign materials to this hierarchy. Create product cost collectors or manufacturing orders for the production of these materials for which settlement will be by period.
When you deliver the materials to stock, the system updates the material stock account of the material and credits the order correspondingly.
Before settling, you must start variance calculation for the cost object hierarchy. Variance calculation summarizes the target costs and actual costs of the hierarchy, and shows the variances at the highest node at which costs of this origin were incurred.
When you settle the costs incurred for the cost object hierarchy, the system checks whether the Variances indicator in the settlement profile is set. If it is, the system generates the following:
A second apportionment rule in the settlement rule for each cost object node that assigns the variances to the profitability segment for the cost object node.
A second distribution rule for each order that passes the variances on to the profitability segment for the material produced.
The following happens when the cost object nodes are settled:
The actual costs are updated to the price difference account.
The variances are passed on to Profitability Analysis according to the PA transfer structure.
The following happens when the assigned orders are settled:
The actual costs are written to a price difference account.
The variances are passed on to Profitability Analysis according to the PA transfer structure.
After settlement, you can display the second distribution rule (receiver = profitability segment) for the cost object hierarchy.
Settlement of a Cost Object Hierarchy With Actual Cost Distribution
You normally use a cost object hierarchy with distribution when you have assigned materials to the cost object hierarchy whose price control indicator in their master record is set to V .
You define a cost object hierarchy that contains a cost object node for each level to which actual costs can be assigned.
You assign materials to this hierarchy. Create product cost collectors or manufacturing orders for the production of these materials for which settlement will be by period. The system generates a settlement rule for these orders that assigns the order costs to the material (stock) by period. These costs influence the stock value.
When you deliver the materials to stock, the system updates the material stock account of the material and credits the order correspondingly.
At the end of the posting period, you distribute all costs that were posted to the cost object nodes in the hierarchy to the product cost collectors of the run schedule headers or to the production orders assigned to the hierarchy.
Distribution is carried out on the basis of the target costs for the assigned materials. The actual costs are updated to the product cost collectors or production orders.
Before settling, you must start variance calculation for the cost object hierarchy.
The system calculates variances for all orders and sets the status variances calculated .
The following takes place when you settle the order costs: For orders whose settlement rule points to a material, the system automatically generates another distribution rule that points to the profitability segment for the material produced.
For a manufacturing order, the settlement receiver is the profitability segment for the material produced, the settlement share is 100%, and the settlement type is periodic .
When you settle the order, the order is credited and the offsetting entry is made in the material stock account of the produced material. The system calculates a new moving average price for the material.