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Background documentationControl Parameters in Cost Object Controlling Locate this document in the navigation structure

 

The following is an overview of the key control parameters in Cost Object Controlling. The main focus is on the control parameters for Product Cost by Order and Product Cost by Period with make-to-stock production and sales-order-related production based on a valuated sales order stock.

These parameters are defined in Customizing for Cost Object Controlling and define how the Cost Object Controlling functions are performed:

Preliminary Costing, Simultaneous Costing, and Final Costing in Period-End Closing

To enable preliminary costing for an order and to be able to carry out final costing in the period-end closing activities, you must make settings for the following control parameters:

  • Valuation variant

    The valuation variant controls the valuation of material usage and activity consumption both in your planning data and in your actuals.

    The valuation variant also determines which transfer prices are used for the materials, internal activities, and external activities in the order.

    In process manufacturing, the valuation variant also determines the transfer prices for the ingredients and by-products.

    For example, the valuation variant contains information on whether a raw material is valuated with the moving average price or the planned price, and whether a particular internal activity is valuated with the plan activity price of the period or with the actual activity price of the previous period. The valuation variant is selected through the costing variant.

    The valuation variant also specifies the costing sheet.

  • Costing variant

    The costing variant specifies the valuation variant and the costing type. These control whether the cost estimate is for your planning data or for your actuals.

    The costing variant is selected through the combination of order type and plant.

  • Costing sheet

    The costing sheet controls how overhead is allocated to direct costs.

    The costing sheet can contain an overhead key.

  • Overhead key

    In conjunction with the overhead group, the overhead key controls the allocation of overhead in dependency on the material being produced.

    The overhead key is specified in the costing sheet. The overhead group is specified in the costing view of the material master record. The overhead group and the overhead key are assigned to each other in Customizing for Product Cost Planning.

This graphic is explained in the accompanying text.

Control Parameters for Costing

Calculation of Work in Process
  • Results analysis key

    A results analysis key must be specified in the order so that the order is included when work in process is calculated at the end of the period.

    The results analysis key is specified as a separate default value for each order type and plant. There are different results analysis keys for work in process at actual costs, work in process at target costs, and for results analysis.

In addition to the results analysis key, you define further settings for WIP calculation in Customizing for Product Cost by Period or Product Cost by Order under   Period-End Closing  Work in Process.

Variance Calculation
  • Variance key

    A variance key must be specified in an order so that the order is included when the variances are calculated during period-end closing. The variance key also controls whether scrap should be calculated in variance calculation and whether line items are written for the transaction variance calculation. Note that this may have adverse effects on performance.

    The variance key is stored as a default value for each plant and transferred from there into the material master record of the plant materials. When you create an order for the material, the variance key is transferred into the order header as a default value.

  • Variance variant

    The variance variant controls which variance categories are included in variance calculation.

    You specify the variance variant in the target cost version.

  • Target cost version

    The target cost version determines which variances the system calculates (total variance, production variance, or planning variance). This means that you specify in the target cost version which costs are used in variance calculation as target costs and which costs are used as control costs.

    You enter the target cost version when you calculate the variances.

Settlement
  • Default rule

    The default rule is the critical control parameter for costing products by lot or by period. The default rule is proposed through the order type and plant.

    The default rule specifies a settlement rule.

  • Settlement rules

    The settlement rule contains a distribution rule and a settlement type.

  • Distribution rule

    The distribution rule determines the following for the settlement sender:

    • The settlement receiver

      The settlement receiver can be objects such as:

      • The material

      • In sales-order-related production and with a nonvaluated sales order stock: the sales order

      • In engineer-to-order: a project, network, or asset

      • An internal order

      • With collective orders: the higher-level order

      • A profitability segment

      In joint production, the order costs are distributed to the order items before they are settled to Financial Accounting.

    • The settlement share

      The settlement share determines the percentage rate or the equivalence number with which the costs are apportioned to the individual settlement receivers.

      In joint production you use this function to define which portion of the costs is settled to which receiver.

      If scrap was incurred during the production of a material, you can specify that the costs for the yield (such as 80% of the costs) are settled to inventory and the scrap costs (such as 20% of the costs) are settled to a cost center.

      In make-to-stock production and sales-order-related production with a valuated sales order inventory, the distribution rule is usually 100% to material.

      In sales-order-related production with a nonvaluated sales order inventory, the distribution rule is 100% to sales order.

      When you create an order, the system normally generates the first distribution rule automatically (usually 100% to material).

      The system generates a second distribution rule during the first settlement of an order. The second distribution rule with the receiver profitability segment is generated according to the settings in the PA transfer structure.

  • Settlement type

    The settlement type is selected through the default rule and determines how settlement is performed:

    • Settlement type FUL

      Here settlement is carried out in full. Settlement type FUL is used in lot-based cost object controlling. It can be used in conjunction with production orders and process orders.

      With settlement type FUL, the work in process is always valuated at actual costs. This means that with settlement type FUL the difference between the debit of an order through postings of actual values and the credit of the order through goods receipt postings is interpreted as work in process as long as the order has the status REL (released). If the order has the status DLV (delivered) or TECO (technically completed), the system interprets the difference between the debit and credit as a variance. With settlement type FUL, an order can never have both work in process and variances at the same time.

      If the work in process for an order is valuated at actual costs, the variances are calculated for the order cumulatively.

      Settlement type FUL is determined through default rule PP1.

    • Settlement type PER

      Here settlement is performed by period. Settlement type PER is used in periodic cost object controlling.

      With settlement type PER the work in process is always valuated at target costs.

      With settlement type PER the difference between the target costs and the actual costs less work in process and scrap is reported as a variance. Work in process, scrap, and variances can exist simultaneously on a cost object during a period.

      If the work in process for an order is valuated at target costs, the variances are calculated for the order by period.

      Settlement type PER is used for:

      • Manufacturing orders, determined through default rule PP2

      • Product cost collectors, determined through default rule STR

  • Settlement profile

    The settlement profile determines which receivers are allowed for settlement (such as material or profitability segment).

    You also specify in the settlement profile whether the settlement variances to Profitability Analysis is allowed.

    If you are using Profitability Analysis, you must set the Variances indicator in the settlement profile and define a PA transfer structure that assigns the variance categories to the value fields of an operating concern. The system settles the variances by variance category to Profitability Analysis.

    The settlement profile also specifies the PA transfer structure and the allocation structure.

    The settlement profile is proposed through the order type.

  • PA transfer structure

    The PA transfer structure assigns cost element groups and variance categories to value fields in Profitability Analysis . This determines which value fields of Profitability Analysis the variances are settled to.

  • Allocation structure

    In the allocation structure you specify the cost elements (settlement cost elements or source cost elements) under which you settle an object.

Special Requirements with Cost Object Hierarchies
  • Cost object profile

    The following control parameters for cost object hierarchies are defaulted through the cost object profile:

    • Variance key

    • Costing sheet

    • Overhead key

    • Settlement profile

    You specify the cost object profile in the cost object category.

  • Cost object category

    The cost object category controls parameters such as which type of processing is allowed for a cost object of that cost object category, and which single objects can be assigned to a cost object node in a cost object hierarchy of that cost object category.

Special Requirements for Production Orders Without Quantity Structure

For a production order without quantity structure, the costing variant for order planning is proposed through the planning profile in the order type, not through the default values for the order type and plant.

More Information

For detailed information on the default rule, see the following section:

Product Cost by Period or Product Cost by Order?