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Background documentationTerminology in Product Cost Controlling Locate this document in the navigation structure


Note how the following terms are used in Product Cost Controlling:

This graphic is explained in the accompanying text.

  • Standard costs

    In manufacturing enterprises, standard costs are predetermined costs that remain relatively stable over longer periods of time. Standard costs are calculated in the following ways:

    • In make-to-stock production, standard costs for materials are calculated in standard cost estimates.

      You create the standard cost estimate for a material in the application component Product Cost Planning.

      You normally create standard cost estimates at the beginning of each fiscal year. When variances are determined in the period-end closing process of Cost Object Controlling, standard costs are used as the basis for calculating target costs.

      The total standard cost of a material can be written to the material master record as the standard price and used to valuate the material during the year.

    • In sales-order-related production when you are using a valuated sales order stock, standard cost is determined according to a predefined strategy sequence (see also: Valuated Sales Order Stock: Valuation; Standard Price with Valuated Sales Order Stocks).

      The total standard cost can be updated to the stock segment of a make-to-order material as the standard price and used to valuate the sales order stock.

  • Planned costs

    Planned costs for cost objects are calculated in preliminary costing. Preliminary costing is part of the application component Cost Object Controlling.

  • Target costs

    Target costs are the costs expected to be incurred when a specific quantity is produced. They are based on the planned or standard cost, which is converted to the target cost based on a reference quantity (such as the yield). This conversion can be performed at various points, for example when the variances are calculated.

    Target costs can also play a part in functions other than variance calculation, such as when the value of unfinished goods (work in process) is calculated in Product Cost by Period (see also: Work in Process in Product Cost by Period) or when actual costs are distributed in cost object hierarchies (see also: Actual Cost Distribution in Cost Object Hierarchies).

  • Material cost estimate

    A material cost estimate is a calculation of the cost of goods manufactured and cost of goods sold for a product. It is the basis for material valuation at standard costs for all application areas.

    • Material cost estimates can be created automatically using the data in Production Planning. This type of cost estimate is known as a cost estimate with quantity structure.

    • Material cost estimates can also be created using the data entered manually in Controlling. This type of cost estimate is known as a cost estimate without quantity structure.

  • Modified standard cost estimate

    A modified standard cost estimate is an alternative material cost estimate. It differs from the standard cost estimate in that it is based on the quantity structure that changed during the planning period.

  • Current cost estimate

    Like a modified standard cost estimate, a current cost estimate is an alternative material cost estimate that you can create in the application component Product Cost Planning.

  • Actual costing

    Actual costing enables you to assign the costs actually incurred in the period directly to your materials. Materials are valuated at a preliminary standard price which is then adjusted to reflect the difference between the preliminary price and actual cost. You perform actual costing in the application component Actual Costing/Material Ledger (CO-PC-ACT).

  • Simultaneous costing

    Simultaneous costing is a process in which the actual costs incurred for a cost object are debited to the cost object.

    Simultaneous costing makes it possible to see and analyze the actual costs for a cost object at any time.

  • Final costing

    Final costing is performed during the period-end closing activities. This entails:

    • Allocation of period costs (template allocation, revaluation at actual prices, overhead calculation)

    • Calculation of work in process and variances (target/actual comparisons)

    • Transfer of data to other application components (such as the work in process to Financial Accounting)