Use

The WIP calculation function valuates the unfinished products (work in process).

In the Product Cost by Order component, the work in process is valuated at actual cost. Work in process is the difference between the debit and credit of an order that has not been fully delivered.

You can calculate WIP at actual costs for the following objects:

Integration

You can use the Schedule Manager to assist you in performing the period-end closing activities. For more information, refer to the following sections:

Scheduler

Monitor

Flow Definition

If you use the Schedule Manager with the flow definition, you can use the multilevel worklist to reprocess the faulty objects. For more information, see the following section:

Multilevel Worklist

The difference between the work in process in the current period and the work in process in the pervious period corresponds to the inventory change of unfinished products.

The inventory change can be transferred to Financial Accounting (FI) and Profit Center Accounting (EC-PCA) during period-end closing for Cost Object Controlling when you settle . Settlement to FI capitalizes the inventories of unfinished products. The system debits the unfinished goods account (balance sheet) and credits the inventory change account (income statement). For goods that have been placed into finished goods inventory during the period, the system cancels the work-in-process inventory when you settle. This posting is performed in accordance with the posting rules defined in Customizing. The posting rules specify which accounts are posted during settlement.

Note also the capabilities of user-defined error management .

Work in Process at Actual Cost

( )

The number of the order for which work in process is transferred into financial accounting is displayed in the Assignment field in the financial accounting document. This ensures that the postings to financial accounting can be explained.

You can use the user-defined error management functions to influence which system messages permit or prevent settlement of work in process.

Prerequisites

You must make sure of the following:

For work in process at actual costs, use results analysis key 000002.

In the posting rules, you specify the G/L accounts to which you want to settle the work in process.

The cutoff period divides the life cycle of the production order into open and closed periods.

To prevent data that has already been posted from being changed, you usually define the cutoff period as the period preceding the results analysis period.

The currency type of the controlling area (under Basic data ) controls which currency is allowed as the controlling area currency and whether this currency can differ from the currency of the company codes assigned to that controlling area. You can use the All currencies indicator (under Control indicators ) to specify whether the values are updated only in the controlling area currency or also in the transaction currency and the object currency.

WIP is always calculated in the controlling area currency and settled to Financial Accounting in the company code currency. If you are costing across company codes with different currencies, the WIP is also updated in the company code currency.

Definition of Work in Process with Requirement to Capitalize

In Customizing for Product Cost Planning , you define which values must be capitalized for inventory valuation, commercial-law physical inventory valuation, and tax-law physical inventory valuation under  Basic Settings for Material Costing Define Cost Components . Cost components show the breakdown of the costs calculated in the cost estimate.

The line IDs for WIP calculation are normally grouped the same way as the cost components in Product Cost Planning . This means that the same cost element interval is usually assigned to the line ID raw materials as is assigned to the cost component raw materials .

However, costs are only taken into account in WIP calculation if they are assigned to a line ID.

In Customizing, you specify the following for each group:

Functions to Be Performed Before WIP Calculation

You can revaluate activities at actual activity prices and allocate overhead for unfinished products and for finished products. Before calculating the work in process, you should therefore carry out Process Cost Allocation , Revaluation at Actual Prices , and Overhead Calculation .

Features

Calculation of Work in Process

This method determines the work in process for each production order by calculating the difference between the actual costs incurred and the actual costs settled (that is, the difference between the debits for goods issues, internal activity allocations, external activities, and overhead on the one hand, and the credits for goods receipts on the other). Once the last part of the order lot has been delivered to stock, any remaining work in process must be canceled so that the order costs can properly be settled to stock.

The status of the order determines whether WIP calculation creates or cancels the work in process.

The cost estimate used to valuate the work in process may contain costs that are not relevant for inventory valuation, such as sales and administration costs. In a product cost estimate with a quantity structure, these costs are shown in a separate cost component view. Costs that are not relevant to inventory valuation are not used for the valuation of the work in process.

In joint production, the work in process is shown separately for each co-product at the level of the order item.

Calculation of Reserves for Unrealized Costs

When the system calculates the WIP, it may create reserves for unrealized costs for certain orders. This happens when the actual cost incurred to date for the manufacturing order is less than the credit posting at the time of the goods receipt. The system creates these reserves because higher costs than the actual costs to date are expected on the basis of the information in the standard cost estimate for the material that was used for material valuation. When you settle, reserves for unrealized costs usually result in the system debiting the expense account (from reserves) in the income statement and crediting the reserves for unrealized costs in the balance sheet.

Update of Work in Process

The work in process is updated to the product cost collector or manufacturing order under secondary cost elements of cost element type 31. Secondary cost elements of cost element type 31 are results analysis cost elements.

The system can update the work in process and reserves not only as a sum but also split into fixed and variable costs. A requirement for this function is that the price control indicator in the material’s master record is set to S (standard price) and that a current standard cost estimate for the material exists.

Work in Process in the Information System

When the WIP is calculated, the system sets the status RESA (Results analysis carried out). The system uses this status to select the orders for which work in process has been calculated.

This data is included in summarization. You can create summarization hierarchies in the information system to be able to see cumulative variances by plant or controlling area, for example.

Work in Process in Multiple Valuation Views

You can calculate work in process at actual costs in up to three valuation views. This means that it is possible to include transfer prices with work in process at actual costs. You control this in Customizing for Product Cost by Order under  Period-End Closing Work in Process Define Results Analysis Versions .

Improving Performance

You can use parallel processing to reduce the runtime of the WIP calculation process.

Schedule Manager: Multilevel Worklist

You can view and edit the objects with errors that were processed with the individual functions. You use the multilevel worklist for this purpose. The multilevel worklist enables you to edit the faulty objects of an individual processing step (that is, a single function) or of an entire processing step sequence.

A prerequisite for using the multilevel worklist is that you are using the Schedule Manager in conjunction with a flow definition.

See Integration in this section.

Constraints

Work in process cannot be calculated separately by operation or phase.

Transfer Prices: Work in Process in Multiple Valuation Views

If you are using transfer prices, you can update work in process at actual cost in multiple valuation views.

User-Defined Error Management

You can influence the messages output in the log of WIP calculation by using user-defined error management.

See Integration in this section.

Example

In the first two periods, work in process is calculated and passed on to FI and EC-PCA during settlement as a stock change.

In the third period, the last goods receipt is entered for the order. The work in process created previously is canceled.

Work in Process

See also:

For information on the default rule and the settlement type, refer to the following section:

Product Cost by Period or Product Cost by Order?

For information on the control parameters for Cost Object Controlling, see the following section:

Control Parameters in Cost Object Controlling

For information on the valuation strategy with a valuated sales order stock, refer to the following section:

Valuated Sales Order Stock: Valuation

Standard Price with Valuated Sales Order Stock

For information on calculating variances and scrap with valuated sales order inventories, see the following sections:

Variances and Scrap with a Valuated Sales Order Stock

For information on the Customizing settings for WIP calculation, refer to the IMG for Product Cost by Order under  Period-End Closing Work in Process.

For information on viewing the work in process in the information system, see the documentation Product Cost Controlling Information System and the implementation guide (IMG) for the Product Cost Controlling Information System .

For information on updating data in multiple valuation views, refer to the following section:

Transfer Prices in Cost Object Controlling

For additional performance improvements in CO-PC, see the section: Performance in Product Cost Controlling