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### Example: Valuation Using Material Cost Estimates

The following example provides an overview of how valuation using cost estimates from Product Cost Planning works. In the example, a valuation strategy is active for point of valuation 01 (valuation of actual data) and record type F (billing document) that allows for valuation using material cost estimates based on the Billed quantity quantity field. In the sales system, a line item is posted with product 4711 and 2 units of quantity (point of valuation 01 and record type F), and the valuation using material cost estimates is run.

##### Assign Costing Key -> Product

Costing keys are assigned to products based on a point of valuation and a record type. In this example, product 4711 is to be valuated using costing key I01 for point of valuation 01 and for record type F.

##### Define How Cost Estimate Is to Be Read

Costing key I01 defines that costing variant PPC1 and costing version 1 are to be used to access the cost estimate.

##### Costing Variant PPC1 - Value Field Assignment (Field Name 1)
• Value Field Assignment: Material

In CO-PC, costing variant PPC1 clearly designates cost component structure 01. According to the value field assignment for cost component structure 01, cost component 10 is assigned to the Material costs value field. The cost estimate found based on costing key I01 shows material costs of USD 100 for cost component 10, which contains the material costs. The amount USD 100 is the sum of the fixed and variable portions of the costs. The fixed/variable indicator 3 tells us that the total of the fixed and variable portions is to be transferred to profitability analysis. Thus, if the sales quantity is 2, the Material costs value field is valuated with USD 200: material costs = 100 * 2 = 200.

• Value Field Assignment: Fixed and Variable Production Costs

The fixed and variable portions of cost component 20 are transferred according to value field assignment to the Fixed production costs (F/V indicator: 1) and Variable production costs (F/V indicator: 2) value fields respectively. If the fixed production costs are USD 200 and the variable production costs are USD 50, the sales quantity of 2 units gives us values of USD 400 and USD 100 respectively, which are then used to valuate the "Fixed production costs" (200 * 2 = 400) and "Variable production costs" (50 * 2 = 100) value fields.

The scenario above is summarized in the graphic below:

Abbreviations:

• Pt - Point of valuation

• F/V indicator - Fixed/variable indicator