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Master concepts of SAP Product Costing (CO-PC). Learn Cost Component Structure, Costing Types, Cost Object Controlling.
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SAP Product Costing
SAPProduct Costing (CO-PC) is a module provided by SAPand is used for planning costs and establishing material prices. It helps in estimating the cost of goods sold manufactured and COGS of each for each product unit. SAP Product Costing has two different types of material costing processes viz.1) Material cost estimate with quantity structure2) Material cost estimate without quantity structureMaterial cost estimate with quantity structure works in combination of BOM (Bill of Material) and Routing assigned to it. SAP CO Product Costing module is used to find the value of internal cost of products. It is also used for profitability and management accounting for production. While configuring Product Costing, it involves two areas for setting Product Cost PlanningCost Object ControllingThe basics of Product Costing is Cost Center Planning. The goal of cost center planning is to plan total dollars and quantities in each Cost Center in a Plant. SAP CO-PC is one of the most important SAP components for the manufacturing companies. The main purpose of SAP COProduct Costing or CO-PC is to calculate and show costs appearing during production process. When costing with quantity structure is performed, the system uses master data from Logistics. Product cost planning function costs individual products precisely and provides various, flexible and quick analysis options. In principle, the data for CO-PC are obtained from the PP module, through Bill of Materials and Master recipes. There are three necessary preconditions for good and reliable operation of the CO-PC module: Properly defined master data structure (BOMs, Resources and Master Recipes)Correctly defined CO structure (Cost centers and Profit centers)Correctly defined structural parameters related to the way of monitoring costsThe following PP master data is necessary for Product Costing: PP parameters in Material Master DataPP ResourcesMaster Recipes with Bill of MaterialsThe following FI-CO master data is necessary for Product Costing: FI-CO parameters in Material Master DataActivity TypesPrimary Cost ElementsSecondary Cost ElementsStructural parameters required for Product Costing define a method of calculating and analyzing production costs. There are nine major structural parameters: Cost Components StructureProduction Overhead Costing SheetCosting TypeCosting VariantValuation VariantWIP costsProduction VariancesCost Categories (Plan, Actual, Target)Settlement ProfileCO-PC module covers an area of management of production costs, which technically covers three areas of work: CO-PC-PCP – Product Cost PlanningCO-PC-OBJ – Cost object ControllingCO-PC-IS – Product Cost Info SystemEstimated cost of production is done prior to the start of production and as a result is a cost of making products and semi-finished products. The price comes on the basis of product structure, price of materials, the cost of activities and correct overhead keys, and cost analysis is done using the Cost components structure. The calculated price can be released to material master once per month. The difference compared to the previous price is posted to the special FI account. Cost of PP orders are displayed as planned, actual and target costs: Planned costs are calculated when a PP order is createdActual costs are the result of the posting of materials and activitiesTarget costs are calculated as part of period closing procedure and represent normative costs for the actual quantity produced. Reconciliation and ReportingDuring the period closing, the system calculates the Variances or WIP (Work in Progress), depending on whether the PP orders are completed or not. The Product Cost info system contains two types of production reports: Reports on current costs of PP ordersDrill-down reports based on specific data collection process after PP orders are completedReports on current costs include data on the basis of production postingThe value of the quantities producedThe value of the consumed materialsProduction VariancesDrill-down reports are based on a hierarchical basis. For them it is necessary to use specific tools for collecting data from PP orders after the completion of the closing period procedure. The collected data are analyzed on the basis of pre-defined data hierarchy. Integration of SAPProduct Costing with other SAPmodulesSAPProduct Costing is integrated closely with various SAP modules: Materials Management (MM) module for material master record / purchase info recordProduction Planning (PP) module for Bill of material (BOM), routing and work centerCost Center Accounting (CO) module as information of cost centers, its linkage of work center, activity types and activity wise cost centers help in determining conversion costs associated with manufacturing processIn a similar manner, the output and results obtained from Product Costing can also provide useful information for various SAP modules: Material Management (MM) module for material and stock valuationSales and Distribution (SD) moduleCost object controlling for calculating variances and WIPU
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