Basics of SAP Standard Cost estimate- understanding costing variant-Part 2

This document is in continuation of my first document Basics of SAP Standard Cost estimate- Understanding the flow of cost settings-Part 1. This is basic and structural way of documenting the steps involved in defining Costing Variant.

This document explains the costing Variant configuration and components assigned to costing variant like Valuation variant, Qty structure Control, Transfer Control and Assignments. originally i thought of writing only 2 parts to complete it but it seems it will need few more parts to complete.This document is intended to explain the cost flows to a standard cost estimate. Explaining various settings in background as previous part.

• Costing Variant

T CODE OKKN- Define Costing variant and name it. For analysis purpose we are taking PPC1.

Basics of SAP Standard Cost estimate- Understanding the flow of cost settings-Part 1

This document is intended to explain the cost flows to a standard cost estimate. Explaining various settings in background.  I will try to explain this from backward from Cost estimate to configuration. This will answer some basic questions like Material Cost, Overhead Cost, Labor etc. in a standard cost.
When you take a look at a material cost estimate what you will understand the Quantity Structure, Valuation, Costing Dates etc.

• Standard cost of a material looks like in T-Code- CK13n (you can view this from costing-2 view in material master too T-Code-MM03.)
• I will try to walk through these 6 tabs below explaining basic configurations and data flows from different configuration to Standard Cost estimate.

Document Splitting in New General Ledger

Background
In SAP ERP the document splitting is the most powerful tool is widely and most commonly used. With this function the document splits the line items based on the “Characteristics” we define in system. Often this function is used to get the financial statements correctly for segment reporting.

Back to the Basics
Concept can be explained of document splitting with the help of one of the most basic business transaction as “Vendor Invoice”. Suppose we have vendor invoice as below which consists of two expense line items say 10,000 in total with 1,000 of tax component which sums to 11,000.

1. Expense Item 1 for 8,000 where it is assigned to PC  - X
2. Expense Item 2 for 2,000 where it is assigned to PC  - Y

Account	Amount	Profit Centre
Vendor A/C	-11,000
Expenses 1	8,000	PC – X
Expenses 2	2,000	PC – Y
Input Tax	1,000

Automation of Standard Cost Estimate (CK40N)

Introduction:
Calculation of standard cost is the annual event generally done at the beginning of financial year during Planning & Budgeting activities, which result into calculation and release of standard cost estimate.
CK40N is a powerful tool provided by SAP to calculate cost estimate with high level of accuracy for in-house produced material and material procured from outside. CK40N is executed in multiple steps from selection of material to release of cost estimate, which generally took of time to get executed. The purpose of this article is to specify how we can use the standard functionality of SAP to automate CK40N, for calculating cost estimates.

Automation of CK40N:
Product cost estimate through CK40N includes the below steps:

• Selection
• Structure Explosion for in-house produced materials
• Costing for all the materials at structure explosion
• Analysis for cost estimates
• Marking for cost estimate as future standard cost
• Release of future cost estimate as current standard cost estimates

CIN - TAXINN Procedure - An Overview

Many times I have seen people who just entered in SAP have a kind of fear of CIN (Country India Version), even I was one of them. To overcome this fear we just need to put some logic and understand how system does calculations. Once you know how it works, you will start getting interest in it.

Here I am writing this blog just for those who just entered in SAP FI. I am not going to write whole configuration steps here, just an overview on the TAXINN procedure and how the system calculates excise duty and taxes.

Here we go.
Transaction Code: OBYZ
Calculation Procedures contains necessary specifications for the calculation and base for calculating and posting of taxes on sales/purchases. Many tax calculation processes have already been defined in the standard SAP system for certain countries. For India its TAXINN and TAXINJ. TAXINN is a tax procedure which follows condition based record (not like percentage/formula base in TAXINJ).

Why Actual Activity Cost ZERO for Production Order

Purpose of writing this document is sometimes Actual Activity Cost does not get updated in KKBC_ORD against a production order. There are number reasons why activity cost not getting updated for production order as per SAP Note 380282 and the possible reason can be as below -

• The order must have a costing variant for actual costs (field CAUFVD-KLVARI).
• The confirmed operation must be relevant to costing (T430-KALKZ = "X"). This indicator is set in the operation control key.
• The order itself must have the "fully relevant to costing" attribute set (AFVGD-SELKZ = "X"). This indicator is copied from the routing and cannot be changed in the production order. For this, refer to SAP Note 378052, if necessary.
• The confirmed operation must have a work centre.
• The work centre must be assigned to a valid cost centre.
• In the work centre, a valid activity type as well as a formula must be defined for every activity whose costs you want to determine.
• These activity types also have to be specified accordingly in the order operation.
• For the activity types used in the work centre, the prices must be maintained for the cost centers of the work centre (transaction KP26).
• The confirmed operation must not be an external processing operation.
• During the confirmation, you must enter activities.

Material Ledger Overview

Introduction:
Material ledger (ML) is functionality in SAP, which helps to calculate Actual Cost for materials and also provide the facility of multiple parallel valuations in multiple currencies. ML has two major functionalities, first to calculate actual cost of materials, semi/finished goods, and second provide an opportunity to calculate actual cost on multiple valuation such as Legal, Group, & Profit center valuation. In this document we will see fundamental concept of material ledger, how the actual cost is calculated for different business scenarios.    

Actual Costing in SAP
Actual Costing has a purpose of calculating actual cost for goods manufactured in-house and materials procured from outside. Calculation of actual cost for finished goods, raw materials is very difficult as we don’t know many of actual costs when business transactions are performed. Business transactions are performed throughout the months and at that time we don’t know the actual cost of our production activities, expenses for full months, total activities performed in month, overhead cost etc., so it’s become difficult to calculate actual cost for finished goods, raw material purchased from outside. The situation becomes more difficult when we talk about a Multinational organization having manufacturing plants in different countries and transfer of goods is happening between groups.