Production Orders
Every production order can use one of the following costing methods:
- Product Cost by Order
- Product Cost by Period
You select the costing method in Customizing in Cost-Accounting-Relevant Default Values for Order Types and Plants.
Available Options
The following options are possible for selecting the costing method:
- If you use Product Cost by Period with a product cost collector, the product cost collector order type will use the default rule STR. The manufacturing order type uses the default rule PP2 (periodic settlement). The Product Cost Collector indicator is set there as well.
- If you use Product Cost by Period without the product cost collector, the order type of the manufacturing order will use the default rule PP2 (periodic). The Product Cost Collector indicator is not selected. Although this controlling method is possible, it is not recommended by SAP.
- If you use the Product Cost by Order, the order type of the manufacturing order will use the default rule PP1 (full settlement). The Product Cost Collector indicator is not selected.
If you automatically post the determined WIP to Financial Accounting (FI) with the settlement, the WIP settlement must be carried out in every period.
Final Costing in Product Cost by Period
When you use periodic settlement, WIP and variances are shown for each period at the same time.
Status-Based Final Costing in Product Cost by Order with Full Settlement
If you use full settlement, the system calculates WIP and the variances based on the status of the order.
Effect on the Calculation of WIP
The following table shows the effect on the calculation of WIP and variances based on the status of the order:
| Status of the Order | Action |
|---|---|
| Released, Partially released, or Partial delivery | The system calculates WIP. |
| Delivered or Technically Complete | The system cancels the remaining WIP balance from the previous period and calculates variances. |
A WIP balance and variance calculation cannot occur at the same time in the same period.
Advantages of Cost Object Controlling Using Product Cost Collectors
- Supports lean cost management.
- Focuses more on the product or production as a process and less on the logical type of production.
- The reduced number of cost objects improves the period-end closing process.
- Variances are recognized in the period in which they occur.
Disadvantages of Cost Object Controlling Using Product Cost Collectors
- It is not obvious whether the costs are assigned to the production order according to cause.
- This controlling method is not recommended if production involves significant set-up costs, if lot sizes vary significantly, or if the Bill of Material (BOM) and routing are not stable.
- It is not available if WIP and variance analysis is required at co-product level or when using collective orders.