Performing Preliminary Costing for Process Orders

The system performs the following activities for preliminary costing:

• Valuates the planned quantities of the material components using the material list

• Determines the planned activity quantities using the master recipe

• Uses the planned valuation variant specified in the default values for the order type/plant for valuating the planned material components, activities, and business processes

• Calculates the overhead costs using the costing sheet specified in the planned valuation variant

• Selects the template if it is using template allocation with the costing sheet and the overhead key

• Updates the planned costs to the manufacturing order

The system generates a preliminary cost estimate for the process order when it is saved or released in accordance with the Customizing settings in the default values for the order type and plant. The system calculates the order costs for the order header and distributes them to the co-products on the basis of equivalence numbers. The equivalence numbers are specified in an apportionment structure.

When a process order is created, the system automatically generates the following:

• The system generates a settlement rule, which defines the settlement of the total order cost to the co-products or the order items on the basis of the apportionment structure. The costs are settled to the order items both in the preliminary cost estimate as well as the actual costs.

• The system generates a settlement rule for each item in accordance with the default rule. These settlement rules control settlement of the items to the respective material.

An apportionment structure is used to apportion the costs to the primary products and co-products. The apportionment structure is specified in the production version or in the material master record of the leading co-product. It can also be specified directly in the process order.

In Product Cost Planning, costs are assigned to the co-products by cost component so that the cost component split can also be used in the costing-based CO-PA for valuation purposes as well as in Financial Accounting using a cost-splitting profile.

In the preliminary cost estimate for the process order, the planned costs are distributed (settled) to the co-products.

You use a source structure for maintaining different equivalence numbers depending on the posted cost elements. You assign cost element intervals to the items of the source structure. For settlement purposes, you can assign different equivalence numbers to each source assignment. For example, you can distribute the material costs to the co-products at a ratio of 3:2 but the overhead costs at 1:1. Another example for distribution the costs to the co-products would be the allocation of the primary costs with a different allocation key than the secondary costs.

Process orders are orders of order type 40 (process order).

Process orders are usually analyzed by lot size. That is, variances are not determined until the order has the status delivered or technically completed. To do this, specify the default rule Production Material Full Settlement (PP1) in the Cost-Accounting-Relevant Default Values for Order Types and Plants table. This ensures that the settlement type full settlement (FUL) is specified in the settlement rule for process orders of the relevant order type.

A results analysis key must be specified for all manufacturing orders for which you want to determine work in process (WIP). Use a results analysis key that was defined for calculating WIP at actual cost.

For preliminary costing and simultaneous costing, enter the costing variant and valuation variant in the order type. This defines the valuation procedure for materials, internal activities, external activities, and business processes. It also determines which overhead structure is used to calculate overhead.

If you want to analyze product costs by lot, collect the costs directly on the process order. In this case, do not select the Product Cost Collector indicator.

The default values for the order type/plant are transferred to the process order when it is created.

The same procedure is used with production orders.