You can create a preliminary cost estimate for a product cost collector. The preliminary cost estimate costs the quantity structure defined by the production process. If you use the controlling level material by production plant and planning plant, you cannot create a preliminary cost estimate for the product cost collector.
In repetitive manufacturing, the activity quantities determined in preliminary costing can be used as default values for the confirmations. This requires you to make the appropriate settings in Customizing in the repetitive manufacturing profile.
On the basis of preliminary costing, you calculate target costs to valuate the following:
Work in process (WIP)
Scrap variances
In repetitive manufacturing, you can update the preliminary cost estimate to convert the quantities confirmed at the reporting points to the new reporting point structure. This is necessary when the reporting point structure of your routing changes.
Preliminary Costing – Overview
The production process quantity structure is valuated as defined in the valuation variant of the costing variant. Basic for valuation could be the following:
Plan Costs / Preliminary Cost Estimate (of the cost object).
Current Standard Cost Estimate (of the material you produce).
Alternative Material Cost Estimate (for comparison).
Preliminary Costing – Direct Materials Costs
To calculate direct material costs, the input quantities of the materials determined by the bill of material (BOM) are multiplied by the prices selected through the valuation variant. The system uses the BOM of the production process. The production process results from the controlling level and its selection (for example, BOM and routing).
You have already specified which costing variant and valuation variant are used by the preliminary cost estimate in Customizing for Define Cost-Accounting-Relevant Default Values for Order Types and Plants.
Preliminary Costing – Direct Costs of Production
The system calculates the direct cost of production by multiplying the planned setup times, machine times, and labor times, by the prices selected in accordance with the valuation variant, to calculate the direct costs of production. The system uses the routing of the production process.
The standard values are specified in the operations in the routing and can be defined as follows:
Fixed standard values:
For example, setup costs, which are independent of the production quantity and also known as ordering costs. They can still indicate stepped costs for technical reasons, such as a tool change required above a certain order quantity. These are known as semi-variable costs.
Variable standard values (lot size dependent):
For example, labor and machine time, which are multiplied by the costing lot size and divided by the base quantity on which the standard values are based.
The exact algorithm is stored in formulas for the work center, which is assigned to the individual operations of the routing. The cost center and the activity type for each operation are in turn assigned to the work center. This determines the price of the activity.
Preliminary Costing – Process Costs
Template allocation is an innovative technique for allocating the costs of Overhead Cost Controlling. All Controlling objects are suitable for use as receivers, especially cost objects and the profitability segments of CO-PA.
The template allocation technique allocates the Activity-Based Costing (CO-OM-ABC) processes with activity types of the cost centers. In principle, all information in the system can be used as the cause value or cost driver.
The process template is determined on the basis of the following parameters:
The costing sheet for the application of overhead is selected with the valuation variant.
The overhead key is entered directly in the cost object or derived from the overhead group from the material master (view tab costing 1).
With the combination of overhead key and costing sheet, you can assign a template in Customizing.
The templates are grouped in Customizing by their usage or environment. For example, a template of the material cost estimate environment can only be used for product costing and PP production orders while a template of the sales order environment can only be used for sales orders.
Preliminary Costing – Overhead Costs
In standard cost accounting, overhead costs are allocated to cost objects with overhead surcharges. In Actual Costing, when these cost objects are debited, overhead cost objects (such as cost centers or orders) are credited in return. In the preliminary cost estimate, no credit will be posted. Nevertheless, the credit element is needed to select the cost element, on which the OVH amount will be posted for preliminary cost estimate and in actual costing. You can define both quantity-based and percentage overhead rates.
Overhead is calculated using a costing sheet. The assignment of the costing sheet is defined in the customizing transaction Define Cost-Accounting relevant Default Values for Order Types and Plants.
The costing sheet consists of the following types of rows:
Base rows:
Here, you enter cost elements, cost element groups, and origin groups to which overhead must be applied.
Overhead rate rows:
Here, you specify the overhead rates to be used in applying overheads to the base rows.
Credits:
Here, you enter the overhead cost objects (such as cost center, process, or internal orders) that must be credited under each cost element.
If you want to apply overhead in different ways, depending on the material being manufactured, you can use the overhead keys. You then define overhead rates based on the overhead keys that can be derived from overhead groups in Customizing. You enter overhead groups in the material master record.
In preliminary costing for the product cost collector, the system uses the costing sheet specified in the planned valuation variant. In simultaneous costing for the product cost collector, the system uses the costing sheet specified in the actual valuation variant. This costing sheet is displayed in the product cost collector.