To determine the costs of a product by period with the Product Cost by Period concept, you need a cost object with settlement type Periodic Settlement. The product cost collector assumes the function of the cost object. If you use a product cost collector, logistical production objects (such as production orders) are not used as cost objects.
Posting in Materials Management (MM), Production Planning (PP), and Financial Accounting (FI) results in actual costs, which will be debited to the product cost collector and not to the production orders. You post confirmations, goods issues, and goods receipts with reference to the production order. You configure the orders to assign these costs to the product cost collector automatically. You can assign other costs, such as process costs or material overhead, directly to the product cost collector. You perform all the period closing activities using the product cost collector.
Periodic actual costs from the cost object can be grouped as follows:
Costs for products for which a goods receipt in the warehouse is listed in the current period (delivery to stock).
Costs for work in process (WIP):
These are target costs for the production quantities that have been confirmed for the operations but not yet delivered to stock. Target cost means that the actual WIP quantity will be multiplied by the standard cost of the material cost estimate, or the preliminary costing of the product cost collector.
Production variances that you calculate using the following formula:
Variances = actual debit - goods receipt - WIP
Uses of the Product Cost Collector
Product cost collectors are created independently of the production type.
You can collect actual costs on the product cost collector for the following types:
- Order-related production (that is, when you use production orders)
- Process manufacturing (that is, when you use production with process orders)
- Repetitive manufacturing for which the cost object is always used as a product cost collector (this also applies to KANBAN production methods)
- Mass production based on sales orders when you use valuated sales order stock, and in repetitive manufacturing when you produce individual requirements materials
Production Order and Product Cost Collector – Process Chain
In the Product Cost by Period scenario, the product cost collector collects and analyzes the costs. Production orders do not serve as cost objects. They are used for logistical processing only. You can calculate the plan cost of the production order for analyzing issues, but you cannot save the plan costs.
To ensure that the system collects costs of a manufacturing order on a product cost collector, you must make the necessary settings for the order type of the manufacturing order in Customizing for Product Cost by Order under Define Default Values for Order Type.
You must create a product cost collector manually before you start production. When you create a manufacturing order, the system links the manufacturing order to the product cost collector automatically.
If you do not create a product cost collector, the manufacturing order collects the costs. In such a case, it is only possible to link the manufacturing order to the product cost collector when no actual costs have been updated to the manufacturing order.
Note
This course often uses the term manufacturing order. This is an umbrella term for production order and process order.
