Evaluating MTO with Service

Objective

After completing this lesson, you will be able to evaluate make to order (MTO) with service

Interactive Simulations

The forklift manufacturer's customers commission the company to maintain their forklifts. In this scenario, a service order is placed for 10 hours. To evaluate the actual costs and revenue, a Work Breakdown Structure element (WBS) is created. A customer order is then created for the service product, and the WBS is assigned to the customer order item.

The customer order item contains a position type that indicates no delivery is required for invoicing. The requirement type in the customer order item ensures that actual revenue is posted to the WBS when the invoice is posted. As employees provide the service, a service allocation is posted from the cost center to the WBS. After invoicing, the actual revenue, actual costs, and resulting margin can be evaluated in Margin Analysis with reference to the WBS.

Note

Since the WBS does not contain planned costs, adjusted revenue cannot be calculated when actual costs are posted to the WBS, even if the recognition key "Percentage of Completion (POC) cost-based" is assigned. Additionally, the revenue-proportional method is not yet available. Therefore, adjusted revenue and deferral adjusted revenue are only shown in the WBS report upon billing.

Steps

Perform Prerequisites and Check the Master Data
ExerciseStart Exercise
Create WBW-Element and Sales Order
In this exercise, you will:
1. Create the WBS for your sales order service
2. Create the sales order and assign your WBS to it
3. Verify the requirement type and conditions in the sales order
ExerciseStart Exercise
Perform Activity Allocation and the Sales Order Billing
After employees have completed the service, you will allocate the actual time from the service cost center to the WBS using performance allocation. You can then analyze the actual costs on the WBS before proceeding with invoicing. Finally, you can evaluate the results in Margin Analysis.
ExerciseStart Exercise

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Summary

Make-to-order service scenarios use a sales order with a service product and a Work Breakdown Structure (WBS) as the cost object for costs and revenues.
The material master of the service product controls item type, requirement type, and pricing; the WBS must be compatible with these settings for revenue assignment.
Actual service costs are allocated from the cost center to the WBS using planned activity rates; billing creates invoices without delivery and posts actual revenue to the WBS.
Margin analysis evaluates actual costs and revenues after billing; adjusted revenue is shown only upon invoice posting because planned costs are not maintained in the WBS.

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