Defining the Quantity Structure

The costing level controls the sequence for costing the materials within the BOM. The costing levels were developed to support multilevel unit costing. Raw materials are always procured externally and then processed. A material master record of this type contains purchasing data, but not sales data since they cannot be sold. The system automatically assigns materials to the appropriate costing level within a cost estimate based on their use in a the product structure. For the items of the cost estimate that are not part of the BOM, the system automatically assigns the costing level 0. If you use a single product in multiple BOMs, the system can only assign it to a single costing level.

The system automatically determines costing levels when you create a cost estimate.

Assigning materials to costing levels ensures that the system performs costing in the correct sequence, raw materials and purchased parts, followed by semi-finished products, followed by finished products.

The BOM Usage has settings that affect costing. In the preceding figure, usage #1 allows costing. The symbols in the BOM Usage work as follows:

• + Costing relevancy required
• . Costing relevancy
• - Costing not allowed

BOM usage and status indicators are used to locate an appropriate BOM for preparing a cost estimate. The usage indicator is a long-term setting that identifies the applications that may use the BOM. The status indicator can represent the current availability of a BOM. For example, when a BOM is still under construction by engineering, it is not yet available for MRP, costing, or production control.

The BOM header contains information that applies to all items in the BOM. The BOM must be valid for costing for the BOM to be read for a cost estimate.

The following fields in the BOM header are relevant to costing:

• BOM usage:

  For example, BOMs in use exclusively for engineering or costing purposes.

  When you view the BOM usage options in a drop-down, you will see BOM usage 1 - Production as well as 6 - Costing. Either one is relevant for costing. For each usage there are symbols that control the usage:

  • + = Must - Costing Relavancy Required
  • . = Can be Used - Costing Relavancy Optional
  • - = Can't be Used

• BOM status:

  You can use the BOM status to control what the BOM can be used for in various other organizational areas (for example, engineering, costing, MRP).

• Alternative BOM:

  Alternative BOMs describe different product structures that create a product with the same properties. For example, in BOM A, the product uses sheet metal A, while in BOM B, the same product uses sheet metal B. The resulting product is the same.

• Lot size range:

  A BOM can be defined as valid for only a limited range of lot sizes, for example 1 to 1,000 units. You can then create an alternative BOM for lot sizes exceeding 1,000 units.

BOM Item Categories:

• D Document item

• I PM structure element

• K Class item

• L Stock item

• N Non-stock item

• R Variable Size Item

• T Text item

Various item categories that are used within the itemization for controlling. The costing relevancy indicator is only relevant for cost planning, not actual costing. This is a useful indicator in an either/or situation, that is, you can use either material x or material y, but not both. The validity indicator is useful for recognizing component changes based on a specific validity date (using Engineering Change Management). By default, items marked as bulk components are not included in cost planning, because it is expected that they will be issued to an overhead cost center. However, there is a user exit to allow bulk items to be included in cost planning. The following fields are relevant for the BOM items:

• Item category:

  This categorization allows you to process data that is relevant to the individual items in a BOM. The item category is used to control field selection, default values for BOM maintenance, triggering of specific system activities, and so on. Some examples of item categories are as follows:

  • Category L indicates a stock item. Valuation in accordance with material valuation strategy or separate cost estimate.

  • Category N is a non-stock item.

  • Category R is a variable-size item. Valuation in accordance with material valuation strategy or separate cost estimate.

• Fixed quantity indicator:

  Setting this indicator shows that the component quantity is always the same regardless of lot size. It applies mainly to unavoidable material loss at the start of the production process.

  Fixed quantity is not allowed for the following items:

  • Alternative items

  • Co-products

• Planned scrap:

  Planned scrap is used in material requirements planning (MRP) to determine the quantities of materials required. When exploding the bill of material (BOM), the system increases the required quantities of the components by the calculated scrap quantity. For example, if you set a planned scrap value of 4% and the BOM requires 100 pieces of a component, the system will calculate that 104 pieces will be required for the assembly.

• Relevancy to costing indicator:

  If you do not select this indicator, the system ignores the BOM item in the material cost estimate. For standard cost estimates, modified standard cost estimates, and current cost estimates, you only need to decide whether or not the item will be costed.

  For inventory costing, you can link relevancy to costing indicators to factors for the fixed and variable costs so that the item values can be adjusted by the system depending on the valuation variant used in costing. You do this in Customizing for Product Cost Controlling. For example, a BOM item or operation has the indicator for relevancy to costing A, which you have linked in Customizing for Product Cost Controlling to a fixed factor of 0.8 and a variable factor of 0.7. The BOM item or operation will be costed in inventory costing at 80% of the fixed costs and 70% of the variable costs.

  The settings in the BOM usage and BOM item categories enable you to specify whether this field has a default value and whether you can change this value when you maintain the BOM.

• Bulk material:

  You usually post bulk material, as consumption at production cost centers, as soon as it is procured. Because it is usually posted, the cost estimate in the standard system does not include the bulk material. A user exit is available if you need to cost bulk materials.

Non-stock materials have item category N. They have a material master or they can be listed only by a description. If the material is identified as a material master, the costing information can be determined from the accounting view. If the material is only listed by a description, the user must define the unit of measure and the purchasing data and must include a price, the pricing unit and the cost element.

Business scenarios that may use this item category include:

• Due to material storage requirements, it may not be possible to stock some items prior to the production requirement.

• Some items may have an extremely short shelf life, and to deliver prior to immediate need would risk expiration of the product.

• You may specify that certain components are only used for a unique requirement, such as in an engineer-to-order environment.

Non-stock materials are materials that are not kept in inventory. You always procure them externally and assign them directly to the order.

Non-stock materials have either no material master or are maintained with a non-stock material master.

For non-stock materials without a material master, you enter the data that is relevant to costing directly in the BOM item. For non-stock materials with a material master, you cannot manually change the prices. The material is valuated in accordance with the strategy specified in the costing variant. The price shown in the BOM might not be the same as the price in the cost estimate that you select depending on the valuation strategy.

The routing header has the following settings that are different to those of the BOM header:

• Assignment of materials:

  A routing can contain multiple materials that utilize the same production process.

• Usage:

  You use task list usage to assign routings to various work areas. This way, you can create several routings to produce one plant material. These routings are differentiated in your task list usage.

• Routing status:

  You use this status to indicate the processing stage of a plan. For example, you can indicate whether a plan is still at the creation stage or whether you have already released it.

You can use some of the fields in the routing similarly to the BOM. Although the usage and status indicators are configured differently to the BOM usage and status indicators, they have similar functions. The system assigns a task list group, which is a number (similar to a document number), to a routing. It is possible to create a routing without reference to a material. This is useful if you produce many different products the same way, but have minor variations in the BOM. Rather than create a material specific routing for each item, it is possible to create a reference routing, and then assign that routing to the materials concerned using the group.

The group counter is similar to the BOM alternative and designates an alternative manufacturing method for producing an item. This is very common in repetitive manufacturing, when you can assemble a product on different assembly lines that have some variation in either standard values or activities and different work centers. It may be necessary to create a costing-specific routing when a ‘blended’ standard is required. In such a case, a usage indicator specific for costing can be chosen.

For the operations, the assignment of the work center, where the work is being performed and provides the production link to controlling through the cost center. You can use the control key to determine the costing indicator, external processing, and the shop floor interaction that is expected, such as confirmation requirements. Not all operations are relevant to costing. Some may just be instructional operations, such as issue material.

The material handling costs could be part of overhead, or they may be a separate cost center/activity type, depending on customer requirements. The standard values represent the expected duration time for each activity. Multiplying this time with the cost center/activity type rate provides the cost for the operation.

The control key indicates if an operation is relevant to costing. If the control key assigned indicates that the operation is relevant to costing, you can use the relevancy to costing indicator to override the control key.

You can overwrite the standard values of the work center in the routing. By deselecting the reference indicator in the work center, you can assign activity types/business process. Linking the standard times with the activity types is done by using the formulas in the work center.

You can adapt routing or work center to production/assembly, scheduling, capacity planning, and costing. They are used as basic data by many applications.

Work Center Category:

The work center category determines which data you can maintain in the work center and which values are proposed.

Standard value key:

The standard value key determines how many default values you can maintain (maximum of six), and assigns a meaning (such as setup time, machine time, or labor time) and a dimension (such as minutes) to the standard values.

Standard values are used in formulas to calculate the execution time, the capacity requirements and the production costs.

Efficiency Rate:

The performance efficiency rate is the relationship between the predefined target time and the actual time. You can use the efficiency rate key in costing to correct the default values.

You can define default values for the routing or master recipe in the work center or resource respectively. If you assign an operation in the routing or a phase in the master recipe to this work center or resource then these default values are transferred to the operation or phase.

The following default values are relevant to costing:

• Control key:

  The control key specifies the following:

  • Whether the operation or the phase are included in the costing

  • Whether the operation or the phase are processed internally or externally

  • Whether they are confirmed and in what form

• Reference indicator:

  Setting this indicator prevents the control key from being changed in the routing.

The most important definition within a work center is the standard value key. This controls how you can plan and measure activities for a work center. You can configure the standard value key to allow up to six measurable standard values and activities that you can plan for a work center.

Of critical importance to controlling, is the assignment of the work center to a cost center (or business process). This provides the cost link for the work center. You can assign a work center to one cost center only at any one time. Based on the standard values that the system allows for a work center, you can define up to six activity types for the work center. These activity types will, by default, be copied to the routing you assign the work center to.

You can define a seventh activity type for the work center for the sole purpose of applying additional costs for production. This can provide a method of applying an indirect cost allocation, using a formula that you can define in configuration. The benefit of this vs. the overhead costing sheet is that this allocation can be based on the output quantity of the operation. This is not possible when using the costing sheet, since the costing sheet is based on input quantity and costs. The seventh activity type does not apply to PP-PI work centers/resources, though it is normally the only standard value that you use for Project Systems work centers.

To enable internal activity allocation, you need to specify which cost centers provide which activity types at what price. You do this in the SAP S/4HANA application by planning the activity output and prices for a cost center. To enable this, the SAP S/4HANA application provides a number of options.

For direct activity allocation, you enter the quantity of the activity to be allocated manually. In order for you to perform a cost allocation and an activity allocation, the SAP S/4HANA application has to valuate the allocated activity amount using the sender’s price for this activity type. For a direct activity allocation, you can use the planned price for the cost center/activity type combination.

You can enter the planned price either manually or let the system calculate it automatically within planning. To manually set the price, you must set the plan price indicator in the activity type master record to the value 3 (manual entry, indirect allocation). You can use this procedure if your price calculation is not complex, for example, this depends on the prices of external suppliers and not on the costs of the cost center.

You use formulas in the work center to calculate the following data in costing, scheduling, and capacity planning:

• Costs
• Execution times for production orders
• Internal processing times for networks and maintenance orders
• Capacity requirements

Specifically for costs, in production orders each of up to six standard values in a work center can be assigned an activity type and a formula with which the costs of the operations conducted in the work center are calculated.

In the SAP system you can use predefined SAP formulas and define your own formulas. You can create formulas in customizing for work centers under define formulas for work centers.

The system calculates the costs by multiplying the quantity by the price. The quantity comes from the standard values for the operation and is modified by the performance efficiency rate and any relevant formulas.

In the itemization for the cost estimate, the system displays an internal activity for the cost center or activity type. The system saves the assignment to the operation and work center in the itemization.