When all necessary master data is created, production can start, and incurring costs can be posted to the process order. The figure below illustrates the goods issue for raw materials and confirmation of production activities.
Through the confirmation of the first process order phase (for example, Phase 0010: Mixing), the produced quantities and corresponding production times are confirmed and hereby posted to the process order. The goods issue for raw material is typically performed through backflushing, meaning that the system automatically performs a goods issue for these materials when the operation is confirmed.
Through the goods issue and activity conformation, the order report will display the following costs:
- Direct material costs for the consumption of raw materials
- Direct production costs, such as machine or personnel costs
- Event-based overhead costs that are calculated based on the costs mentioned above
- Event-based WIP costs that represent the goods in production
These costs are posted and calculated on different levels of the process order: all material and production costs incurred during production are initially posted to the order header and automatically distributed event-based among the order items. However, WIP costs are not distributed from the header level, but calculated at the level of each order item.
These different kinds of postings will be detailed in the following figures.
Event-based Cost Distribution
As you've already learned, planned costs for a process order are automatically distributed from the order header to the order items. Similarly, actual costs posted to a process order are immediately distributed through event-based cost distribution, following the same apportionment structure and source structure as planned costs.
In the example above, a goods issue resulted in primary costs on the process order header, while an activity confirmation resulted in personnel, machine, and setup production costs (secondary costs). Based on these costs, event-based overhead costs were automatically calculated.
When they are posted to the process order header, these costs are then distributed among the order items. In the example above, primary costs are distributed between co-products A and B at a ratio of 500:7. Secondary costs are distributed at a ratio of 300:7. This distribution ensures that each co-product is allocated an appropriate share of the total costs, based on the predefined equivalence numbers in the source structure.
Note
The actual balance of the process order header is always cleared due to the automatic event-based cost distribution. However, when reviewing the actual costs at the order header level using the Order Cost Details – Event-based app, values for direct material costs, production costs, and overhead costs are still displayed. These values represent the summed-up values for both order items.
WIP Calculation
How is event-based WIP calculated for process orders?
The figure above illustrates a sample process order with two order items that carry any actual costs from production. Co-product A has already been delivered to stock, whereas an actual balance remains. The delivery for co-product B is still pending.
Similar to production orders in order-related Production Accounting, WIP costs incurred for process orders are valued at actual cost. Actual costs posted to a process order are distributed event-based among the order items to ensure appropriate allocation. Consequently, WIP is calculated separately for each order item.
The actual balance of each order item is considered WIP as long as goods are still in production. The system continues to calculate WIP for co-products until the process order header reaches the status DLV (Delivered) or TECO (Technically Completed).
In the example above, the status of the process order is Partially Delivered because order item 2 is not yet delivered. When the order status is DLV (or TECO), the WIP calculation clears any remaining WIP and production variances are calculated.