A process order covers information from both logistics and management accounting perspectives. It is typically created for the leading co-product (main product).
As illustrated by the blue arrows in the image above, a master recipe which has been created for the same leading co-product, provides the required logistics and manufacturing data for production, including the necessary operations/phases and material components. This data is then displayed in the master data of the process order.
From a management accounting perspective, a process order comprises the order header and different order items that represent the different co-products. Costs are typically posted to operations but collected on the order header. Then, these costs are distributed among the different order items / co-products. This distribution will be explained in more detail in the next lessons.
Order Plan Costs
How are plan costs calculated for a process order, including the order header and its respective order items?
When a process order is created and saved, a preliminary cost estimate is generated. This estimate results in planned values being stored at the process order header level, comprising direct material costs, direct production costs (activities), as well as material and production overhead costs.
As shown in the figure above, planned costs are automatically distributed from the order header to the process order items using an apportionment structure. This structure is maintained in the material master of the leading co-product (Co-Product A), ensuring that both planned and actual costs on the order header are properly distributed between the order items.
The apportionment structure includes a source structure that further details the distribution. This source structure contains various source assignments, such as cost element groups or intervals, and certain distribution rules. These rules can be based on percentages or equivalence numbers.
In the figure above, apportionment structure "1" is displayed, which includes source structure "CP". Source structure "CP" contains two lines with source assignments (cost element groups) and equivalence numbers: one line is for primary costs (PC) and one for secondary costs (SC). Based on these assignments, primary costs are distributed between the order items using 500 shares for order item 1 and 7 shares for order item 2. In contrast, secondary costs are distributed separately in a ratio of 300:7.