In sales-order-related production (MTO scenario) the controlling focus is lot-based on the ordered product quantity. Costs are collected and analyzed for the particular quantity the customer ordered. For that, the production accounting method product cost by order is used. The costs to produce the particular quantity of a product in a sales order item are collected in an event-based manner and analyzed on a manufacturing order which is the cost object. This can be either a production or a process order.
Note
If the product ordered in a sales order item has a multilevel BOM, other materials may have to be manufactured with reference to the sales order item if the materials are controlled by individual requirements and consequently cannot be withdrawn from the make-to-stock inventory. Then several manufacturing orders are created for these dependent requirements and assigned to the sales order item. This is determined as part of material requirements planning (MRP) for the finished good.
The manufacturing order is created with reference to the respective sales order item. Once the ordered quantity is produced, the manufacturing order is completed. The produced quantity is then transferred to the valuated sales order stock. A sales order stock is assigned exclusively to a particular sales order. Materials related to the specific sales order are assigned to the respective sales order stock. If material is externally procured for the sales order item, the materials are assigned to the sales order stock at the time of the goods receipt. Materials in this sales order stock can’t be used for other sales orders or anonymous stocks. When the ordered production lot or parts of it are delivered to the customer they are withdrawn from the sales order stock. In MTO, the sales order item is only used due to logistical reasons and not as a cost object. Production accounting in sales-order-related production is not managing the costs of sales orders but the costs of products.
