In this lesson, you want to know how the COGM and COGS are aggregated from the simple line items, using cost elements and cost categories, and where these figures are displayed.
Summarizing COGS Detail, Line Items, Cost Elements, and Cost Components
Objective
After completing this lesson, you will be able to calculate Cost Of Goods Manufactured (COGM) and Cost Of Goods Sold (COGS)
Lesson Overview
Cost of Goods Manufactured (COGM) and Cost of Goods Sold (COGS)
A cost estimate with quantity structure is based on a BOM and a routing (or recipe). Cost component splits are used to subdivide costs into high-level categories such as material, labor, and overhead.
When a cost estimate with a quantity structure is created, SAP S/4HANA systematically refers to settings such as a cost variant. It contains all the required information and uses master data from logistics to generate the cost estimate. This method costs individual products precisely and provides various analysis options to compare different alternatives.
A cost component structure is assigned to the costing variant to organize the original costs of production, materials, and overheads in a grouping of costs. These individual buckets are called cost components. This cost component breakdown is crucial for providing information to other areas in financial or management accounting, such as profitability analysis.
Cost components are established by grouping various cost elements together. Grouping cost elements provides transparency to a product's costs, such as material, activity types, or overheads. In parallel, the cost elements are also assigned to different views to provide a different angle of analysis.
In addition to the costing variant, SAP S/4HANA uses a valuation variant to determine which prices are used to valuate the materials, activity types, subcontracting, and external activities. The settings can defer from one plant to the other (plant-dependent).
From Itemization to Cost of Goods Sold
The cost components are assigned to cost component views. They will be used in the Display Cost Estimate app where you can select up to five different cost component views. A cost component view consists of a combination of cost components based on various characteristics. The cost component view creates a filter in the information system reports so that only data assigned to the view is displayed.
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