Cost Management for Make-to-Order and Material-Ledger/ActualCosting

Solution Management ERP FinancialsSAP AG

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SAP AG 2009. All rights reserved. / Page 3

1. Material-Ledger/Actual Costing: General overview2. Material-Ledger/Actual Costing and MTO

Agenda

Benefits of Multi-Level Actual Costing

Benefits of Material LedgerContribution Margin with Actual Costs of SalesActual Values for Costs Components in Contribution Margin Accounting (ActualCost Component Split) available as from release 4.6C

Total Cost of Sales in PAProduction variances for unsold Stocks are activated

Variances of Finished GoodsVariances from external Procurement (Purchase Orders) and from Productionare rolled up from raw and semi finished Materials to the finished Goods

Support for procurement related decisions- detailed reporting for procurement processes possible

Combines benefits of Moving Average and Standard Price- stable price for controlling purposes- actual price for valuation purposes

Can be used as a decision tool

Actual Costing as a Decision Tool (1)

What is ...

... the cheapest Source for external Procurement?

Actual Costing as a Decision Tool (1)

What is ...

... cheaper: Make or Buy?

Actual CostingActual CostingMultiMulti--levellevel

Periodic Material PricesPeriodic Material Prices

Parallel CurrenciesParallel CurrenciesValuation with HistoricValuation with Historic

Exchange RatesExchange Rates

Parallel ValuationParallel ValuationTransfer pricesTransfer prices

Group Legal Profit Center

TransparencyTransparencyof Value Chainof Value Chain

Actual CostingActual CostingMultiMulti--levellevel

Periodic Material PricesPeriodic Material Prices

MaterialMaterialLedgerLedger

Inventory ValuationInventory Valuation

Environment of Material Ledger

Product Cost Controlling: ApplicationComponents

BOM RoutingRouting

Material pricesActivity pricesProcess pricesOverhead

Product Cost Planning

Value structure

Quantity Structure:PP Master Data

Standard price

Material Internal OH Process

PlannedcostsActualcosts

Work in processScrap variancesVariancesSettlement

Order

Material $Internal $OH $Process $Total ...

Final costingPeriod-end closing

Preliminary Costing,Simultaneous Costing

Cost Object Controlling

Price diff.Standard price

Material movements

Material settlement:actual price

Value structure

Actual Costing/Material Ledger

Quantity Structure:Material Movements

Material Ledger

ProcessProcess

Material Internal OH Process

Actual Costing: Single Levels

Production

ProductionLevelLevel

LevelLevel

LevelLevelExternal Procurement

External ProcurementLevelLevel

Production

Production

Actual Costing: Multi-Level

LevelLevel

LevelLevel

LevelLevel

MultiMulti--LevelLevel

External Procurement

External ProcurementLevelLevel

External Procurement External Procurement

Production

Production

Single-Level Price Determination

SingleSingle--Level Price DeterminationLevel Price DeterminationActual Material Price based onActual Material Price based onCosts of ProcurementCosts of Procurement

External Procurement External Procurement

Production

Production

Multi-Level Actual Costing

MultiMulti--Level Actual Costing allowsLevel Actual Costing allowsInventory valuation withInventory valuation withactual periodic material priceactual periodic material price

RollRoll--upup of price differencesof price differencesfrom raw materials tofrom raw materials tofinished materialsfinished materials

Actual Costing and Product Cost Planning

Variance AnalysisVariance Analysis

Actual Costing withActual Costing withCost ComponentsCost Components

BOMRouting

PP Master Data

Mat Proc OHLab

Standard PriceStandard Pricewithwith

Cost Component SplitCost Component Split

Product CostProduct CostPlanningPlanning

Cost Estimate

Material Movements

Mat Proc OHLab

Periodic Unit PricePeriodic Unit Pricewithwith

Cost Component SplitCost Component Split

MultiMulti--LevelLevelActual CostingActual Costing

Price Determination

Actual Quantity Structure

Same cost componentSame cost componentstructure as in planningstructure as in planning

No Cost EstimatesNo Cost Estimatesnecessary for Actualnecessary for ActualCostingCosting

Optional: Primary costOptional: Primary costcomponent splitcomponent split

Actual values in Profitability AnalysisActual values in Profitability AnalysisContribution Margin AccountingContribution Margin AccountingCost of salesCost of sales split intosplit into cost componentscost componentsPlan/ActualPlan/Actual Variance analysisVariance analysis

Actual Costing and Profitability Analysis

PlanPlan ActualActual Var. %Var. % Var. Abs.Var. Abs.RevenuesRevenues:: 100,000 US$100,000 US$

Sales Quantity:Sales Quantity: 1,000 pc1,000 pc

50,00050,000 45,00045,000 5,0005,000 10 %10 %Raw MaterialsRaw Materials4,0004,000 5,0005,000 --1,0001,000 -- 25 %25 %Labor variableLabor variable4,0004,000 4,5004,500 -- 500500 -- 13 %13 %Machine variableMachine variable

10,00010,000 7,0007,000 3,0003,000 30%30%Logistic ProcessesLogistic Processes5,0005,000 5,5005,500 -- 500500 -- 10 %10 %Material OverheadsMaterial Overheads

6,0006,00027,00027,000 33,00033,000 22 %22 %Contribution Margin IContribution Margin I10,00010,000 10,00010,000 00 0 %0 %Labor fixLabor fix7,0007,000 7,0007,000 00 0 %0 %Machine fixMachine fix

10,00010,000 16,00016,000 6,0006,000 60 %60 %Contribution Margin IIContribution Margin II

Controlling Levels of the Material

Process Type

Purchase order

Subcontracting

Stock transfer

Reposting/material

Production

Plant/materialPurchasing organization/ vendor

Plant/materialPurchasing organization/ vendor

Plant/materialIssuing plant

Plant/materialIssuing plant/ material

Plant/materialProduction plant/ planning plant

BOM / routing

Production version

Procurementalternatives

Characteristics of the Controlling Levels

...

...

...

...

...

Vendor A,Vendor B, ...

Materials(Receipts)

Materials(Withdrawals)

Procurement Alternative

Procurement Process

Quantity Structure: Elements

SAP AG 2009. All rights reserved. / Page 17

1. Material-Ledger/Actual Costing: General overview2. Material-Ledger/Actual Costing and MTO

Agenda

MTO and Material-Ledger/Actual costing

Material-Ledger functionality is only available for valuated sales order stock

ML functionality for valuated sales order stock is not available in release 4.0.

In release 4.0A and 4.0B, consider note 115323 if ML is active and valuated salesorder stock is used

For valuated sales order stock, the following ML functionality is available as fromrelease 4.5A

Parallel valuationParallel currenciesSingle-level actual costing

As from release 4.6A, multi-level actual costing is available for valuated sales orderstock

Quantity Structure for MTO-production

Sales Order Stocks

Materials(Withdrawals)

Procurement Alternative

Procurement Process

Production processes and procurement alternatives include the sales order theMaterial is produced for.

The material price determination and the re-valuation of material does not takeplace for the material, but for the sales order stock.

MTO production and ML: Cost ObjectControlling

The usual cost objects can be used if valuated sales order stock is used with MLfunctionality

The following cost objects can be assigned to production processes:Production orders and process ordersProduct Cost Collectors

MTO & ML: Production Order

SD-Order SD-Order SD-Order

Production order Production order Production order

StockSales Order

valuated

$

StockSales Order

valuated

$

StockSales Order

valuated$

COCO--PAPA

RevenueCost of sales

Profit

For analysis, use reportsfrom CO-PA CO-PC-ACT CO-PC-OBJ

MMMM

SDSD

COCO--PCPC

MTO & ML: Product Cost Collector

SD-Order SD-Order SD-Order

StockSales Order

valuated

$

RevenueCost of sales

Profit

ProductProductCost CollectorCost Collector

StockSales Order

valuated$

For analysis, use reportsfrom CO-PA CO-PC-ACT CO-PC-OBJStock

Sales Ordervaluated

$

COCO--PAPA

MMMM

SDSD

COCO--PCPC

SAP AG 2009. All rights reserved. / Page 23

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