COGS at Actual Costs E

SAP AG 2000 filename (author) / 1

Revaluation of Cost of Goods Sold

at Actual Costs

Frank BigdonSAP Development Cost Management


Introduction

1) Introduction


Example: Consumption of a Finished Product

Ending Inventory

500kg

Sales

400kg

Cafeteria

100kg

1000 kg


Price Determination

Ending Inventory

500kg

Sales

400kg

Cafeteria

100kg

1000 kg

ML Price Determination:Roll Up of Variances


Revaluation of Ending Inventory

1000 kg

Ending Inventory

500kg

Sales

400kg

Cafeteria

100kg

ML Period Closing:Revaluation of EndingInventory


Revaluation of Cost of Goods Sold (COGS)

1000 kg

Ending Inventory

500kg

Cafeteria

100kg

Revaluation of

COGS

Sales

400kg


Postings in FI

Preliminary Valuation: 10 USD / kg

Variances calculated by price determination: 1 USD / kg

Material stock Price difference Consumpt. Sales

10000USD

1000USD

500USD

500USD

4000USD

4000USD

400USD

400USD

Production 1000 kg

Sales 400 kg

Price determination

Revaluation Inventory

Revaluation COGS


Modification of the Material Ledger Update

2) Modification of the Material Ledger Update of Goods Movements for Revaluation of COGSCOGS SAPRCKML_COGS ZSAPRCKML_COGS


Types of Consumption Relevant to Revaluation

Sales Cafeteria Quality Inspection

? ? ?


Types of Consumption Relevant to Revaluation

It is specified in Customizing which movement types are relevant to revaluation(by assigning special movement type groups CF and CC).

Movement type Movement type group

251 - Sales CF (Revaluation FI)201 - Cost Center (Cafeteria)

331 - Quality Inspection


Tracing of Movements Relevant to Revaluation

Material: chocolate

Beginning Inventory 0 Kg

Receipts 1000 Kg

Production 1000 Kg

Cumulative Inventory 1000 Kg

Consumption 500 Kg

Sales 400 Kg

Account 890000 250 Kg


Cost Center 100 Kg

Cafeteria 100 Kg

Ending inventory 500 Kg

Consumption Alternatives relevant to revaluation:

FI Account is a key of of the Consumption Alternative


Revaluation in CO

Sales Cost Center: Cafeteria Quality Inspection


Revaluation in CO

To revaluate also the CO-Object (besides the FI-account) in customizing you assign the movement type group CC (instead CF)


251 - Sales CF (Revaluation FI)

201 - Cost Center (Cafeteria) CC (Revaluation FI and CO)

331 - Quality Inspection


Consumption to Cost Center:Iteration Problem

1) Cost Center Closing

Cost Center Cost Center

Cost Center

2) Order Settlement

3) Multi-LevelActual Costing


Tracing of Movements Relevant to Revaluation

Material: chocolate

Beginning Inventory 0 Kg

Receipts 1000 Kg

Production 1000 Kg

Cumulative Inventory 1000 Kg

Consumption 500 Kg

Sales 400 Kg



Cost Center 100 Kg

Acc.850000, CC. Cafeteria 100 Kg

Ending inventory 500 Kg

The CO Object - besides the FI Account - is a key of a Consumption Alternative relevant to Revaluation in CO


Revaluation of Other Consumption (COC)

Sales Cafeteria Quality Inspection

COC Account


Example

Material: chocolate

Beginning Inventory 0 Kg 0 USD 0 USD

Receipts 1000 Kg 10000 USD 1000 USD 11 USD

Production 1000 Kg 10000 USD 1000 USD 11 USD

Cumulative Inventory 1000 Kg 10000 USD 1000 USD 11 USD

Consumption 500 Kg 5000 USD 500 USD 11 USD

Sales 400 Kg 4000 USD 400 USD 11 USD

Account 890000 250 Kg 2500 USD 250 USD 11 USD

Account 895000 150 Kg 1500 USD 150 USD 11 USD

Cost Center 100 Kg 1000 USD 100 USD 11 USD

Cafeteria 100 Kg 1000 USD 100 USD 11 USD

Ending inventory 500 Kg 5000 USD 500 USD 11 USD

Revaluation COGS Revaluation COC


How the old program worked

3) How the old program worked

PRCKML_COGS SAPRCKML_COGS ZSAPRCKML_COGS


Problems of standard Material Ledger update

z In standard Material Ledger update of goods movements consumption to sales does not always appear in the correct process type (Example: If goods are sold via a cost center the consumption appears as Consumption to Cost Center)

z Reversal movements sometimes appear as procurement (above the cumulative line) and thus cannot be revaluated

z Reading of material and accounting documents is needed to determine the COGS accounts that have to be revaluated


The Old Program SAPRCKMN_COS

The old program ....

z makes no use of the material ledger update to identify the quantities consumes for sales (Reason: goods issues to sales are not always updated under the correct process type in ML)

z identifies goods issues to sales by existence of a billing document in the Sales & Distribution Module

z obtains all information needed to revaluate the movements (consumed quantities, accounts etc.) by reading the document flow of the Sales & Distribution Module


Document Flow

Material

Delivery Material document

Invoice

Quantities, Accounts

Accounting document


Problems of the Old Program

z Use of Sales & Distribution Module required!z High Complexity of Processes in SD. Reading of the document flow

can be very complicated. This difficulty has caused many errors in the old program.

z Performance: Reading of the document takes very long time in systems where much transaction data exists!

z Time dependency: Sales movements are only recognized if the billing has already been posted and if it has been posted in the same period!

The old program had poor performance and often determined wrong consumptionquantities for the sales movement


Posting Logic

Old Program:

Cumulated Posting per Account.

New Program:

Separate Posting foreach Material. Material specific data is provided to Acc. Interface

Material B COGS Account: 850000Revaluation Amount: 300,-

Material B COGS Account: 850000Revaluation Amount: 300,-Business Area: 6100Profit Center: PC 2

Material ACOGS Account: 850000Revaluation Amount: 500,-

COGS Account: 850000Revaluation Amount: 800,-

Accounting Interface

Material ACOGS Account: 850000Revaluation Amount: 500,-Business Area: 6000Profit Center: PC 1

Material specific data


Conclusion

! Conclusion:SAP recommends not to usethe old program anymore!!


How to Implement and Use the New Program

4) How to implement and use the new programZSAPRCKML_COGS


Implementation of the New Program

z Step 1: Modification of the Material Ledger Update. For this step follow the instructions of OSS-NOTE 305056.

It has to be done BEFORE the start of the period, for which the new program shall be used

This step includes the settings in customizing for all movement types that shall be revaluated at periods end

z Step 2: Installation of the new report For this step follow the instructions of OSS-NOTE 320152.

In customizing you have to assign accounts for transaction key COC, if you want to revaluate Cost of Other Consumption


Settings in Customizing


601 - delivery CF

602 - GI to delivery (Reversal) CF

201 - Cost Center CC

202 - Cost Center (Reversal) CC

261 - Production Order

301 - Stock Transfer

Never forget to assign the reversalmovement !!

Never assign multi-level movements!!

Test each movement type, you assigned to CF or CC!!


General Understanding:Single- and Multi-Level Consumption

MaterialsMaterialsCost Center

CustomersMulti-Level Consumption

Single-Level Consumption


The new Program: Advantages/Disadvantages

Advantagesz Higher performance, because

all relevant data is collected during the period. No reading of documents needed.

z S & D Module is not requiredz Higher reliability because

reading of the document flow is avoided

z Revaluation of other single level consumption types possible

z Revaluation of original CO-Objects possible

z All reversal movements can be recognized correctly

z Material Ledger update of goods movements needs to be modified before period starts. Otherwise program can not be used at periods end.

Disadvantges

Documents

COGS at Actual Costs E