J64 Production Planning and Discrete Manufacturing

SAP ECC 5.00

June 2005

English

J64: Production Planning and Discrete Manufacturing

SAP AGNeurottstr. 1669190 WalldorfGermany

Business Process Procedure

SAP Best Practices Production Planning and Discrete Manufacturing: BPP

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Icons

Icon Meaning

Caution

Example

Note

Recommendation

Syntax

Typographic Conventions

Type Style Description

Example text Words or characters that appear on the screen. These include field names, screen titles, pushbuttons as well as menu names, paths and options.

Cross-references to other documentation.

Example text Emphasized words or phrases in body text, titles of graphics and tables.

EXAMPLE TEXT Names of elements in the system. These include report names, program names, transaction codes, table names, and individual key words of a programming language, when surrounded by body text, for example, SELECT and INCLUDE.

Example text Screen output. This includes file and directory names and their paths, messages, source code, names of variables and parameters as well as names of installation, upgrade and database tools.

EXAMPLE TEXT Keys on the keyboard, for example, function keys (such as F2) or the ENTER key.

Example text Exact user entry. These are words or characters that you enter in the system exactly as they appear in the documentation.

<Example text> Variable user entry. Pointed brackets indicate that you replace these words and characters with appropriate entries.



Abbreviations

R Required entry field

(used in the end-user procedures)

O Optional entry field


C Conditional field




ContentsDiscrete Manufacturing.................................................................................................................. 6

Purpose...................................................................................................................................... 6

Process Flow.............................................................................................................................. 6

Prerequisites.............................................................................................................................. 6

Preparatory Steps.......................................................................................................................... 8

Production Planning.....................................................................................................................14

Overview.................................................................................................................................. 14

Creating Rough Cut Plan for Material C10151.........................................................................14

Creating Planned Independent Requirements.........................................................................15

Creating Planned Order in MRP...............................................................................................16

Production Order Processing.......................................................................................................18

Creating a Planned Order........................................................................................................18

Converting a Planned Order to a Production Order.................................................................19

Releasing Production Order.....................................................................................................20

Entering Goods Issue for BOM Components...........................................................................20

Entering Goods Receipt for Manufactured Goods....................................................................21

Creating Order Confirmation....................................................................................................21

Comparing Planned and Actual Costs.....................................................................................22

Cost Object Controlling in Discrete Manufacturing......................................................................22

Preliminary Costing..................................................................................................................22

Simultaneous Costing..............................................................................................................25

Period End Closing..................................................................................................................26



Discrete Manufacturing

Purpose This script demonstrates production by lot size, using the packaging and labeling of a Finished good.

The process involves using packaging C50210 (Packaging material tray 1), a raw material C40660 (Raw material 11) and semi-finished product C30380 (Semi finished good 34) to assemble the finished product C10151 (Finished good 3) in plant BP01 using production by lot size. First you make, several settings in the material master, routing, and in the work center. You then begin the process by manually creating a planned order that is converted to a production order in the next step. Alternatively you can create the planned order via production planning (SOP and Demand Management) and MRP. After releasing the production order, you post the goods issue for the BOM components, and the goods receipt for the finished product. You complete the production process with order confirmation by calculating the actual costs.

Finally you calculate the WIP, the overhead cost and order settlement.

Branching to quality checks is not possible in this example.

Process FlowThe typical planning process starts with rough-cut planning. The previous year's sales figures can be used as a basis for this distribution. To ensure that production stays in line with sales, you may create the production plan synchronously to sales. However, this demands a certain degree of flexibility in production.

In rough-cut planning, long-term planning takes place with a time frame of approximately one year. The planning data is transferred from SOP to Demand Management. Demand Management generates primary planning requirements, which are a prerequisite for the subsequent Material Requirements Planning (MRP) run. This is short-term planning, with a maximum time frame of four weeks. In material requirements planning, the bill of materials (BOM) for the material gets expanded and production is planned right down to component level. Alternatively, you can also create a planned order manually.

As a result, planned orders are generated for the material to be produced. If insufficient warehouse stock is available, purchase requisitions are created for the raw materials required. If there is no MRP run, it is also possible to create a planned order manually.

The goods issues can be posted manually before order processing, and the goods receipt will also be created manually before the completion confirmation is issued.

When the order is created, target costs are calculated for the order lot size (preliminary costing). During the production process, costs incurred during production are updated on the order, which enables you to keep track of and compare target costs and actual costs at any time (simultaneous costing).

Period-end-closing activities are applied to the order. This includes revaluation at actual prices, calculation of overhead surcharges, WIP calculation and variance calculation. After this, production variances are settled to CO-PA.

PrerequisitesBefore running through this scenario, ensure that the following master data exists.

Production plant Description



Plant BP01 Production Plant

Material: C10151 Finished good 3

Material: C50210 Packaging material tray 1

Material: C30380 Semi finished good 34

Material: C40660 Raw material 11

Work center: 3220 Labeling/Packing machine



Preparatory StepsThis section contains activities that you need to carry out before you run through the Business Process Procedure. Usually, you only have to execute these steps before you run the BPP for the first time, for example to create initial stock for goods movements.

Creating Initial Stock

UseThe purpose of this activity is to create initial stock for the BOM components of the finished good.

Once you create the initial stock, you will have ample stock available to run the BPP several times. Once the stocks have been used up, execute this activity again to create more.

Procedure1. Access the activity choosing one of the following navigation options:

SAP R/3 Menu Logistics Materials Management Inventory Management Goods Movement Goods Receipt Other

Transaction code MB1C

2. On the Enter Other Goods Receipt: Initial Screen, make the following entries:

Field name Description R./O./C User action and values Comment

Movement type

561

Plant BP01

3. Choose Enter.

4. On the Enter Other Goods Receipt: New Items screen, make the following entries:


Material (1)

Material (2)

Material (3)

C30380

C40660

C50210

Quantity 30000 For each material

SLoc (1)

SLoc (2)

SLoc (3)

Storage location 0002

0004

0001

Batch (1)

Batch (2)

e.g. C30380-01

e.g. C40660-01

No batch required for material C50210

You can change the batch number if



required.

5. Choose Enter.

6. On the Enter Other Goods Receipt: New Items 0001, enter the date of production for material C30380 / Batch XXXXX, then choose Enter.

7. On the Enter Other Goods Receipt: Classification screen choose Back twice.

8. On the Enter Other Goods Receipt: New Items 0002, enter the date of production for material C40660 / Batch XXXXX, then choose Enter.

9. Choose Save.

10. Choose Back.

ResultYou have created initial stock.

Costing Run

UseThe costing run allows you to cost multiple materials at the same time. It is used to cost materials based on planning data.

You can use the costing run to process mass data. The purpose is to calculate prices for the selected materials. These are then updated in the material master records as the standard price, which is used to valuate goods movements within the company. The price update consists of two steps, marking the price computed and then releasing it. Marking the price means setting it as the future price for the material, releasing it means making it the current standard price. Before you can do the marking, you have to allow it for the company code involved.

PrerequisitesMaterials, BOM, routing, work centers, costing variant must have been created.

Procedure1. Access the activity using one of the following navigation options:

SAP R/3 Menu Logistics Production Product Cost Planning Material Costing Costing Run Edit Costing Run

Transaction code CK40N

2. On the Edit Costing Run screen, make the following entries.


Costing run Key, which identifies the costing run

R Enter costing run key (e.g. 01_2005)

Costing run date

Current date R

3. Choose Create Costing run (F5).

4. On the Create Costing Run screen, make the following entries:




Costing run text

Text, which identifies the costing run

O Enter text describing costing run key. (e.g. costing run Jan. 2005, legal valuation)

Costing variant

R YPC1

Costing version

R 01

Controlling Area

R BP01

Company Code

R BP01

Transfer Control

O Adopted automatically from costing variant

Server Group O

5. Save your entries.

6. Chose Enter.

7. On the Dates tab page, enter today’s date in the Costing Date from field. Also enter today’s date in the Qty Structure date and Valuation date fields.

8. In the Create Cost Estimate section, choose Change Parameter in the Parameter column of the Selection row.

9. Make the following entries:


Material Selection of single materials, an interval of materials

R Enter the materials C10151

If you have already created and released a cost estimate for one of these materials in the current period, e.g. while running another scenario, exclude the material here to prevent error messages in the course of processing the costing run.

Low-level code

O

Material type O

Plant O BP01

Select configured

O No flag Not used in CP scenarios



materials only

Always recost material

O No flag

Background processing

O No flag

Print log O No flag

10. Save your entries and choose Back.

11. Save your entries again.

12. On the Create Cost Estimate screen, choose Execute.

13. In the Create Cost Estimate section, choose Change Parameter, which is located in the Parameter column of the Struct. Explosion row.




O No flag

Print log O No flag


16. Choose Execute.

17. In the Create Cost Estimate section, choose Change Parameter, which is located in the Parameter column of the Costing row.



Cost ests with errors only

Set the indicator if you have already costed the run once and now want to recost only those cost estimates with errors

O No flag

Log per costing level

Set the indicator to generate a separate log for each costing level.

O No flag

Parallel processing

O No flag


O No flag

Print log O No flag


20. Choose Execute.

21. In the Create Cost Estimate section, choose Change Parameter in the Parameter column of the Analysis row.





Variant catalog for program RKKBKAL2

The program provides different list variants for the analysis

R Select SAP&11 and choose Enter.

Costing run R Select your costing run

Costing date R Select your costing date


24. Choose Execute and then choose Back.

25. Continue through the Leave list dialog box.

26. Choose Back twice.

27. Access the next activity using one of the following navigation options:

SAP R/3 Role Menu J64: Scenario Discrete Manufacturing Installation (EN) Costing Organizational Measure

Transaction code CK22

28. On the Organizational Measures screen, make the following entries:


Posting Period

R (current period)

Fiscal Year R (current year)

29. Choose Enter.

30. Double click on the company code BP01, and select the costing variant YPC1.

31. Save your entries.

32. Choose Enter and then choose Back.


SAP R/3 Role Menu J64: Scenario Discrete Manufacturing Installation (EN) Logistics Production Product Cost Planning Material Costing Price Update

Transaction code CK24

34. On the Price Update: Mark Standard Price screen, make the following entries:


Posting Period

R (current period)


Company code

O BP01

Plant O BP01

Material O C10151

Test run O Not set

35. Choose Execute and choose Back.



36. Choose Release, then choose Execute.


ResultThe calculated standard price is used to valuate goods movements within the valuation area. The marking of the calculated price changes the field Planned price in the future on the material master view Costing 2. The releasing of the calculated price changes the field Current planned price on the material master view Costing 2 and the valuation of the material master. If a released material cost estimate exists for the material master in the current period, it is not possible to release a new cost estimate for the current period.



Production Planning

OverviewThis script describes a typical planning process starting with rough-cut planning. The previous year's sales figures can be used as a basis for this distribution.

In rough-cut planning, long-term planning with a time frame of approximately one year is performed. The planning data is transferred from SOP to Demand Management. Demand Management generates primary planning requirements, which are a prerequisite for the subsequent MRP run. This is short-term planning, with a maximum time frame of four weeks. In material requirements planning, the BOM for the material is exploded and planning takes place right down to component level.

As a result, planned orders are generated for the material that is to be produced. If insufficient warehouse stock is available, purchase requisitions for the raw materials required are created.

The finished material Finished good 2 (C10151) is used in this example.

Creating Rough Cut Plan for Material C10151

UseTo ensure that production stays in line with sales, it is possible to create the production plan synchronous to sales. This, of course, demands a certain degree of flexibility in production.


SAP R/3 Menu Logistics Production SOP Planning For Material Change

Transaction code MC88

2. On the Change Plan screen, make the following entries:


Material C10151

Plant BP01 Choose Enter

3. Choose Enter.

4. Choose Active Version.

5. On the Create Rough-Cut Plan screen, in the Sales fields, enter values for the upcoming six months (for example, 10000, 10000, 5000, 5000, 10000, 10000).

6. From the menu bar, choose Edit Create Production Plan Synchronous to Sales.

7. Choose Enter.

8. Choose Save.

9. Choose Back.



Result You have created your production plan for a defined period of time according to your sales figures.

Creating Planned Independent Requirements

UseBy transferring the production plan to Demand Management you create the planned independent requirements and determine the requirement dates and requirement quantities of the material.

Prerequisites You have created your sales and/or production plan in SOP.


SAP R/3 MenuLogistics Production SOP Planning For Material Transfer Material to Demand Management

Transaction code MC74

2. On the Transfer Planning Data to Demand Management screen, make the following entries:


Material C10151

Plant BP01

Production plan for material or PG members

Mark

Date Enter today’s date

Invisible Transfer

Set Flag

Requirements type

LSF (VSF)

Version GP

Active Set Flag

3. Choose Transfer now.

4. Confirm the dialog box.




Result You have created the planned independent requirements for the material.

Creating Planned Order in MRP

UseMRP generates planned orders for the material that is to be produced. You can display the planned orders that are generated in the current stock/requirements list (transaction md04).


SAP R/3 Menu Logistics Production - Process MRP Planning Single-Item, Multi-level

Transaction code MD02

2. On the Single-Item-Multi-Level screen, enter the material and the plant and choose Enter.

Field name Description Req./Opt./Dep.

User action and values Comment

Material C10151

Plant BP01

Processing key NETCH

Create purchase req 2

Delivery schedules 3

Create MRP List 1

Planning mode 3

Scheduling 1

Also plan unchanged components

Set Flag

Display results before they are saved

Set Flag

Display material list Set Flag

3. Choose Enter twice.

4. Choose Save.

5. On the Next stopping point dialog box, select the Proceed without stopping checkbox, then choose Continue.

6. Choose Materials.




8. Choose Exit.

ResultYou have created planned orders for the material C10151. See transaction MD04.



Production Order ProcessingThis section covers all of the steps involved in labelling and packaging the finished good.

Creating a Planned Order

UseIf there are no planned orders available from requirements planning, you have to manually create a planned order. Otherwise you can continue the production process with section Converting a Planned Order to a Production Order.


SAP R/3 Menu Logistics Production MRP Planned Order Create

Transaction code MD11

2. In the Plnned order profile field, enter LA and choose Enter.

3. On the Create Planned Order: Stock Order screen, make the following entries:

Field name Description R./O./C User action and values

Comment

Material Finished good 3 C10151

Planning plant/MRP-area

BP01 Die F4 Hilfe ist fehlerhaft

Order quantity Each 12

Basic dates Start Today

Prod. version 0001

4. Choose Component Overview. The changeable requirements quantity for the individual BOM components is displayed with production storage location.

5. On the Processing Components: Component Overview screen, review the data.

6. Choose Back.

7. Choose Comp. ATP. An availability check is performed on the components. An additional field displays the confirmed quantity. If it appears, ignore the message Missing parts overall confirmation date could not be determined.

8. Choose Back.

9. Choose Save.

10. The system displays the message Planned Order XY is created. Make a note of the planned order number: __________________ .

11. Choose Back.



Converting a Planned Order to a Production Order

UseWhen a planned order is converted to a production order, the product, the order quantity and the basic order date are adopted from the planned order. The BOM components are also reserved for production.


SAP R/3 Menu Logistics Production MRP Planned Order Convert to Prod. Ord. Collective Conversion

Transaction code CO41

2. On the Collective Conversion of Planned Orders screen, make the following entries:

Field name

Description R./O./C User action and values Comment

Planning plant

BP01

Material C10151

Order type

YB01

3. Choose Execute.

4. On the Collective Conversion of Planned Orders: List screen, select the planned order noted in the previous step.

5. Choose Convert.

6. The message Planned order xxxxx was converted into production order 1xxxxxx is displayed by the system. Note the production order number here: _______________ .

7. Choose Exit.

ResultThe planned order has been deleted and a production order has been generated.



Releasing Production Order

Procedure

1. Access the activity choosing one of the following navigation options:

SAP R/3 Menu Logistics Production Production Control Order Change


2. On the Production Order Change screen, in the Order field, enter the production order number noted in the previous step and choose Enter.

3. On the next screen, choose Status. The system status includes PRC (pre-costed) and BCRQ (order to be handled in batches).

4. Choose Back.

5. From the menu bar, choose Functions Cost.

6. From the menu bar, choose Goto Costs Itemization.

7. Choose Back.

8. On the Production order Change screen, choose Release in the upper left corner of the screen and then choose Save. The message Order number xxx saved is displayed.

9. Choose Back.

Entering Goods Issue for BOM Components


SAP R/3 Menu Logistics Production Production Control Goods Movements Goods Issue

Transaction code MB1A

2. On the Enter Goods Issue screen, in the Movement type field, enter 261. In the Plant field, enter BP01. Choose To order….

3. On the Reference: Order dialog box, in the Order column, enter the order number.

4. Choose Adopt + Details.

5. Choose Enter.

Ignore the warning message.

6. Choose Enter.

Ignore the warning message.

7. Choose Save.

8. The system displays the message Document 49xxxxxxx posted.



9. Choose Back.

Entering Goods Receipt for Manufactured Goods


SAP R/3 Menu Logistics Production Production Control Goods Movements Goods Receipt

Transaction code MB31

2. On the Goods receipt for Order screen, make the following entries:


Movement type 101

Order Production order number

Plant BP01

3. Choose Adopt + Details.

4. In the Production date field, enter today’s date and choose Enter.

5. Choose Save.

6. The system displays the message: Document 5xxxxxxx posted.

7. Choose Back.

Creating Order Confirmation

UseTo collect activity costs you create an order confirmation.


SAP R/3 Menu Logistics Production Production Control Confirmation Enter For order


2. On Create Order Confirmation screen, make the following entries:


Order Enter the order number

3. Choose Enter.

4. On the Confirmation of Production Order Create screen make the following entries:


Aut. fin. confirm X



Yield to conf. 12

Unit Piece EA

5. Choose Save.

6. The system displays the message: Confirmation of order xxxxx saved.

ResultActual costs are calculated.

Comparing Planned and Actual Costs


SAP R/3 Menu Logistics Production Production control Order Display


2. On the Production Order. Display screen, in the Order field, enter the order number and choose Enter.

3. On the menu bar, choose Goto Costs Analysis.

4. Choose Back three times.

ResultOrder confirmation completes the production process. The actual costs are calculated and goods receipt is posted to unrestricted-use stock.

Cost Object Controlling in Discrete Manufacturing

Preliminary Costing

Prerequisites Cost Object Controlling is an area in cost accounting that assigns the costs incurred in the production of company activities (such as internally manufactured materials) to those activities.

Product cost by order enables you to analyze costs at the level of manufacturing orders, process orders, and production orders. In product cost by order, the manufacturing orders themselves are the cost objects. Costs charged to manufacturing orders are usually analyzed and settled by lot. This means that variances can only be analyzed after the entire planned production quantity has been put into stock.

The settings in Production Planning & Control (PP, PP-PI) are required to cost manufacturing orders as part of the production execution.



Use The system calculates the planned order costs when you create a process order, and following each subsequent change of data in the order. The planned costs are allocated to cost elements.

Graphical overview:

Costing variant

Display planned / actual costs

Cost elementsCost itemizationCost component split

Planned costsPlanned costs

Material costs

Costs for externalprocurement

Production costs

Material overheadcosts

Production overheadcosts

Costs for externalprocessing

Cost elementsCost elements:: PhasesPhases

Gen. operation values

Standard values

Control key: "Costingindicator"

ResourcesResources

Formula key forcosting

Cost center

Activity type

Formula constants

Cost calculationlog

Ind. "Rel. to costing"

Price

MaterialMaterial components components

OrderOrder type type / Plant / Plant

Planned costs for components

Whether costs are calculated for a material component depends on the costing relevancy indicator of the component. This indicator specifies that the component is fully relevant to costing. If the indicator is not set, the material component is not taken into account in costing. This indicator is in the material list General data screen in the order. It is set as a default setting, but can be removed manually.

Planned costs for material manufactured in-house

If a material is manufactured in-house, the system calculates the planned costs of the material using the valuation variant and a price is stored in the material master record.

In Customizing, a costing variant is defined for each order type and plant. The costing variant refers to a valuation variant which determines which price from the material master record is used to calculate the planned costs of a material (for example, the moving average price or the standard price).

Planned costs for production

Whether a phase is calculated depends on the control key and the costing relevancy indicator of the phase.

- Using the control key of the phase, you can specify whether the phase is relevant to costing.

- If the phase is relevant to costing, you can additionally use a costing relevancy indicator to specify the factor that is to be used to calculate the services



performed in a phase or you can disconnect the phase from costing. Operations are automatically excluded from costing.

Setting up a quantity structure

The most important data for setting up a quantity structure for an activity is defined in the resource/ work center:

- Activities

- Formulas

Every activity is allocated to an activity type. Each activity type is allocated to a formula in the resource. Using the formula and the standard times in the phase, the system calculates how much activity is expected for a particular activity type in a particular phase. As soon as the system has calculated how much activity is expected for a particular activity type, it can valuate the activity for each activity type.

Cost center assignment

You can assign a resource to a cost center on the Cost Center Assignment screen. You can maintain the following data:

- In the validity section, you determine the effective period for the assignment of the resource to this cost center.

- To cost activities, enter the cost center to which the activity types have been allocated. The cost center must be defined in the controlling area. The controlling area is specified via the plant.

Keep in mind that the cost center to which you want to assign a resource must already exist in the system. If you want to assign the resource to different cost centers with different validity periods, overwrite the old validity periods and enter the new cost centers. However, the resource may be assigned to only one cost center at any one time.

To cost standard values, assign activity types to the appropriate cost center. These activity types can then be entered in the cost center screen of the resource.



Example:

Resource Cost centerFormula Activity types Charge rates

F1 A USD 10/hF2 B USD 20/h . . . . . .

Example :

Formula F1 Rate foractivity type A

x x Duration = Total time

(Max. 6)

USD 10/h

Total time x Charge rate = COSTS

Operation qty Base output

Base qty Res. output

Standard values

Operation values

Resourceconstant

Overhead costs

Overhead costs are costs which can be assigned only indirectly to the process order, such as electricity costs or general storage costs. Overhead costs are assigned to the process order via overhead surcharges. They are updated in the order under the cost elements defined in the costing sheet.

A costing variant is defined in Customizing for each order type and plant. The costing variant refers to a costing sheet. The costing sheet determines what overhead surcharges are assigned to the order.

The costing sheet specifies:

- Which direct costs to apply surcharges to

- Under which conditions an overhead is calculated

- How high, depending on these conditions, the surcharge percentage is

- Which object (for example, a cost center) is reduced under which cost element during actual postings

The order type is set up in such a way that the planned costs are determined automatically when you save the production/process order. You can then execute the preliminary costing by choosing Cost order (Ctrl + F7) in the application toolbar on the Create Production Order screen.

Simultaneous Costing

Prerequisites See above under preliminary costing.



Use In Cost Object Controlling, actual costs for cost objects are recorded during simultaneous costing. In the Product Cost by Order component, you can record actual costs for manufacturing orders.

Cost objects can be debited with primary costs in the following ways:

- Through postings in Financial Accounting (FI)

- Through postings in Materials Management (MM)

- Through postings in Human Resources (HR)

Cost objects can be charged with secondary costs in the following ways:

- Through postings in Controlling (CO)

- Through the use of time sheets (CATS)

Cost objects can also be debited with actual costs by confirmations in Logistics. In confirmations, a cost object can be debited with:

- Secondary costs through internal activity allocations that are generated automatically by the confirmation

- Primary costs through material withdrawals that are generated automatically by the confirmation

Simultaneous costing derives automatically in background from the main processes in Logistics like goods movements and activity confirmations.


SAP R/3 Menu Logistics Production Production Control Order Change


2. On the Change Production Order screen, enter the production order number and choose Enter.

3. On the Production Order Change: Header screen, on the menu bar, choose Goto Costs Analysis.

4. The costs debited to the order can be analyzed by using a layout such as Cost Trend.

Period End Closing

Use From a business perspective the period-end closing in cost object controlling consists of three different areas:

- Allocation of periodic costs: With SAP R/3 you can allocate process costs, revaluate activities and processes with actual activity prices, post overheads and distribute costs from order header to the order items in case of using co-products



- Analyze the costs on the cost objects by calculating Work in Process (WIP) as well as target costs and variances

- Correct the financial accounting by posting WIP and price variances

Calculating work in process will calculate your WIP either at actual costs (when using full settlement) or at target costs (when using periodic settlement).

Variance calculation calculates not only variances, but also target scrap and target costs as the basis for the target/actual comparison and scrap variances.

Settlement is the last step in period-end closing in Cost Object Controlling. The necessary accounting documents are posted in Financial Accounting and in the material ledger, if used, and data passed on to other components such as Profitability Analysis and Profit-Center Accounting.

In the CP solution a lot-based production scenario is chosen with production and process orders. In this case the costs posted onto the order via goods issues, confirmations and goods receipts are stored on a CO-object, which has a one-to-one relationship to the order. In this example

orders have the settlement type FULL.

As long the process order is not fully delivered or flagged technical complete the remaining order balance is treated as WIP. Otherwise the order balance shows up in variance calculation.

With lot-based product controlling, WIP is valuated at actual costs. The WIP is calculated as the difference between the debit and credit of an order as long as the order does not have the status DLV (delivered).

In lot-based product controlling the variances are not calculated until the order has the status DLV (finally delivered) or TECO (technically completed). This means that at the time the order has reached this status, the system no longer interprets the difference between the debit and the credit as work in process but as a variance. In lot-based product controlling orders never have work in process and variances at the same time.


Periodic Costs

Analyzing Costs

FI/CO -Posting Settlement

Scrap, Variances,

Target Costs

Work in Process

Overhead

Process Costs Allocation

Revaluation at Actual Prices

Distribution for Co-Products

Periodic Costs

Analyzing Costs

FI/CO -Posting Settlement

Scrap, Variances,

Target Costs

Work in Process

Overhead

Process Costs Allocation

Revaluation at Actual Prices

Distribution for Co-Products


Variance calculation compares the actual costs incurred for the production/process order with the target costs according to the standard cost estimate for the finished material, and assigns the individual variances to variance categories. The target costs are calculated using the quantity delivered for the order.

In this way you can find out which variances occurred between the value of the delivery and the actual costs and you can find the reason for the posting to the price difference account for materials with standard price control.

Variances from production (target version 1)

Variance calculation compares the actual costs incurred for the production order with the target costs for the production order and assigns the individual variances to variance categories. The target costs are calculated using the quantity delivered for the order.

This enables variance calculation to find out which variances occurred between the time the production order was created and the end of the production process.

Variances from planning (target version 2)

Variance calculation compares the planned costs for the production order with the target costs according to the standard cost estimate for the finished material, and assigns the individual variances to variance categories. The target costs are calculated using the quantity delivered for the order.

This enables variance calculation to find out which variance occurred between the time the standard cost estimate was created and the time the production order was created.

Variance categories:

The system assigns every variance to a variance category. The variance category indicates the cause of the variance (such as price change, lot-size variance). Variances are updated to the information system and passed on to Profitability Analysis according to variance category.

You differentiate between variance categories on the input side and on the output side:

- Variances that occur because of goods issues, internal activity allocations, overhead and G/L account postings are displayed on the input side. Price variances, quantity variances, resource-usage variances and input variances are displayed on the input side.

- Variances that occur because too little or too much of the planned order quantity was delivered, or because the delivered quantity was valuated differently are displayed on the output side.Variances on the output side occur when you deliver using a price that differs from that found by dividing the target costs and the delivered quantity. If you deliver using the standard price, a variance can occur when the order lot size differs from the costing lot size. This is displayed as a lot-size variance.



Variances on the input side:

Variances on the output side

Settlement:

During the production process, product cost collectors and manufacturing orders are debited with actual costs. The actual costs posted to an order can be more or less than the value with which an order was credited when the goods receipt was posted. When you settle, this difference between the debit and credit of the order is transferred to Financial Accounting (FI).

The total variance can be transferred to profitability segments in Profitability Analysis (CO-PA). This enables you to see an additional contribution margin in CO-PA. You can transfer the individual variance categories of the total variance to value fields in CO-PA in combination with certain cost elements or cost element groups.

The WIP will be transferred to Financial Accounting (FI) and Profit Center Accounting (EC-PCA) in accordance with the posting rules in Customizing.


PlannedCosts

Price

QuantityPlannedQuantity

PlannedPrice

ActualPrice

ActualQuantity

Price Variance

QuantityVariance

Owncategory ?

PlannedCosts

Price

QuantityPlannedQuantity

PlannedPrice

ActualPrice

ActualQuantity

ActualPrice

ActualQuantity

Price Variance

QuantityVariance

Owncategory ?

Output Price Variance

Lot-sizeVariance

Price

Quantity

Lot-sizeindependent portion

of procurement alternative

Price ofProcurement Alternative

S-Price(mixed cost estimate)

changed S-price

PlannedQuantity

ActualQuantity

Mixed Price Variance

Output Price Variance

Lot-sizeVariance

Price

Quantity

Lot-sizeindependent portion

of procurement alternative

Price ofProcurement Alternative

S-Price(mixed cost estimate)

changed S-price

PlannedQuantity

ActualQuantity

Mixed Price Variance



SAP R/3 Menu Accounting Controlling Product Cost Controlling Cost Object Controlling Product Cost by Order Period End Closing Single Functions Revaluation at Actual Prices Individual Processing

Transaction code MFN1

2. On the Revaluation at Actual Prices Production order screen, make the following entries:


Due to the fact that the Baseline solution does not use ABC the function Template Allocation will not be used.

Order R Enter production order number

Period R (current period)


Test Run O No flag

Detail List O Set flag

3. Choose Execute.



SAP R/3 Menu Accounting Controlling Product Cost Controlling Cost Object Controlling Product Cost by Order Period End Closing Single Functions Overhead Individual Processing

Transaction code KGI2

6. On the Actual Overhead Calculation: Order screen, make the following entries:


Order Order key R Order number



Test Run O No flag

Dialog List O Set flag

7. Choose Execute.


9. Confirm the dialog box.

10. Choose Back again.




SAP R/3 Menu Accounting Controlling Product Cost Controlling Cost Object Controlling Product Cost by Order Period End Closing Single Functions Work in Process Individual Processing Calculate

Transaction code KKAX

12. On the Calculate Work in Process screen, make the following entries:


Order R Enter production order number

WIP to Period

R (current period)


All RA versions

O No flag

RA version O 0


O No flag

Test Run O No flag

Log information messages

O Set flag

Save log O Set flag

Display orders with errors

O No flag

13. Choose Execute.

14. To perform variance analysis, make sure that variance key is maintained in Production order header – control data (variance key = 000001)

If Production Order has a CNF, you will get an error on the log. This is OK. The reason is because we chose to confirm the whole quantity on the order.

15. Access, the next activity using one of the following navigation options:

SAP R/3 Menu Accounting Controlling Product Cost Controlling Cost Object Controlling Product Cost by Order Period End Closing Single Functions Variances Individual Processing

Transaction code KKS2

16. Choose Extras Set target cost versions from the menu bar and make sure the “0: Target costs for total variances” box is checked.

17. On the Variance Calculation: Initial screen, make the following entries:


Order Order key R Order number





All target cost vrsn

R No flag

Selected Target Cost Vsns

R Set Flag 000

Test Run O No flag

Detail List O Set flag

18. Execute (F8)

19. Choose Back.


SAP R/3 Menu Accounting Controlling Product Cost Controlling Cost Object Controlling Product Cost by Order Period End Closing Single Functions Settlement Individual Processing

KO88

21. On the Actual Settlement: Order screen, make the following entries:

Field name Transaction code KO88 User action and values Comment

Order Enter production order number

Settlement period

R (current period)

Posting period

R (current period)

Fiscal year R (current year)

Processing type

R Full settlement

Test Run O No flag

Check trans. data

O No flag

22. Choose Execute.



Documents

J64 Production Planning and Discrete Manufacturing