Costing Variant

Costing variant is a tool that contains all control parameters for costing, including parameters
that control how cost estimates are executed and the material prices or activity prices that are
used to valuate the costing items.
1. In material costing (costing with and without quantity structure), the costing variant
determines the following:
2. The purpose of the cost estimate (costing type)
3. The prices that are selected to valuate the quantity structure and calculate overhead
expenses (valuation variant)
4. The dates that apply to the actual cost estimate and to the explosion and valuation of the
quantity structure (date control)
5. How the BOMs and routings are selected to create the quantity structure (quantity
structure control; only relevant for cost estimates with a quantity structure)
6. The strategy by which the SAP System looks for costing data from other cost estimates
(transfer control)
In unit costing (base object costing and unit costing for orders), the costing variant determines
the following:
1. The purpose of the cost estimate (costing type)
2. The prices that are selected to valuate the costing items (valuation variant)
3. Whether the individual costing items are assigned to cost elements
In Easy Cost Planning, the costing variant determines the following:
1. The purpose of the cost estimate (costing type)
2. The prices that are selected to valuate the costing items (valuation variant)

3. For internal orders, work breakdown structure (WBS) elements, and adhoc cost estimates,
the dates that apply to the cost estimate (date control). For WBS elements, the dates can
be overridden by the dates of the WBS element.

Costing variants contain control parameters for all aspects of costing. The costing variant forms
the link between the application and Customizing, since cost estimates are created and saved
with reference to a costing variant.
The costing variant controls how costing is executed, such as:
1. Whether the costing results are planned costs or actual costs
2. Which prices are used to valuate materials, internal activities, and external activities
3. How overhead is calculated A costing variant includes the following groups of settings:
4. Costing type
5. Valuation variant
6. Number range assignment

Basics of SAP Standard Cost estimate- Understanding the

flow of cost settings - Part 1
This document is intended to explain the cost flows to a standard cost estimate. Explaining
various settings in background. I will try to explain this from backward from Cost estimate to
configuration. This will answer some basic questions like Material Cost, Overhead Cost, Labor
etc. in a standard cost.
When you take a look at a material cost estimate what you will understand the Quantity
Structure, Valuation, Costing Dates etc.
o Standard cost of a material looks like in T-Code- CK13n (you can view this from costing2 view in material master too T-Code-MM03.)
o I will try to walk through these 6 tabs below explaining basic configurations and data
flows from different configuration to Standard Cost estimate.

Screenshot-1
o For our analysis purpose I have selected standard layout 1SAP02-Costing items
(overview)
o there are several layout available in standard SAP and user can define their own
too.

Screenshot-2

Screenshot-3
1-Costing Data
It contains data like Costing variant, Costing Version, Lot Size and Transfer Control. Lets talk
about Costing Messages and Costing status later on.

Screenshot -4

o Costing variant-Configuration Costing Variant in T-code OKKN- (Will cover in more

detailed way in part 2.)
-Assign various Control parameters like Costing Type, Valuation variant, Date Control QTY
structure Control, Transfer Control etc.
-Maintain parameters different Tabs like Control, Qty Structure, Addictive Cost, Assignment and
Misc.

Screenshot 5
o Costing Version configuration using T CODE- OKYD
-Number that serves to differentiate between cost estimates for the same material.

Screenshot 6
o Lot Size
The costing lot size in the material master record is usually used as a basis for costing all materials, however one
can manually change the lot size during cost estimate.

o Transfer Control-Configure in T-code OKKM usually used the standard.

Screenshot 7
This controls how costing with quantity structure searches for existing cost estimates when
existing costing data are transferred to another cost estimate. In this example we assigned PC02
in TCODE OKKN.
2-Costing Dates-we will learn more about date control in Costing variant

Screenshot 8
-Costing Date from -Date from which the cost estimate is valid.
-Costing Date to- This date determines the date up to which the cost estimate is valid
-Qty Structure Date-Date with which the quantity structure is selected for the cost estimate with
quantity structure.
-Valuation Date-Date on which the materials and activities in a cost estimate are valuated.
3-Qty Structure-It contains BOM and Routing data. ( Usually PP functionality)

Screenshot 9
o Bill Of Material (BOM)- T CODE- SET up CS01 , To view T-code -CS03

Screenshot 10
If you go back and refer my screenshot 3 the detailed cost (M) comes from this settings.
Note- we will have to do cost component settings too will cover the point in net part.
o Routings- Create Routings T-Cod-CA01 ( PP functionality) to view CA03
A routing shows operations in a sequence. This form the basis for
Lead time scheduling. Product costing, capacity planning, Refer screenshot 3 Cost
Internal Activity (E) comes from this settings. We will understand more detail in my next
part about assigning work center, activity and activity planning.

Screenshot 11

4- Valuation- It contains the currency, Costing sheet and Overhead key.

T CODE-KZS2-Creating and maintaining Costing Sheet,
T CODE-KOOK-Defining and changing Overhead key

Screenshot 12
if you refer to screenshot 3 Overhead cost (G) flows from this settings from costing sheet and
overhead key.
o Costing Sheet-It controls the calculation of Overhead basically we use one costing sheet
for each object for which system is to determine overhead costs. ( will see more detail in
my next part)
o The Overhead Key-The overhead key is used to determine order-specific or materialrelated overhead rates. The overhead amounts depend on the plant and the overhead key.
The overhead depends primarily on the overhead key. If an overhead key is not
maintained for the material or the order, overhead is to be determined in relation to the
plant.
After defining a costing sheet that points to two condition tables. In the first table, the
overhead amount depends on the overhead key. In the second table, the overhead amount
depends on the plant. An access sequence determines which conditions have priority.
5- HISTORY- It contains the user and costing run date data.

Screenshot 13
Cost By/Marked By/released By- The user names who performed respective costing run task.
Some large companies have different person to mark the cost and different person to release the
cost as it rectifies the human errors if any. But in my experience i have seen mostly it is
performed by the same person.
Costing run usually this data updated when we use T-code CK40n to do standard costing in
case of individual material costing using CK11n this field will not populate. So we can always go
and check that costing run data to verify the settings at that point of time.
6-Costs-Baiscally it is summarization and cost component view
TCODE-OKTZ setting up cost component Structure (we will see in detail in part 2 of this
document)
o If you refer back screenshot 8 breaking out cost like overhead, labor and material based
on these settings here.In Product Cost Controlling, the cost component structure
determines how the results of material costing are updated. The cost component structure
groups the costs for each material according to cost component (such as material costs,
internal activities, external activities, and overhead). If the material is used in the
production of another material, the cost component split (which breaks down the costs
according to material costs, internal activities, external activities, overhead, and so forth)
remains in the system when the costs are rolled up

Screenshot 14
Error Log- Identifies the messages if costed with error or without error.
Intention of creating this document is to reach out to the beginners and those who wanted to
know and understand the flow of Standard Costing. i will update the document as n when some
more points needs to be included .

This is my first document and I should thank Ajay , Forum members,and SCN SAP ERP
Financials Controlling
I was nervous to put together the basics in a document and publish it in SCN. I will continue edit
it for improvement.
The next part of document will update the more detailed configuration and steps to understand
Basics of Standard costing

Basics of SAP Standard Cost estimate- Understanding the

flow of cost settings - Part 2
This document explains the costing Variant configuration and components assigned to costing
variant like Valuation variant, Qty structure Control, Transfer Control and Assignments.
originally i thought of writing only 2 parts to complete it but it seems it will need few more parts

to complete. This document is intended to explain the cost flows to a standard cost estimate.
Explaining various settings in background as previous part.

Costing Variant

T CODE OKKN- Define Costing variant and name it. For analysis purpose we are taking PPC1.

Screenshot 1
Then double click on PPC1 and configure other parameters.

Screenshot 2
Now lets understand each of these parameters and its assignment..

Control

1-Costing type The costing type enables you to specify the purpose of a cost estimate.

Click on create Costing type n existing or create a new one, or define it using T-code OKKI
In Save parameter tab selec Start with Period ( Most commonly used),

Screenshot 3
In Price Update tab select Standard price. The reason we select standard price because we want
to calculate standard cost.

Screenshot 4
2-Valuation variant T CODE OKK4

This is most important part of configuration, We will understand the importance of Different
tabs.
For Material valuation,Internal Activity,Sub-Contracting, Overhead and Misc.

Screenshot 5
If you want to use different valuation strategies or different overhead rates in plants that belong
to the same company code, you can define plant-specific valuation variants by assigning a
valuation variant to a plant. Choose the push button Valuation variant/plant. If you dont do this,
the valuation variants apply to all your plants.
Here I have created a Valuation variant in a plant then most important part comes is Material
valuation
Here we define how do we wanted our Material to be valuated Strategy Sequence. The one above
used is most commonly used however it can be modified according to Business requirement.
For material valuation, you can choose up to five (5) strategies for each valuation variant.

-Planned price-According Planned price in Costing 2 tab of Material master (MM03 view)
During cost run or standard costing if this has maintained the system will consider this value
first.
-In case the system did not find price in priority 1 , It goes to priority 2 Valuation Price
accordingly to Price control in Material master, Costing 2 tab (MM03 view)
-L Price from Purchasing Info Record-This one used in case of outside buy or sub contract
materials. And for this we also maintain a sub sequence that too in Sequence wise.
Explore more options in TCODE OKK4 and understand each options and its usage.
Internal Activity Here you define the sequence in which the system searches for prices in
activity type planning or actual activity price calculation in Cost Center Accounting or ActivityBased Costing to valuate the utilized activity types and business processes. You also specify
which plan/actual version is used.

Screenshot 6
For activity types/processes, you can choose up to three (3) activity prices for each valuation
variant.
In the above example I have selected 1 planned price for the period option as per planning data in
Cost center planning/ activity planning (TCODE-KP26/KP06 We will see more in next
document Part 3)

Subcontracting Here you define the sequence in which the system searches for prices in the
purchasing info record. In purchasing, the quota arrangements are used to create a mixed price
for materials that are manufactured with external vendors with parts provided by the customer.
You can specify whether the quota of the individual vendors that are entered in the list for the
material to be processed should be determined through the planned quota arrangement or the
actual quota arrangement.
For subcontracting, you can choose up to three (3) strategies for each valuation variant

Screenshot 7
I have selected 3 Net Quotation price from Info record where as there is 8 other options out there
which you can select according to your business need. Quotation in Purchasing i have selected
Actual Quota Arrangement you have an option of Planning Quota Arrangement as well to select
as per business need.
External Processing-Here you define the sequence in which the system searches for prices in
the purchasing info record or routing operation for valuation of the external activities

Screenshot 8
I have selected Net purchase order price here however for external processing, you can choose
up to three (3) strategies for each valuation variant. Based on Business requirement you can
select priorities amongst 9 Strategies available in standard SAP.
Overhead Costs
You can link the valuation variant for definition of overhead to a costing sheet. You can also
enter a costing sheet for the allocation of overhead to raw materials, if you want to use specific
overhead conditions for raw materials.
If you want to differentiate overhead application according to material groups, you must have
defined overhead groups (T CODE OKZ2) and made the necessary settings for the costing sheet
in the step Define costing sheet (T CODE KZA1- I will explain that in My Next Document).
Here in the example I liked a Costing sheet for our analysis purpose.
You can also specify whether overhead is calculated for subcontracted materials in material
costing.
Miscellaneous-Price Factors

Screenshot 9
If you want to use the valuation variant for inventory costing, you can link it with price factors.
Specify whether the factors of the relevancy to costing indicator should be valid for all valuation
variants or only for particular valuation variants.
If you enter three plus signs (+++) as the valuation variant, the factors are valid for all valuation
variants that do not have specific entries. I have selected this option for our analysis purpose
If you specify a particular valuation variant, the system uses the associated relevancy to costing
indicator and the associated factors. Enter a relevancy to costing indicator for each line. Enter a
factor for the fixed costs and a factor for the variable costs.
3-Date Control
Key that controls the dates for material cost estimates.
For example you can use date control to define the day for selecting the quantity structure when
costing with a quantity structure

Screenshot 10
When you checked manual entry that means during cost estimate you can manually change the
date according to your requirement.
4-Qty Structure ControlYou can use the quantity structure control to specify how the system selects a bill of material and
a routing for the material to be costed.
You define the quantity structure control in Customizing for Product Cost Planning. The quantity
structure control can apply to either a specific plant or to all plants. You enter the quantity
structure control in the costing variant. When the cost estimate is created, the system selects the
quantity structure control ID through the costing variant.
When you create a cost estimate for a material, you always use a costing variant. This variant is
the link between the cost estimate and the quantity structure control.

Screenshot 11
I have selected BOM application PC01 and selection ID 05 (TCODE OS30 define BOM
Application, A PP Functionality)

Screenshot 12
The BOM application controls the following:

The order of priority of the BOM usages (selection ID), When a BOM is required to embrace
various enterprise areas (in other words, it has several BOM usages), you can determine which
usage will be selected by the system first by using a selection ID.
The priority of an alternative BOM for a specific multiple BOM, You can control which
alternative BOM the system selects as of a certain date for a specific material, taking into
account the plant and the BOM usage. You can use the application to determine whether the
system takes this specification into account or ignores it.
Whether the system includes only those BOMs with a status containing particular status
indicators
An alternative BOM is only exploded if the BOM status contains the indicator required in the
application.
You can check the BOM application and the parameters that are linked to it in Customizing for
Product Cost Planning.
I have selected Routing 01 ( TCODE OPEB can be used to define automatic selection, A PP
functionality)

Screenshot 13
The routing selection ID determines how the system selects a routing. You can define several
priorities. You assign selection criteria (task list type, task list usage, and task list status) to each
of these priorities.
The routing that corresponds to the selection criteria with the highest selection priority is
selected. If, however, no alternative routing can be found, the system continues searching using
the selection criteria of the next selection priority.
When determining the BOM and routing, the system also checks, Whether the BOM and the
routing are valid on the quantity structure date (refer date Control screenshot 10). Whether the lot
size in the BOM and in the routing are the same as the costing lot size.
4-Transfer Control-

In this step you define parameters for partial costing. You use partial costing to prevent the
system from creating a new cost estimate for a material when costing data already exist. Instead,
the existing costing data is simply transferred into the new cost estimate. This improves
performance.

Screenshot 14
Single-Plant Transfer -If cost estimates for certain materials already exist in the individual levels
of the BOM, they are not recosted. Rather, the existing costing data is transferred into the cost
estimate in accordance with the transfer control.
If you always want to recost, choose the transfer control No transfer.
Cross-Plant Transfer-The special procurement types are used for material cost estimates:
Transfer from other plant, Withdrawal in other plant, Production in other plant
Strategy Sequences for Single-Plant and Cross-Plant Transfer-You can define up to three
strategies for single-plant transfer and three strategies for cross-plant transfer. The strategy
sequence determines the order in which the system searches for costing data. If the system
cannot select a cost estimate even after reaching the end of the strategy sequence, it explodes the
BOM of the material and creates a new cost estimate.

Qty Struct.-

Pass on Lot Size- Controls whether the system determines the costing lot size using the lot size of the highest
material in the BOM and the input quantities of the components.

1) Do not pass on lot size

If this indicator is not selected, the materials further down in the structure are costed in
accordance with the lot size in the costing view of the material master record. When the materials
in the next-highest costing level are costed, the costing results of the semifinished materials are
converted to the lot size of the finished material to calculate the material costs for the finished
product.
2) Pass on lot size only with individual requirement
In the MRP view of the material master record, you can specify that a material is planned as an
individual requirement. If such a material is added to another material, costing uses the lot size of
the highest material.
3) Always pass on lot size
Here, the costs for all the materials in a multi-level BOM are calculated using the costing lot size
of the highest material. This function is used principally in sales order costing.

Screenshot 15
Ignore Product Cost Estimate without Quantity StructureDetermines whether a cost estimate with quantity structure can access data that was produced by
a cost estimate without quantity structure
You set this indicator if you do not want to work with a cost estimate without quantity structure.
If this indicator is set, the system will ignore data produced by a cost estimate without quantity
structure when selecting the BOM as well as when costing. Instead, the system will attempt to
calculate the costs of manufacturing the material using an existing BOM or an existing operation.

In the costing view of the material master record, you can use the With quantity structure
indicator to specify that the material should be costed either with or without a quantity structure.
If the Ignore cost estimate w/o qty structure indicator in the costing variant is set, the system will
ignore the entry in the material master record.

Addictive Cost

You use additive costing to add costs manually to a material cost estimate when they cannot be
calculated by the system. Examples of such costs are freight charges, insurance costs, stock
transfer costs, incomplete or changed BOMs, and routings.
As a rule, costing calculates the costs of a material on the basis of the quantity structure. This
type of cost estimate is performed automatically by the system. However, you can also manually
enter estimated values for costs that cannot be calculated by the system. This allows you to add
costs to a cost estimate that was calculated automatically.

Screenshot 16
When you cost materials, the system determines the BOM for the material, and selects a price for the
valuation of the material components through the valuation variant. If you set the Incl. additive costs
indicator in the valuation variant, the system looks for any existing additive cost estimates for the material.
The system adds the costs entered manually to the costs calculated by the system. The costs in the
automatic cost estimate and the additive cost estimate are added together for each cost component.

Update

Screenshot 17
Update Allowed- Indicator that determines whether a cost estimate can be saved.
Dependencies
Since the cost estimate must be saved if the costing results are to be used further, you must set
this indicator.
Examples of further use of the costing results
1. Update in the price fields of the material master:
As the standard price: the results of the standard cost estimate
As the tax or commercial law price: the results of the inventory cost estimate
As special planned prices 1,2,3: the results of all cost estimates
1. Use of the costing results in Cost Object Controlling for:
Variance calculation

WIP calculation
Results analysis

Assignments-We will know more about Cost Component Structure in my next part, I
have already explained in my first part about costing version.

Screenshot 18
Cost component Structure Specifies which costs are contained in the cost component split. You
can use the cost component structure to specify that certain costs
Remain visible in the cost estimate are passed on to Profitability Analysis.

MISC.-Parameters for Error Management

Controls how messages (information messages, warning messages, and error messages) are
collected within an application.

Screenshot 19
Online Messages-The messages are issued individually from the status bar. The log function is
inactive in the cost estimate.

Messages logged and saved, mail inactive ,The messages are collected in a log, which can be
saved. The messages cannot be sent.
Messages logged and saved, mail active, The messages are collected in a log, which can be
saved. The messages can be sent to the person responsible for correcting the error. Messages
logged, saving not possible, mail inactive, The messages are collected in a log, which can be
processed online, but not saved.
Note
To be able to use a costing variant for the costing run, you must save the log.
This is a long Document i tried to capture each and every aspects of Costing variant. We will see
some more configuration and explanation about it in my Next Part. I will try to close this
document series in my next part if its too lengthy then i will try to put together a separate
document.
Intention of creating this document is to reach out to the newbies and beginners and those who
wanted to know and understand the flow of Standard Costing. i will update the document as n
when some more points needs to be included or any suggestion from Experts.