Product Costing Concept in MMKI

Process Description :
1. In MMKI Production is triggered on the basis of Sales data as received from ALC which is termed
as ‘Back flush’ . MMKI initiates Sales Order Based Production process :
2. SAP picks up the quantity of raw material and packing material required from BOM.

 In MMKI Production Order is set up for each Vehicle. So that means 1 PO issued for 1 Vehicle
Production so whatever direct cost is involved is captured and later on settled via Production
Order.
 From BOM Direct Material Cost is calculated based on each Production Order.

Production Order Process Flow :

Overall Business Process Flow and Function – At a Glance:

Sales Data received from ALC in a form of ‘Back Flush’

Program: ZD4PCOTC_10301 [choose the Actual transaction button and input plant=D4N1, Production order,
Processing Line-ID=1(Welding)]

Product Costing -- Cost Posting and Settlement process

Cost Flow : e.g. YZM01AG8AK13180000

1. In MMKI based on each sales order – Production Order is issued

2. One Production order for one vehicle
3. Get Standard Cost from Mat master ( MM03 ) & BOM (CS03) and set Production Cost estimates
4. Valuate Inventory – Fin / Un Fin goods , WIP including all activity costs
5. Set Activity rates
6. Calculate variance ( Actual – Planned )
7. Book Cost Variance in FI ( Month End activity)
8. Calculate Actual Cost
Product Costing flow from the following sources (CBU & Press Parts):
1. Material -- BOM ( CBU & Spare Parts & Press Parts )
2. Production Overheads ( Labor Hr / Machine / Power) -- Routing

BOM ( Source - Component Structure)

 Material -- Finished Good : E.g. MMKCAR (CBU)

1. Material -- Car tool Kit : M50E35F900 _01 10.

Unit
BOM Component Description (Qty) Rate Price 1. Direct Material
JOINT ASSY LWR ARM ( local / KPD)
1 4013A332 BALL 1 XX XXXX
2 MB621148 WRENCH 1 XX XXXX 2. Direct Material
3 4615A243 DISC BRAKE 15V 1 XX XXXX (Other)

Routing / Cost Sheet (Source)

Activity Work Center 20. Process Cost (Variable)

Welding Line 1000-1999 Labor / Other
Paint Line 2000-2999 30. Process Cost ( Fixed)
Assembly Line 3000-3999
Test / Ins[pection 4000-4999

Cost Collection via Cost Center (Source)

40. Other Cost -- Tooling / Defect / Cost Collection via Cost Center Charge by Direct Material

50. Other Cost before Line Off --- From Outsource Cost , KD unpacking, Logistic , MP Expense, FOB

60. Other Cost After Line Off -- From Outsource Cost , KD unpacking, Logistic , MP Expense, FOB

 Material ( Spare parts )

BOM

Routing
  Press Parts ( Goods)

Using of Program Enhancement

Activity: BOM Copy Function ( ADD ON )

Transaction Code : ZD4PCOTC_10811 : For Next Term , Std. Costing Variant : D4S1

ZD4PCOTC_10821: For Current Term, Std. Costing Variant: D4S2

Mandatory Checks : Company Code, Plant Code, Costing variant, BOM Usage, Routine Status is in place

Program Logic: This program is created to perform combined functionality of BOM/ ROUTINE Copy
creation along with automatic assignment of material components even used for Assembly.

Following customized table is updated :

ZD4PCOT_00004 BOM Routing Alternative BOM Table

ZD4PCOT_00005 Actual Material Pattern (For the Cost)

ZD4PPPT_00007 Actual Material Pattern

ZD4PZZT_00001 Common Constants Table

Unlike Standard SAP Functionality of BOM/ Material creation this program updates the BOM / Routine
status for each material relating to CBU. This is prime requirement for CK40 – Standard Cost Estimation
run.
BOM / Routine Function through following process:

1. Acquire Component Material : using the table BOM Header [STKO] , Item [STOP] ,

This program updates the internal TABLE: ZD4PCOT_00004. Once BOM / ROUTINE is Copied updating
the Selection List and ensure the copy of the same usage using the functional module :

2. Since most of the Direct materials creation and updating is happening via interface called
“EPICS” Program is utilizing BAPI_MATERIAL_BOM_GROUP_CREATE for creation of Material
BOM Group. Using specific Functional Module: CS_BOM_EXPL_MAT_V2_HANA program is
Copying BOM / Routine.
3. This program using the table MAPL for Assignment of Task Lists ( Components) to Materials

Master Data Settings : Cost Element Structure used in MMKI Product Costing

 FI Bookings -- Cost Captures within Primary Cost Element.

 In CO it is transferred between related secondary cost elements and later on settled by
Production Order to COGS /WIP

In MMKI Secondary Cost Element holds certain naming convention:

1-3 ・・・ 699 [ Always starts with 3 ]

4,5 ・・・ D4 [Default MMKI Company Code] ]
6 ・・・ 1 ’21’ Internal Order Settlement
2 ‘31’ Order & Project Result Analysis
3 ‘41’ Overhead Rate
4 ‘42’ Assessment
5 ‘43’ Internal Activity Allocation

7 ・・・ Cost structure group

1 Direct Material 8. For Cost Allocation(Optional)
2 Processing cost (Variable) 9. For Cost Settlement(Optional)
3 Processing cost (Fixed)
4 Other Cost (per unit basis)
5 Cost before complete
6 Cost after complete
7 For recognizing cost occurrence

 Process Cost Calculation :

For In-house cost calculation CO – MMKI follows the formula of Head count / Cycle time using the
following:

1. Activity Type : For Process, Tool, Defect) Cost , Cost Driver

2. Cost Sheet : Contains list of Calculation base , Cost Elements for which Overhead rate is applied.
3. Work Area
4. Routing

In MMKI ‘D4C001’ is defined as Cost Sheet which contains detail Activity type List, Cost Base , O/H key
are defined based on the required costing criteria.
Cost Center for direct distribution to the production dept. e.g. Cost relating to Utility, Production
Engineering and other Management charges.

Product Costing Cycle: Posting Cost Order to Settlement

1. KP06 -- Change Cost Element / Activity Planning
2. KP26 -- Change Activity Type / Price Planning
3. KSPI -- Execute Plan Price calculation
4. ZD4PCOTC_10001 – Update Cost Sheet

ADD ON : ZD4PCOTC_10001 – Update Cost Sheet

Functional Specification : This Program will Update the cost sheet based on Activity Type , Cost Center,
Credit O/H, Work Center.
This ADD on includes internal programe :

ZD4IPCO_00001 – for Constant / VARAINT definition

ZD4IPZZ_00001 -- Update price / activity
This add on also updating quantity information along with price of activity type which is assigned to a
cost element of costing sheet based on unit / price.
 Program update from price table T683S & T683T.
 Once Overhead rate is acquired from TKZU3 it is later updated to the cost sheet according to the
cost element / Cost center and Overhead Key.

Besides that this program also updating data from the following table :

Program Prerequisites & Dependency:

Besides that program will fail to update Cost Sheet if there is existence of combination from single to
multiple instances (Cost element with multiple cost center / activity) system sends error.

Mandatory Checks has been put on the following fields:

p_bukrs <Company Code> p_stlnfr <BOM Usage(Copy From)>

p_werks <Plant>
p_klvar <Costing Variant>
p_exedat <Date>
p_mtidcb <Selection List(CBU)>
p_mtidsp <Selection List(SP)>
p_stlnto <BOM Usage(Copy To)>
p_stlst <BOM Status>
p_verwe <Task List Usage>
p_statu <Routing Status>

ADD ON : ZD4PCOTC_10001 – Update Cost Sheet

Selection List for Standard Cost Calculation: Ref : Pg 41

 ZD4PCOTC_11221
 ckmatcon -- Delete
 We need to choose Cost Variant : D4S1 next FY, D4S2 middle of FY
D4S9 Revision standard cost, D4C1 standard cost Current moment
 Execute: ZD4PCOTC_10821—BOM Routing Copy Function. [Run ckmatcon -- Delete Variant]
 Standard Cost Run -- CK40N
 After successful run Material Standard cost will be updated in the Material Master
M01AG8AK03 180000

Product Costing
Cost
Mode Cntr Particulars Source Rate (Basd on ) Qty Amount
BOM copied to PO Direct Material BOM XX XXXXXX
BOM copied to PO Direct Mat Other BOM XX XXXXXX
Allocation to CC (KSUB) XXXXXX Indirect Material SKF XXXXXX
O/H Calculation ( % on Mat % on Mat
Consumption) (KSUB) Material Handling SKF Consumption XXXXXX
Indirect Costs Post to PROD Drct. Production /
CC Processing Cost
Assessment / Allocation Direct Labor - Salary &
(KSUB) wages SKF Head Count XXXXXX
Assesment / Allocation % on cost of
(KSUB) Machine O/H SKF Machine Time XXXXXX
Labour O/H ( Accounting / % on cost of
Operations) Labor Time XXXXXX
Utility & Other
Internal Allocation (KSUB) Administrative Cost SKF SKF
Based on Cubic
Internal Allocation (KSUB) Power, Water, Rental SKF Meter XXXXXX

Total XXXXXX
Standard Cost Calculation: (Model Perception)

Labor Cost Calculation: from Units stored in SKF

Utility Cost Allocation: from units stored in SKF
Order No: 15X2013
Customer: Platinum Interiors
Units: 150
Type: 6 unit
Amounts in IDR(Rp)
Cost of direct materials 25,000
Cost of purchased components 35,000
Labor cost 15,600

Activity Relevant Cost Driver Activity Usage

Order No: 15X2013
Customer: Platinum Interiors
Units: 150
Type: 6 unit
Amounts in IDR(Rp)
Production of components Machine hours 320
Assembly of components Number of labor hours 250
Packaging Units 150
Shipping Units 150
Setup costs Number of setups 15
Designing Designer hours 70
Testing Testing hours 22
Rent Labor cost 4500

(A) (B) (A × B)
Activity Activity Rate Activity Usage Activity Cost Assigned
Production of components 93 320 29,760
Assembly of components 62 250 15,500
Packaging 43 150 6,450
Shipping 46 150 6,900
Setup costs 143 15 2,145
Designing 123 70 8,610
Product testing 48 22 1,056
Rent 75% 15,600 11,700
82,121
Total cost of the order is hence:
IDR
Direct materials (dp) 25,000
Purchased components 35,000
Labor cost 15,600
82,121
Manufacturing overheads (Ind)
Total cost under Product based costing : 157,721

Reports:
ZD4PCOTC_10601 - Price Variance Transfer
ZD4PCOTC_10901 - Drill down by partner
ZD4PCOTC_10501 - PPV
ZD4PCOTC_10902 - Cost Center report

In MMKI 3 Different cost variance settlement / transfer are there :

 Cost variance of production order
We transfer cost variance of production order to either stock or COGS. The basic idea here is that if the vehicle
is sold, then the cost variance is transferred to cost of goods sold.
But if the vehicle is not sold, then the cost variance goes to stock of BS (ending inventory).
SAP judges production order is sold or not from the shipping document. If there is shipping document with the
production order, then SAP judge this order is sold.

 Cost center variance

The second cost variance is cost variance in cost center important idea here is that we will multiply the
retention rate to the cost variance because there is nothing has to do with the fact that a vehicle is sold or
not.
*retention rate = finished goods+WIP/ COGS+finished goods+WIP
Retention rate represents how much stock is left in inventory.

 Cost variance of GL account.

The last one is variance in GL account.
Purchasing dep. purchases goods, and there should be difference
Between purchase price and standard price. Here again, we multiply the retention rate.
After goods receipt cost the purpose of this transfer is that we don’t want to allocate
cost of after goods receipt cost to a vehicle which is not sold yet.(but in SAP, standard cost is COGS and if we
include after goods receipt in COGS, SAP recognize as COGS.)

MMKI COST Flow Structure: (CBU)

Monthly Activity
 T Code / Programe Variant
ID Name:
MMKI
WIP calculation SAPKKA07
Training
Cost variance MMKI
RKKKS1N0
calculation Training
MMKI
Settlement RKO7CO88
Training
Update Order group ZD4PCOTC_10401
Cost Variance MMKI
ZD4PCOTC_10601
Transfer Training

 Update Standard Price in MM related to Production Order :

4 Z Programs are updated in order to auto maintain Standard prices from PO Items:

ZD4RPMM_10601 Goods Receipt IF(ex ship)

ZD4RPMM_10701 Stock transfer IF
ZD4RPMM_12201 Goods Receipt IF
ZD4RPMM_12301 Sequential Order Delivery Instruction IF

Above programs call function module ZD4PMM_STD_PRICE_UPDATE_PO to update Standard prices

from PO Item price.
CO-PC END to END Scenario Testing:

1. Create Production Order from Sales Order – Data updated from ALC in a form of Back flush
o Run ZD4PCOTC_10301 : Custom Table : ALC Actual Data ZD4PCOT_00001
o Upload ALC.tsv file from Local Folder and Execute .

Expected Result: System will generate list of Production Order created for each Sales Order ..
 2. Production Orders & Cost Collectors : ZD4PCOTC_00003 : Overhead Calculation

Prod. Order : 100000002373 (CBU )

3. WIP Calculation : Prod Order : 100000002373

Execute: ZD4PCOTC_00004
4. Create Selection List : ZD4PCOTC_11221

5. Costing Run : CK40N

o Executed Material Selection :

 6. Update Planned Price in Material Master -- ZD4PCOTC_00001
Frequency of Run: Yearly
It is required to run Cost Estimates for Current FY and next FY. For that it is necessary to update the planned price in Material Master via
price deletion.

 Planned Price 1 : Updates Price for Next FY

 Planned Price 2 : Updates for Current Year.

Price valuation of D4C1 and D4S

Priority D4C1 D4S

1 Purchasing Price Future Price
2 Previous Standard Cost Planned Price
3 N/A Purchasing Price
4 N/A Previous Standard Cost

Steps of deletion function.

1）First, it is necessary to finish costing run for current fiscal year. After that it is allowed to run the deletion function.
2）With a night batch function of Purchase price update, Clear Planned Price1
3) After Previous Standard Cost , Planned Price1 is copied to Planned Price2
  Monthly Activities : Production Order Settlement - WIP Calculation

PO : 100000000032
Program : SAPKKA07 / T Code ZD4PCOTC_00004
 Variance Calculation : Production Cos (Lot)
 BW Reporting

BW reports will provide the following reports:

1. Production & Sales Planning

2. Manufacturing Cost Information - Cost Budget , Sales Budget