Product Costing IO Budgeting

Product Costing IO Budgeting

Internal order is going to be used for budgeting, collection of cost. Internal order will be used for control of Capital Expenditure, Advertisement cost, R & D expenses, Exhibition Cost, Manufacturing meet, Project etc.

During planning stage planned cost is estimated and once the planned cost is approved, funds equivalent to approved planned cost is prescribed as budget.
In case of unforeseen events, additional budget requirement due to for example Price rise in external activities will be updated as Supplementary Budget and similarly in case of reduction, budget can be reduced by updating Return.

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Product Costing Cost Estimation in SAP

Product Costing Cost Estimation In SAP

Cost Estimation

The price of the finished goods (FG) and semi-finished goods (SFG) manufactured is determined through Standard Cost estimate.  Standard cost is estimated based on the cost of input materials, planned cost of activities and overheads. It is the price at which the finished and semi-finished goods are valuated in finance. The standard cost once estimated is valid for a specific period interval.

A standard cost estimate is created at the end of the period and is valid for the entire next period. When the standard cost estimate for the respective material (FG & SFG) is released, the system updates the result of this estimate as standard price in ‘Accounting 1’ and ‘Costing 2’ view detail screen of the material master record. This price is then valid for valuation of material in financial accounting till next cost estimate is run. The materials are revaluated when the next standard cost estimate is released.

In this specific period interval, all the FG and SFG produced through production order or product cost collector are valued at the standard cost updated in the material master. This is termed as ‘Cost of goods manufactured’ (COGM).

Following are the important tools used in cost estimate.

Costing Variant
Cost Component Split
Costing Estimate with/without quantity structure
Costing Run/Price Update

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Product Costing in SAP

Product Costing In SAP

Product Costing Controlling

Product Cost Planning is a tool for setting standard prices of FG and SFG. The standard price is compared against the actual cost of production and any difference between the standard price and actual cost is recorded as variance by the system. It will also form the basis for valuation of FG and SFG inventories at the period and year end. It uses information from the Overhead Cost Planning to calculate costs such as labour, machine, or factory overhead.

Product Cost Controlling includes:

Overhead Cost Planning: It consists:

•    Planning of activity output quantity and activity prices for production cost center.
•    Overhead rate maintenance in overhead cost sheet for overhead prices.

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