Sometimes organizations implement only Financial Accounting (FI), Managerial Accounting (CO), and materials management (MM) processes in their SAP systems. They continue using non-SAP systems for production planning and shop floor control. As a result, manufacturing transactions for goods issued and goods received are performed in the non-SAP system. When production planning is not implemented in an SAP system, quantity structure master data is not available in the SAP system. That includes bills of materials (BOMs) and routings, the valuation of which is critical for planning manufacturing costs. Also, transactions relevant to manufacturing costs, including goods issues, confirmations, and goods receipts, run in the non-SAP system. Because of a lack of this data in the SAP system, it is not possible to control manufacturing costs using normal manufacturing orders. In this situation, CO production order functionality provides features that can be used to implement a manufacturing cost control solution. A CO production order allows you to post both plan and actual costs. Plan costs on the CO production order are posted using unit costing functionality. Actual costs are posted using goods issues, activity postings, and overhead costs. Likewise, goods receipts are posted to the CO production order. As both plan and actual costs are posted on a CO production order, you can run a work-in-process (WIP) calculation and posting, variance calculation, and order settlement similar to the manufacturing orders using BOM and routing data. Another major benefit of CO production order functionality is that it enables you to update CO, general ledger (G/L), and profitability analysis (CO-PA) data.

Note You cannot calculate WIP at target cost and calculate scrap variances. Generally, WIP is calculated at actual costs. Therefore, this limitation of a CO production order does not reduce its utility.

Set Up CO Production Orders

Now I explain how to set up CO production orders. I also discuss interfaces with a non-SAP system to transfer transactions to CO production orders. In my explanation of the configuration settings specific to CO production orders, I assume that you understand the general manufacturing cost control process in the SAP system. I discuss specific configuration steps you need to carry out to enable product costing by CO production orders. For the scenario I describe, there are two prerequisites:

• The standard price or moving average price is maintained in the material masters.
• Activity types and rates are maintained.

Define a CO Production Order Type

An SAP system comes with a preconfigured order type CP01 for CO production orders. You can use it as a reference for creating your customer-specific order type. Figure 1 shows details of the configuration for the standard CO production order type. To define CO Production order types follow menu path IMG > Controlling > Product Cost Controlling > Cost Object Controlling > Product Cost by Order > Manufacturing Orders > Check Order Types. You need to assign a settlement profile and planning profile in the CO production order type configuration that meets business requirements of your organization. Other parameters in the order type can remain the same. For this article, I use the SAP standard settlement profile PP01 and planning profile 000002. Configuration for settlement profile is the same for other manufacturing order types. In the next section, I discuss configuration for a planning profile.

Planning Profile

Configuration of a planning profile is important because the planning profile specifies a costing variant that is used to determine material prices, activity rates, and overhead costs for the plan cost calculation on a CO production order. To configure the planning profile, follow menu path IMG > Controlling > Product Cost Controlling > Cost Object Controlling > Product Cost by Order > Manufacturing Orders > Define Planning Profiles for CO Production Orders. Figure 2 shows an SAP standard planning profile. SAP standard costing variant PC01 is assigned to this planning profile. Other fields displayed on the planning profile are not relevant for CO production order discussion. Now I review the settings of the costing variant PC01 to help you decide if you can use it as it is or if you need to set up a customer-specific costing variant.  

Costing Variant 

  The SAP standard costing variant PC01 is used to calculate plan costs for CO production orders. To configure the plan costing variant, follow menu path IMG > Controlling > Product Cost Controlling > Cost Object Controlling > Product Cost by Order > Manufacturing Orders > Check Costing Variants for CO Production Orders. You can define your costing variant either by copying SAP’s defined costing variant and changing it to meet your requirements or defining a new variant from scratch. I recommend copying the PC01 costing variant to define your own costing variant. To create a costing variant using a copy of the SAP standard costing variant, click the copy icon (Figure 3). After you copy the costing variant, change the settings to meet your business requirements. Figure 4 shows configuration details of the copied costing variant. You select the costing type and the valuation variant from the drop-down list of options for each of these elements. The valuation variant defines how prices for cost calculation are determined for resources such as materials and activity types. You can also specify rules for overhead cost calculation using the overhead costing sheet. Configuration of the valuation variant is the same as the valuation variant for other manufacturing order types. Note that for defining a costing type for CO production order plan costs, you must use the costing type 09 Unit cost estimate ProdOrder. Figure 5 shows the next tab of the costing variant, Assignments. Note that you cannot configure anything under the Assignments tab. No configuration is available under the next tab, Misc., either. To demonstrate the CO production business process, I have used SAP standard costing variant PC01.

Actual Costing Variant

In contrast to other manufacturing orders, you do not specify a costing variant for the actual costs for CO production orders. Actual material consumption is valuated using price control on the material, and actual activities consumed are valuated with the plan price of the period. The overhead costing sheet, if assigned in the plan valuation variant, is also defaulted in the CO production order master data for actual costing.

Define Controlling Relevant Parameters for CO Production

Having defined the costing variant, planning profile, and the order type for the CO production order, I now show you how to assign this order type to the manufacturing plant and specify plant-specific controlling parameters for the CO production order type. Follow menu path IMG > Controlling > Product Cost Controlling > Cost Object Controlling > Product Cost by Order > Manufacturing Orders > Define Cost-Accounting Relevant Default Values for Order types and Plants. Use the New Entries button (Figure 6) to assign a CO production order type that you defined earlier to the plant and specify plant-specific parameters. In the assignment screen (Figure 7), you can specify only a Result Analysis key for a CO production order type. The default rule PP1 (full settlement) is mandatory for CO production orders. I assign the SAP standard results analysis key 000002 (WIP Calculation at Actual Costs) for the CO production order type. Configuration for WIP for a CO production order is the same as for other manufacturing orders.  

Variance Calculation

  Because the standard cost is not available, the target cost used for variance calculation is the plan cost. Target cost version 0 does not allow the plan cost to be used as a target cost. Therefore, I define a target cost version 1 for the variance calculation. Figure 8 shows the settings for the target cost version 1. Other configuration for variance calculation is the same as for other manufacturing orders. This article assumes you are familiar with configuration for the SAP General Ledger posting of variance. Having defined the necessary configuration for using CO production orders, I now execute a manufacturing process using a CO production order. I start by creating a CO production order.

Create a CO Production Order

To create a CO production order, use transaction code KKF1 or follow menu path Accounting > Controlling > Product Cost Controlling > Cost Object Controlling > Product Cost by Order > Order > CO Production Order. In Figure 9, the Prd-end closing tab shows period-end parameters for a CO production order. Similar to other manufacturing orders, the Results Analysis Key defaults from the order type and the Variance Key from the plant. The Costing Sheet defaults from the costing variant specified in the planning profile.

Plan Costs on the CO Production Order

Plan costs on a CO production order are calculated using unit costing. Unit costing does not use BOM or routings for cost calculation. Instead, you use a spreadsheet to upload resources and quantities needed to manufacture a product planned for a CO production order. The resources can be materials or activity types. When uploading, the system accesses material prices and activity prices for valuation based on the settings in valuation variant and automatically calculates the plan costs. You can find more information on unit costing in SAP help documentation using this link. To calculate and post the plan costs on a CO production order, use transaction code KKF4 or follow menu path Accounting > Controlling > Product Cost Controlling > Cost Object Controlling > Product Cost by Order > Planning > CO Production Order > Create/Change Plan Costs. In the initial screen for this transaction (Figure 10), enter the plan lot size and the costing variant for plan cost. In the next screen, enter the resource details, including resource category, identifier, and quantity. The system valuates each row and calculates the total plan cost.  Figure 11 displays plan cost thus entered. After confirming the values save the cost by clicking the save icon.  

Plan Overhead

  If an overhead costing sheet is assigned to the CO production order, the system calculates overhead cost and creates a new item for the overhead cost in unit costing. Use of this functionality is the same as used in production or process orders.

Actual Costs on CO Production Order

Similar to other manufacturing orders, types of actual costs posted on CO production orders are direct material costs, direct labor costs, and manufacturing overheads. I discuss how these costs are posted on CO production orders. In many situations in which a CO production order needs to be implemented, these transactions are posted in a non-SAP shop-floor control system and therefore need to be interfaced with the SAP system. I now discuss methods of posting of each type of actual cost on the CO production order. Direct material costs: You post actual material costs on a CO production order using transaction code MB1A. Follow menu path Logistics > Materials Management > Inventory Management > Goods Movement > MB1A - Goods Issue > MB1A - Goods Issue. Direct labor costs: You can post direct labor on CO production order using transaction code KB21N. Follow menu path Accounting > Controlling > Product Cost Controlling > Cost Object Controlling > Product Cost by Order > Actual Postings > Activity and business process allocation > Enter. Actual overhead: If you have assigned a costing sheet in the CO production order, you can use actual overhead cost calculation functionality transaction code KGI2 (CO43 for collective processing). Finished goods receipt: As for other manufacturing orders, you post goods receipt for a CO production order using transaction code MB31. I assume that you are already familiar with the process of posting actual costs. Month-end processing: WIP calculation, variance calculation, and order settlement processes are similar to other manufacturing orders and use the same transaction codes. The only difference is that, in variance calculation, you use target cost version 1 instead of version 0. Order status management is similar, too. Although I do not discuss these topics, I include the screen prints of plan, actual cost comparison, and variance postings for the sample CO production order for you to use as a reference. Figure 12 shows plan, target, and actual cost comparison for the sample CO production order. As per the definition of the target cost version 1, target costs are equal to the plan costs. Also, as standard cost is not used to determine the target cost, variance total is not equal to the balance on the order. Figure 13 is the order settlement details for the order. The system posts the balance on the CO production order to the SAP General Ledger accounts.

Interface with a Legacy Production Planning System

You can build an interface to create plan costs on a CO production order. Click here for useful information on building an interface to post goods movements that could be used to post goods issues and goods receipts for a CO production order. SAP Notes 521427 and 441872 provide updated information on this topic. You can use a BAPI_ACC_ACTIVITY_ALLOC_POST to upload actual activity consumption for a CO production order.