A six-month or yearly cost rollup is a job that is usually understood and carried out successfully at most companies. However, costing a new product during the year is also necessary, and this task can cause problems. One of the difficulties is the decision of whether to update the standard price of components.

If a new product contains all new components, a new standard price is needed for all components. However, what if some of the components already exist and are shared with other existing products? Changing the existing standard price for these components can lead to a planned variance on production orders for existing products.

R/3 provides standard functionality called transfer control, which allows transfer of existing component cost estimates to new product cost estimates. You can enter transfer control in the initial screen when a costing run is created with transaction code CK40N, as shown in Figure 1.

Figure 1

Costing run with transfer contro

Depending on the configuration of the costing variant entered when you create the costing run, transfer control may default into this screen. It may or may not be changeable.

How Transfer Control Defaults into Costing Runs

A costing run is used to create and process many cost estimates; it is a way of mass processing cost estimates. When creating a costing run, header information must first be entered, such as name (identifier) and date of the costing run, Controlling area, Company code, and other information, which applies to the whole costing run (Figure 1).

The costing variant is one of the values first required when creating a costing run. The parameters associated with the costing variant are shown in Figure 2. The costing variant is maintained using transaction OKKN in Customizing. The parameters include the Valuation Variant, which determines the strategy for finding the price of raw materials and activities, and Transfer Control, which determines the strategy for selecting existing cost estimates. The order of the three steps that comprise transfer control (previous, current, and future standard cost estimates) varies depending on whether your search is for a single plant or across plants. For more information, see the sidebar, "How Transfer Control Selects Cost Estimates."

Figure 2

Costing variant showing default transfer control

Figure 2 shows the Control tab for costing variant configuration (transaction OKKN), which indicates the transfer control that will be defaulted into the header information when creating a costing run. Figure 3 shows the Qty struct. tab of costing variant configuration, which controls whether transfer control can be changed when creating a costing run using the Transfr ctrl can be changed option. The field appears white if it can be changed, and if it can't be changed, it appears gray in the general data section of the costing run.

Figure 3

Costing variant showing transfer control change indicator

After the costing run header information is entered and saved, a screen similar to that shown in Figure 4 appears with a list of six steps that can be used to manage and monitor the costing run process. Here is a brief description of each step:

1. Selection selects the initial materials for which cost estimates will be created. Transfer control can be used to ignore materials that already have a cost estimate, depending on the status of the existing cost estimate. Any materials ignored due to transfer control strategy will not be included in the list of materials for which cost estimates will be created.
   
   
2. Structural explosion (Struct. explosion) explodes the bill of materials (BOM) for each of the materials selected in the previous step and includes these materials in the list of materials for which cost estimates will be created. Transfer control can be used to ignore materials that already have a cost estimate.
   
   
3. Costing creates standard cost estimates for all materials in the list generated during the previous two steps.
   
   
4. Analysis compares the proposed standard prices generated by the new standard cost estimates with existing standard prices.
   
   
5. Marking populates the Future standard cost estimate field of the Costing 2 tab (commonly referred to as "view") of each material master.
   
   
6. Release moves the information from the Future standard cost estimate to the Current standard cost estimate field of the Costing 2 view of each material master. Inventory is revalued and accounting documents generated.

Figure 4

The six steps used to manage and monitor the costing run process

During the Selection step of a costing run, the system checks whether a material cost estimate already exists for a material using transfer control criteria. If one exists, the material is not included the selection step. By clicking on the parameter icon of the Selection step of the costing run shown in Figure 2, the change parameters screen shown in Figure 5 appears.

Figure 5

Use the Always recalculate material check box to ignor

If a costing variant uses transfer control that cannot be changed (PC01, grayed out in Figure 1), the Always recalculate material check box in the change parameters screen (Figure 5) can be used to ignore transfer control. Cost estimates will be created automatically for all components of BOMs during the costing step of the costing run. At least this is what many people assume by reading the first paragraph of the F1 help text available on this indicator: "This indicator restricts the use of transfer control. If you select this indicator, the transfer control is ignored in the selection in the costing run. A cost estimate is created for all the materials that are selected in the costing run."

But the second paragraph is difficult to understand, and most people assume that this indicator allows transfer control to be ignored completely. This is not the case, and in certain cases transfer control becomes active again during the costing run, even with the indicator selected. Unless the outcome of a large costing run is closely monitored, the standard price of some of the components may not be updated, and this might go unnoticed.

The second paragraph is easier to understand if two parts are italicized: "If the quantity structure is determined for all the selected materials in the costing run, transfer control becomes active again. For materials that were determined via BOM explosion, the system looks for an existing cost estimate according to the transfer strategy." This paragraph indicates that materials determined in the costing run Struct. explosion step in Figure 4 are treated differently than materials determined in the Selection step.

A misleading situation can occur if material type FERT (finished goods) is entered in the costing run selection screen in Figure 5 with the Always recalculate material check box selected. All finished goods are selected in the Selection step of the costing run. However, transfer control now becomes active again. In the Struct. explosion step of the costing run, materials that are determined at lower levels of the BOMs are subject to transfer control. Existing cost estimates that can be identified according to the transfer strategy in Figure 6 (transaction CKC1) are in the costing run, and new cost estimates are not created.

Figure 6

Transfer strategy

In this situation, all materials that require new cost estimates should be entered in the costing run Selection step, with the Always recalculate material check box selected. Several methods to enter all required materials can be used:

1. Manually enter all BOM components and plants in the Selection step of the costing run. This ensures all required materials are chosen in the Selection step without transfer control activated. No materials are to be identified in the Struct. explosion step of the costing run. Disadvantages with this option include identifying all materials in the BOM and the work required to manually enter the materials in the Selection step.
   
   
2. Enter material types FERT (finished goods), HALB (sub-assemblies), and ROH (raw materials) in the costing run selection screen in Figure 5. This ensures that all materials in BOMs in the plant are chosen in the Selection step. This option works when carrying out a major costing run of all materials in a plant. However, when costing a single BOM, this option does not work.
   
   
3. Leave all fields in the selection screen in Figure 5 blank except for Plant. This has a similar effect as option 1. The difference is that materials both in and not in BOMs in the plant are chosen. This may lead to many costing run messages, as materials not in BOMs that do not require cost estimates are included in the costing run.
   
   
4. Allow the user to change or delete the transfer control in Figure 1 in the Selection step of the costing run. This is the simplest option. However, it depends on company costing policy. For instance, it may be company policy that no existing cost estimates are to be recreated in between major costing runs. In this case, transfer control may be configured as not changeable. Note that with the transfer control field blank, there is no need to select the Always recalculate material check box.

Let's follow an example of how the transfer control becomes active during the Struct. explosion step of a costing run, even though the Always recalculate material check box is selected in the Selection step. Figure 7 shows the costing view of a semi-finished good, indicating there is no marked future cost estimate, no current released cost estimate, and no previously released cost estimate with a start date within the current fiscal period (12, 2004).

Figure 7

Costing view of material master

Let's create a costing run for a finished good that contains this semi-finished good. Figure 8 displays the costing run after the Selection step has been executed. The finished good has been selected and appears in the Material overview section of the costing run. During the Struct. explosion step, materials lower in the BOM structure that require new cost estimates are determined. Figure 9 displays the costing run after the Struct. explosion step. The semi-finished good was selected during the Struct. explosion step and the finished good was selected during the Selection step. New cost estimates are created for both of these materials during the Costing step of the costing run.

Figure 8

Costing run — Selection step executed

Figure 9

Transfer control does not locate a cost estimate

Now let's create and mark a cost estimate for the semi-finished good. The Costing 2 view in Figure 10 shows a cost estimate marked in period 12, 2004.

Figure 10

Costing 2 view

Remember, transfer control first searches for an existing released cost estimate with a start date within the current fiscal year. The Costing 2 view shown in Figure 10 indicates there is no presently released cost estimate. If unsuccessful, transfer control next searches for a marked cost estimate with a start date within the current fiscal period.

Since transfer control is active during the Struct. explosion step, it locates the marked cost estimate for the semi-finished good. The semi-finished good that was previously selected in Figure 9 is now not selected, so it does not appear in the Material overview list shown in Figure 11. Since the semi-finished good is now not selected, a new cost estimate will not be created.

Figure 11

Transfer control locates a cost estimate

Finally, in large costing runs, the effect of transfer control and the Always recalculate material check box may be difficult to analyze. I recommended that you carry out test costing runs on a small number of materials and BOMs to determine the existing and required behavior.

John Jordan

John Jordan is a freelance consultant specializing in product costing and assisting companies gain transparency of production costs resulting in increased efficiency and profitability. John has authored bestselling SAP PRESS books Product Cost Controlling with SAP and Production Variance Analysis in SAP Controlling.

You may contact the author at jjordan@erpcorp.com.

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