Actual costing without the implementation of Material Ledger
This is the most important questions by any SAP Customer to have the actual costing, but without the implementation of Actual Costing Material Ledger components of SAP CO Module, As any SAP Customer don’t want to go into the complexity of Material Ledger, though it is the standard options of the Actual Costing by SAP,
Moreover the alternative to the above approach are as under;
By maintaining the SFG and FG with Moving Average Price:
In this approach the SFG and FG are maintained with moving average price, and the settlement of the production orders will be on a daily basis i.e. immediately after the goods receipt from the production order. (Before the sales or consumption of SFG/FG)
Pros:
- The production variance will be loaded on the inventory value directly and the stock value along with the MAP gets adjusted.
- The complexity of SAP Standard costing is also not there.
Cons:
- The production variance will be booked on the existing inventory if the stock is reduced after production and before settlement of orders. This result in abnormal high/low of the inventory value.
- Breakup of the standard cost is also not available for the SFG and FG
- Variance calculation and settlement of orders on a daily basis will be a cumbersome activity.
In which business scenario this approach is suitable:
- Processes where for each batch one production order being created
- Settlement of Production orders can be done on a daily or regular basis after completion of production. And before sales or consumption of SFG/FG
- Mostly in textile or fabric industry this processes would be suitable.
By Maintaining the SFG / FG with Standard Price:
In this approach the SFG/FG would be maintained with standard prices (As suggested by SAP best practice as well). However the standard costing of the SFG/FG would be carried out at the start of the current period or at the last day of the current period. This will ensure the impact of Moving Avg. price of Raw materials will be there in the latest standard cost of SFG/FG. Anyway the impact of change in conversion cost would not be that significant for monthly standard cost.
With this the available standard cost will be very close to the actual cost of the SFG/FG.
Pros:
- The production variance will be very minimum as the actual cost of production and the standard cost of production would be very close.
- Breakup of the standard cost for all the SFG/FG to the extent of different RM and different components of Conversion cost is available in the SAP system.
- The variance can be allocated to COPA for determining the actual cost at the product level.
Cons:
- The production variance will remain in the profit and loss account and it will neither inventorised nor factored in COGS.
In which business scenario this approach is suitable:
This approach is suitable for most of the SAP customers with manufacturing facility and actual costing requirements.
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