Joint Product & By Product Costing

Joint & By Product Costing in SAP Visualization

Joint product costing & By product costing in SAP

Overview:

The costing processes have these variants for different types of costing we decide based on the business processes as which is the better process for the costing purpose.

What is Joint Product Costing:

Joint product costing is a process of costing we need to apply in the cases where there are more than one output gets generated from a production process, where we create the production order for the Main material but the Joint products are also produced as a part of the production cycle and the value of that joint product is also substantial in nature, as that joint product has also consumed the portion of raw materials and other production overheads.

In this scenario we just can’t load the total cost of production of raw materials and production overheads on only one main product.

The joint products also should share the total cost of production in some proportion with the main product.

This will give the proper costing of main products and all the joint products, the cost sharing ratio can vary depending on the types of joint products.

What is By product Costing:

By product costing is a process of costing by which we give the benefit of by product cost or value to the main product. The product generated from the production process will qualify for byproduct only if the market value is minimum or negligible as compared with the main product.

Total cost of production for the main product again will comprises of RM Cost and Production overheads, though the byproducts also consumes some of the raw materials and production overheads during the process of production, but unlike in joint product costing we cannot share the cost with byproduct as these byproducts are negligible in valuation.

Hence as per the globally accepted costing practices we give the credit of the by-product quantity with market value to the main product.

This will ensure the actual costing of the main product after the credit of the by-product and the by-product gets valued with the “net realizable value”

How to achieve these costing solutions in SAP

Joint Product Costing: In SAP Joint product costing is also known as Co Product Costing:

1. Maintenance in material master of the main product and Joint product we need to tick the Co Product indicator.

MM of Main Product: We need to set the Co Product indicator in the MRP 2 view of Material Master for main product.

[Image of Material Master Main Product]

2. MM of Joint Product: We need to set the Co Product indicator in the MRP 2 view of Material Master for Joint products.

3. Maintenance of joint product apportionment structure in the main product.

Apport.Str of Main Product and same structure we need to maintain in the joint products as well.

For sharing the cost we have maintained the ratio between main and joint products as 7:3

4. Maintenance of the BOM for the main product and define the Joint product as outcome in the BOM of the Main product.

BOM of Main Product

Joint product output is 100 quantity with a production lot of 100 main product.

5. Run the cost estimate for the main product:

Costing of Main Product

Total Cost of Main product production : 12,500*70%=8,750/-

Per unit cost of joint product is : 8750 / 100 = 87.50

[Image of Costing Main Product]

6. Run the cost estimate for the joint product:

Costing of Joint Product

Total Cost of Main product production : 12,500*30%=3,750/-

Per unit cost of joint product is : 3750 / 100 = 37.50

7. Release the costing for Main and Joint product together

Cost Release for both

Check material masters for Main and Joint products

8. MM of Main Product after costing release, it is appearing as the standard price of main product.

9. MM of Joint Product after costing

Conclusion:

The joint products are such products for them we don’t need to maintain any BOM for that specific joint products, however it takes the cost and BOM from the Main Products.

This is a special costing treatment for the Joint Products and this type of scenarios should only be treated with the concepts of Joint product costing only.

Though there are some configuration are involved in this whole exercise we can help to do the same as per your requirements