After production order settlement, where does the cost go?

[Former Member]

Dear Experts,

I understand after we did the "order settlement" for production order, the cost will be settled to material manufactured from the said production order. Say, the total cost is $10,000 to produce 1000 units of finished goods (FG), then the cost settled to each individual FG at $10 each, am I right? Where can I see the settled cost in the material master?..

I checked in the cost center report, S_ALR_87013611, I can see the cost Credited from "production" cost center with a breakdown in settlement cost element such as machine hour, setup and personnel hour. I understand the other side of Debit was to the production order, and only after order settlement, I'm not sure which cost center will be Debited.

That would be the CO side, how about the FI, would there be any cost posted to the GL side after production order settlement to the material?

Please advise..

regards,

Abraham

[former_member588855 · Accepted solution]

Dear Abraham,

After settlement of production you can urself check the accounting document created and entries generated.

Double click on the settlement line item. Click on document on the header and then to Accouting document.

if your FG is managed on price indicator S. The entry will be

FG-Price Diff

To COGM/COGP

or vice versa as the case may be.

Regards,

Divraj

[Former Member · Accepted solution]

Hi Divraj,

Can you show me what's the menu path to get the information as mentioned?

regards,

Abraham

[former_member588855 · Accepted solution]

After Settlement of production order.

In CO03 GO TO> Cost > Analysis . Select Layout Sap Cost Trend.

Below the report you will settlement line item. Double click on Actual Costs.

Line item of settlement entry will appear. Double click again on the amount.

Settlement Doc will appear. Click on Accouting documents tab displayed on the screen.

Regards,

Divraj

[Former Member · Accepted solution]

Hi Divraj,

I followed your steps until I got the screen with a title "Process Order Confirmation Display : Actual Data". By the way, I'm actually using Process Order not Production order, therefore, I used COR3 instead of CO03.

But at the screen, I couldn't see any Accounting tab, it's just a single screen without tab.

Am I at right place?

Regards,

Abraham

[Former Member · Accepted solution]

Abraham,

Once u carry out the settlement, on the top of the screen in which it shows, settlement executed = 1 (or more) , u can find a detail list icon (left to information icon). click on that and it will take u to a screen which gives senders and receivers line items. On the top u have accounting documents button.

By the way, i think there is a slight difference in ur understanding. Once the settlement happens, the cost is not settled to material the way u mentioned. Material cost is still dependent on the standard cost in the material master tab. And material is debited not when settlement is done, but when confirmation of goods receipt is done. (before settlement)

Now what happens on settlement is that, system calculates the variance (difference between total input and total output (std cost of mat) ) and it will post the difference to price difference account (as explained above). That is the accounting part of it.

Best Regards

Vimal

[Former Member · Accepted solution]

Hi Vimal,

Thanks for replying..

I tried your steps, and I saw the buttton called "Detailed List of Acrrual Data for FI". If that's the button you mentioned, it showed nothing, I guess it has no cost variance as you explained.

By the way, do you have a link that explain about the CO and FI flow from the time production/process order issued to the time of settlement?

If you don't have one, could you elaborate on the flow concept by giving some examples? I truly appreciate that..

regards,

Abraham

[Former Member · Accepted solution]

Hi Abraham,

It's not the button i mentioned. I was just trying to take u to the accounting document from the settlement screen. well just drill down the settlement screen and u'll get it. No big deal.

But more important is the concept. I'll share my understanding here. (cost by production order)

Any value that flow into controlling module should have a cost object. Here production order is the cost object.

First u create a production order (cost object) for say 1 unit of X with a std price of Rs. 10

Std price comes frm material master as a result of std cost estimate

U start production - Raw materials are consumed - 2 qty x Rs.3.

Entry RM Consumption Dr Rs. 6 Inventory Cr Rs.6 (Prod order is debited with Rs.6)

Activity (Let's say machine hours - 3 Hrs x Rs.2) According to the routing it was 2 hrs but actual production took 3 hrs.

Entry - None - But production order is debited with Rs. 6.

When production is complete for 1 qty of X, entry flows

Finished Goods Dr Rs.10 Change in Stock Cr. Rs.10 (Production order is credited with Rs.100

Abraham, now visualise both sides of the production order. It will have debit of Rs.12 and credit of Rs.10.

Now accountant sees the production order and confirms the values are ok and puts the status of TECO to the order. which means the order is technically complete.

Now when u run the order settlement, this production order is picked up by the system (due to it's status). System sees difference between debit and credit of Rs 2.

So it cedits the production order with Rs. 2. Now both debit and credit of production order is equal (Rs.12)

Entry Price diff A/c Rs,2 Change is stock A/c Rs.2

Now this rs. 2 is settled to COPA. It does not flow to material.

Reason: in a std costing system materials are valued at standard cost and

Hope this helps. Do revert in case of doubts.

Best Regards

Vimal

[Former Member · Accepted solution]

Hey,

To finish the last sentence, in a std costing system, sfg and fg are valuated at stanard price over a period of time and variances from standards are separately analysed by the accountants/ management . Hence the variance of each production orders are not added to material when settlement is done.

Best regards

Vimal

[Former Member · Accepted solution]

Thank you so much Vimal for spending time to explain.

I got a better picture now.. except, why the settlement rule at the order settlement put Material as Receiver, and yet at the end, it didn't go there.

From your explanation, I wonder where's the other leg of entry corresponding to the entry to Production Order? I could see the complete entries for FI but as for CO, it seems like something hanging there as entry only made to production order.

by the way, why we need to settle the cost to COPA? Is it neccessary to use COPA for production?

regards,

Abraham

[Former Member · Accepted solution]

Hi Abraham,

I understood ur doubt, . All i can point is that, if put the price control as V (Moving average) the variances of a production order will go and settle to material. May be to give that option the sys is taking up MAT as default receiver. (not very sure abt this)

COPA is not a mandatory setting. It's purely an analysis tool. If you dnt settle the variance to COPA, u dnt get the actual values in COPA for analysis. But as far as i understand, the other leg of Prod order goes to COPA only.

Best Regards

Vimal

[Former Member]

I see.. Maybe let me explore further from what you've explained to me..

Anyway, thanks a lot Vimal.