Material To be Valuated in Project System

[former_member323706]

Hi All,

We are implementing PS,MM,SD,FI &CO for a companay which works essentially on engineer to order scenario and using vlauated projec stock & actvity account assigned networks

Inhouse production is through typical assembly processing process - Where input & output materials are transferred through BOM PS Transfer from WBS BOM.

Input materials are issued to activity; work performed by work centers are entered by confirmation; at completion of work out put materials is 'Received from activity'. Both material issue and receipt are done wrt reservation.

When this is done, as per standard process, the cost addition (and hence value addition) is to activity and thereby to WBS element. The output material is not valuated. All the cost(or values) become project value which will reflect in WIP calculation. WIP is calculated as month end process.

At month end if the company wants to know the current asset from project and relevant stocks:

= WIP of project + Inventory value of the mmaterials.

Pl. note that only input materials i.e. raw materials and Bought out materials will have inventory value; the output material will not have any value.

The process is alright and I think we are alos complying to Accounting stanadard for project system - directive from Institute of Chartered accounts - India.

This process was first aceeptable to customer; but now they say - the out put materials should be valuated. So that, when inventory value is taken - it is RM+BO and valuated semifinished +valuaed finished materials

One big reason they say is that they have to show inventory value to the Banks.

Now I need clarification in following points

1. How to valuate the out put material when working only with project system. (apart from using user exit )

2. If this is done, the project cost/WIP calculations will show ups amd downs - as goods receipt with valuated value will be with sign - this will reduced the cost. This will cause variuos problems - almost no standard SAP PS cost report will reflect the reality - WIP can not go up and down...This is illogical.

3. Have you faced similar situation in implementation - that - Banks can not be conviced about this PSway of WIP calculation? Taking into consideration that project implementation is in India - an experienced reply can be very helpful

Thanks and regards

A.Saravanan

[former_member220491 · Accepted solution]

Hi,

You have mentioned "Assembly Process" is followed in your client. If it is assembly process system defaultly activates GR Non-valuataed tick in Production order goods receipt tab, this means no FI document generates in this case until delivery and invoice is done from SD.

for the above point i am assuming " Assembly process" means you are creating projects automatically from SD, am i right.

Now if you want the FG(finished product) to be valuated then assign the material components to the project directly and run MRP and carryout subsequent production/procurement process, this all willl be account assigned to project only. when u run RA also you will not face any problem.

The GR non-valuated is controlled through the requirement class settings., Requirement class is assigned to requirement type and requirement type is determined from the MM strategy , MRP Type or setting can be done in SD " determination of requirement type". why i am mentioning about this point is you change these settings and check whether the result you are expenting will attain.

But for sure GR-Non valuated cannot be avoided in Assembly process, as in production order settlement rule will be defaulted to WBS. If GR to be valuated then assign the materials to project directly. Or follow assembly process till Planed order creation and create Production order manually with account assigned to WBS using CO10 transaction code, in this case FG settlement rule will be created as Mateial MTL.

Hope this helps you

thanks

regards

kishore

[former_member323706 · Accepted solution]

Thanks Kishore!

A Clarification on the process:

We are not creating project automatically from sales order - that is generally done for Make-to-order Scenario. This is Engineer to order. So, Here a project spefic BOM is created and this is assigned to activities - in SAP a network is an order type like production order - hence here an actvity functions like a production order - Released activity is athorisation to execute that activity which can be production as in this case.

Thanks and regards

A.Saravanan

[former_member388328 · Accepted solution]

Hi,

Your requirement is standard process in Product cost controlling. As far as PS is concerned there are differnet ways to achieve it. One simple process is once assembly is finished at activity level. Please do goods issue from activity to WBS as special stock. Now at WBS it will be a valuated finished stock. Or else you can use multiple RA key one at the activity and other at the project level. Please let me know if any issues.

Thanking you

Vengaiah Chowdary

[former_member323706 · Accepted solution]

Hi

Thank you for the reply.

Now how to assign RA key to activity? Is it in automatic rule generation configuration for network? Even there what we assign will be for network - that means all the activities.

Our scenario is as follows:

1. External activity - For subcontracting: One activity cost = cost of mfg of output material

2.Internal activity -

a. One activity cost = cost of mfg of output material

b. one network cost = cost of mfg of output material

c. More than one activities cost = cost of mfg of output material

3. One WBS element cost = cost of mfg of output material

Looking forward to your reply.

Thanks and regards

A.Saravanan

[pradeep_mahamuni · Accepted solution]

Dear Vengaiah,

Cab you please eloborate the the process you are suggesting. I am also facing the same issue faced by Saravanan.

You are saying to issue the finished material from Activity to WBS ? and use RA key for activity and WBS, I am not able to understand this.

How the finished material will be valuated and WIP will be calculated and how value will be flow to financial accounting ?

Please eloborate the solution in detail as I am not able to complete this process.

CC : Saravanan : If you have fount the solution please share.

Regards,

Pradeep Mahamuni

[former_member323706 · Accepted solution]

Dear Pradeep,

When we work with network/activity/wbs element, Finished material is assigned to activity with sign. This means GR can be done. Technically system treats lke by-product. This material will not be valuated with in put costs...since there is no logic...For our convention, one WBS element, one network or one activity can be used to book all related costs..but still GR will happen with valuation as per valuation variant in NW only. This is quite logical and correct.

So...customer wants to know the cost of manufacturing a complex project assembly..then process under one WBS element..cost accumuated at that WBS element is cost of mfg. I have kept such finihed material std price at Rs.1. (Ideally it should be '0'.). Meaning material will not valuated.

Now if customer wants to knwo the cost ...look at WBs element

If needed, you can do unit costing and update the value in a suitable field in material master.

Therefore, I have kept all the semifinished/finished material std price at Rs.1.

This way..std functions of PS like RA, costforecasting are work properly.

For WIP calculation, this is of standard method and WIP will be current asset of company..this will be acceptable to Banks...one concern I had..cross checked with a Banker.

Another issue was sub-contracting. In India during S/C..we have Delivery challan and legal requirement of excise. We developed a program integrating dc, excise challan, transfer posting, goods issue against reservation and mateials assigned in activity. For user it will appear as one transcation, and system will propmt/list appropriate excise challan No. based on dc no & material as input...(I hope i remember right).

Again here GR of seni/finished naterial was atRs.1. since Service cosst, matarial issue cost get booked at activty.

Thanks and regards

Saravanan.A

[pradeep_mahamuni · Accepted solution]

Thanks Saravanan for sharing the information.

I am also on the same track. We are maintaing the std price of semi-finished and finished material as 1 Rs and collecting the cost at WBS level. So GR will happen as a price 0  as per the valuation varient.

You daid that std RA will calculate the WIP. for the same which RA method you are using ?

Is it method 13 ? I tried it it is executing correctly.

Please share you concern.

Regards,

Pradeep Mahamuni