i am new to SAP PS. Can anyone tell me when to use Revenue-based with profit realization RA method vs Cost-based method? I have a scenario where we use Ps for ETO with production order and sales order.
It's depend on CO consultant how he has assume the business scenario in sap term like if production order marked as DLV then after RA execution system will calculate cost based on if production ord as marked DLV or other desired parameter.
RA is nothing but its process to compile cost like before selling what was the total cost and after selling what was the total cost of our product. so it will work based on what kind of parameter we have set in configuration. as define above.
Thanks for your reply. But all I am looking is some kind of layman's explanation in what circumstances we use 01 - Results Analysis method and 02 - RA method.
There are many factors involved to decide on RA methods.
It is based on the business, client procedures, local laws and country,
In a nutshell, Revenue based RA uses actual and planned revenue for calculating percentage of completion (POC). Without revenue you cannot calculate other parameters like Work in progress (WIP), cost of sales (COS) etc..
Cost based RA uses actual and planned costs for calculating POC. Companies can show profit even without receiving any revenue in projects. This is not allowed in certain countries. Mostly this type of RA is used in professional services industries where you have costs incurred from services, personnel and travel.
In your case, since you are using ETO process, it is better to use revenue based RA. Your local country laws will decide whether to use 'with profit realization or without profit realization'.
Hope this helps.
Please let me know if you need detailed explanation.
In a nutshell, Mr. Srinivasa has provided you with a very good explanation of how RA works for both the methods.
In addition to that i would suggest you to refer SAP Help where there are more details that are provided and with examples. That should surely help you understand these concepts in a much better way.
You can very well come back and post specific queries.
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