Costing Lot size of material in Product costing

[former_member184737]

Hi All,

       We are using Product costing to calculate the price for our in house produced materials based on master data values. Our product price is too low as well as using less cycle time to produce the material. The problem we are facing here is, while we running product costing, system doesn't calculate Activities cost (setup/machine/labor). We understood that it's because of low cycle time as well as the calculated activity cost  is very minimal ( like 0.0000345). Since, we are maintaining only 2 decimal places for currency unit. so, system didn't display with any value. If we are increase the costing lot size, then setup activity cost may be zero and both machine and labor cost will be calculate as minimal. For example, one FERT and 3 stages of HALB (HALB1, HALB2, HALB3) and ROH are used. We maintained proper BOM as well as routing. When we calculate the price for HALB1, activities cost are zero. This may be used as a component of next stage HALB2. So their price also not calculated properly, because first stage HALB1 price was not included with activity price and so on for further upper level assembly materials. If we are maintaining costing lot size, based on our input, machine and labor activity cost will be calculate but setup activity cost become zero. How we can handle this scenario ( Low cost product with less cycle timing ) in product costing?

         We have 3 operations ( for an material Example, HALB1 ) which are using different work centers. Their setup time as well as lot size are totally different. In this case, how can i will give the product lot size for an material in material master for costing run?

Thanks

[Former Member]

Hello Sankar,

Did you solve your problem here?Coz we have the same problem.

costing run is shown below :

[Former Member]

Hello Sankar,

May I ask what Tcode did you maintained the 2 decimal places for currency unit?

Thanks,

[rajneesh_saxena]

Dear SKA

Mr. Choi has given a very good and descriptive reply please go through carefully.

Further in short we can say that in order to avoid rounding issues in material costing we should take as big quantity in costing lot size in costing 2 tab as we can. Ideally Costing lot size, BOM base quantity and Routing base quantity should be same. In this way we can avoid the above situation.

In your case you consider your order size also, if it is big enough to calculate setup time also along with other activities, you can consider that at all places or else which is the maximum possible quantity you should use.

Hope the problem will be solved.

Regards

Rajneesh Saxena

[Former Member]

Hi..

To use the lot size in the costing view of the highest material master record,

You should enter Always pass on lot size in Pass On Lot Size of qty struct tab of costing variant.

Refer to below Pass On Lot Size description.

Pass On Lot Size

Controls whether the system determines the costing lot size using the lot
size of the highest material in the BOM and the input quantities of the
components.

Use

1) Do not pass on lot size

If this indicator is not selected, the materials further down in the
structure are costed in accordance with the lot size in the costing view of the
material master record. When the materials in the next-highest costing level are
costed, the costing results of the semifinished materials are converted to the
lot size of the finished material to calculate the material costs for the
finished product.

2) Pass on lot size only with individual requirement

In the MRP view of the material master record, you can specify that a
material is planned as an individual requirement. If such a material is added to
another material, costing uses the lot size of the highest material.

3) Always pass on lot size

Here, the costs for all the materials in a multi-level BOM are calculated
using the costing lot size of the highest material. This function is used
principally in sales order costing.

If you are costing sales orders
using product
costing for a material with a multilevel BOM that is produced in-house,
choose 2) or 3). For those individual requirements materials,
from a business management point of view it is recommended that the order lot
size be used when costing the material components going into the finished
product. On the other hand, materials subject to collective requirements are
generally costed using the costing lot size in the material master record.

If you want to pass on the order lot size to only the semifinished products
controlled by individual requirements, enter By individual requirement
only. The costing procedure is as follows:

• The costs for materials from collective requirements are calculated using
  the costing lot sizes in the costing views of the corresponding material master
  records, and are converted when used in the higher-level material.

• The costs for materials from individual requirements are calculated using a
  lot size determined dynamically for every production level, based on the order
  quantity entered in the sales order item.

If you want to pass on the order lot size to all the semifinished products,

enter Always pass on lot size. The costing procedure is as follows:

The costing lot size is determined dynamically based on the order quantity.

This involves the following steps:

• Calculation of the costs of the finished product based on the order
  quantity

• Calculation of the costs of the materials in the next-lowest low-level code,
  based on the consumption quantities in the BOM items for the finished product,
  converted to the order quantity of the finshed product

• Calculation of the costs of the materials in the next-lowest low-level code,
  based on the consumption quantities in the BOM items for the semifinished
  products, using the quantities calculated for the higher-level low-level
  code

Dependencies

In Product Cost by Sales Order, the setting of this indicator should agree

with the value of the indicator Transfer only with collective requirements
material in the transfer strategy.

• If you pass on the costing lot size for individual requirements materials
  only (entry 1), you should set the indicator Transfer only with
  collective requirements material in the transfer strategy.

• If you always pass on the costing lot size (entry 2), you should not
  define a transfer strategy for the sales order cost estimate, so that the
  correct fixed costs portion is shown.

If the costing variant is used in a costing run, this indicator should be
blank.