Wednesday, October 5, 2011

Simple Overview of Product Costing

SAP Product Costing deals with Plan Costing + Actual Costing of Finish products or Services.
CO comprises Product Costing + cost accounting integrated with FI.

It uses Integrated Cost Accounting.

Product costing also has 2 phases depending on the Mfg Scenarios.

If you are a normal mfg comp, making goods to stock & sale, you have to first do planning of the costs of products initially as a STD COST of a product. This is used in many phases in SAP CO accounting.

In simple terms, you cost a product by different methods depending on different LIFE CYCLE phases of product. These are Development of new product. Growth stage by modifying it. Mature stage (mass prod). Decline Retirement of that product from Mfg+Mktng)
The whole CO process starts with these PLANNED costs of products & ends with totaling the STD Costs for Actual Production.

This is a simple STD cost Accounting system, in which the end result is calculating Variance bet Planned & Actual & analyzing those for further corrective actions.

Product costing is well integrated to FI, but only where overhead cost accounting is used.  Otherwise normally it used only for settlement. All these actual costs of Prod are finally settled/offset to FI or Profitability segments. SAP CO is a very vast & complicated module of all.  It needs deep understanding of the subject.

Product Costing
Identified Need: You need to accurately determine the costs incurred in producing the goods and services that your company provides.

Business Process to meet that Need: Product Costing
Product Costing helps a company know the costs incurred by its products in order to successfully manage its product portfolio. The product cost accounting business process calculates cost of goods manufactured (COGM) or cost of goods sold (COGS) broken down by each step of the production process.

How Do I Implement this Process with SAP Solutions?
mySAP ERP (Product Cost Controlling, CO-PC) enables a company to determine the costs incurred to make its products or to provide its services. It uses cost information gathered about the product automatically in other SAP applications (e.g., using the bills of material (BOMs) and routings in Production Planning).

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