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SAP Product Cost Controlling: Complete Book Guide

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SAP Product Cost Controlling helps organizations plan, calculate, monitor, and analyze manufacturing costs. In SAP S/4HANA, Product Cost Controlling integrates Product Cost Planning, Cost Object Controlling, Material Ledger, and Actual Costing to improve cost transparency and profitability.

This guide introduces the 20 chapters of Product Cost Controlling with SAP, covering costing master data, standard cost estimates, production orders, work in process (WIP), variance calculation, settlement, and reporting.

Explore the chapter summaries and SAP screenshots below to understand the end-to-end product costing process, including foundational concepts that remain relevant to SAP S/4HANA.

Since publishing Product Cost Controlling with SAP, I've also authored Product Cost Controlling with SAP S/4HANA, which explores product costing in the S/4HANA environment. Both books are available from SAP PRESS and provide guidance for SAP professionals working with product cost planning, manufacturing cost analysis, and controlling.

  • Walk through SAP product costing from end to end with easy-to-understand graphics
  • Initial cost planning, cost estimates, production order costing, reporting, and actual costing

  

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Table of Contents by Chapter

 
PART I: Integrated Planning

We first create sales plan quantities in Profitability Analysis CO-PA or sales and operations planning S&OP. We convert these quantities into a production plan that is transferred to demand management. 

SAP Integrated Business Planning (SAP IBP) for Supply Chain provides modern planning capabilities, including demand, inventory, and supply planning. It complements or replaces certain traditional SAP ERP sales and operations planning (S&OP) processes, depending on the organization's system landscape and planning requirements.

Long-term planning determines work center loads and purchasing requirements. You transfer activity quantities to Cost Center Accounting CCA, where plan activity prices are determined.

Chapter 1 Integrated Planning

In Figure 1, follow a best-practice planning scenario, including S&OP, & long-term planning runs.


Figure 1 : Sales and Operations Planning

The third edition of Product Cost Controlling with SAP includes examples of flexible planning and uploading planning data from Microsoft Excel to Cost Center Accounting (CCA).

PART II: Product Cost Planning

You plan procurement and production costs, and set prices for materials and services.

You determine the purchase price for purchased items, and the manufacturing cost for assemblies.

The following master data and configuration chapters cover how to setup and create cost estimates.

Master Data

Master data consists of relatively stable information used across business processes, including product cost planning. The following three chapters examine master data and configuration settings used in SAP Product Cost Controlling, with practical examples covering Controlling, Material Master, and Logistics master data.

Chapter 2 Controlling Master Data

Chapter 2 introduces essential SAP Controlling (CO) master data, including cost elements, cost centers, activity types, and statistical key figures. In SAP S/4HANA, cost elements are integrated with G/L accounts, providing a unified foundation for Financial Accounting and Controlling, as illustrated in Figure 2.


 Figure 2: Maintain GL Accounts Centrally

Learn about COS cost elements, how to swap cost center standard hierarchy, & activity type groups.

Chapter 3 Material Master Data

As shown in Figure 3, we examine fields in material master views, including Material Requirements Planning (MRP), Controlling (CO), and Accounting.

The Material Master contains essential settings for SAP Product Cost Controlling, including price control, material valuation, and material price determination. To understand how price control S and V interact with price determination 2 and 3, see our guide to Material Price Determination in SAP S/4HANA Material Ledger.


 Figure 3: Change MRP2 View

We also examine:

 Chapter 4 Logistics Master Data

Chapter 4 examines logistics master data used in SAP Product Cost Controlling, including bills of materials (BOMs), routings, product cost collectors, and purchasing information records. These master data objects help determine material quantities, production activities, and procurement costs used in product cost estimates, as illustrated in Figure 4.


Figure 4 Example BOM and Routing

Topics include recursive BOMs, product cost collector lists, plant-specific purchasing info records, & source lists.

Configuration

SAP Product Cost Controlling configuration determines how product costs are planned, calculated, allocated, and analyzed. Configuration settings are typically established during implementation and maintained through controlled change processes to support consistent costing and reporting. The following four chapters introduce key configuration components used in product costing.

 

Chapter 5 Costing Sheets

Chapter 5 explains how costing sheets are used to calculate and allocate overhead costs in SAP Product Cost Controlling. Costing sheets define calculation bases, overhead rates, and credits to assign indirect costs to products and cost objects, as illustrated in Figure 5.


 Figure 5 Costing Sheet

This chapter includes:

  • Dependency
  • Overhead groups and keys
  • Default costing sheets
  • Quantity-based overhead

 

Chapter 6 Cost Components

Chapter 6 explains how cost component structures organize product costs into categories such as raw materials, labor, and overhead. Cost component splits provide visibility into the composition of product costs and support cost estimates, inventory valuation, and cost analysis, as illustrated in Figure 6.


 Figure 6: Cost Components

Discover how cost component groups improve reporting with cost components in cost estimate lists.

Chapter 7 Costing Variant Components

Chapter 7 explains how costing variants control the creation of product cost estimates in SAP Product Cost Controlling. A costing variant combines configuration settings that determine the costing type, valuation strategy, costing dates, quantity structure, and transfer of existing cost estimates.

  • Costing Type
  • Valuation Variant
  • Date Control
  • Quantity Structure Control
  • Transfer Control
  • Reference Variant

Transaction OKKN displays the costing variant configuration, as illustrated in Figure 7.



Figure 7 Standard Costing Variant PPC1

The valuation variant determines how material and activity prices are selected during cost estimation, including the treatment of purchasing prices and delivery costs for externally procured materials.



 

 

 

 

 

 

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Chapter 8 Costing Variant Tabs

Chapter 8 examines the configuration tabs of an SAP costing variant and how their settings control product cost estimates. These tabs define costing behavior, quantity structure determination, additive costs, cost estimate updates, and other settings used in Product Cost Planning.

  • Control
  • Quantity Structure
  • Additive Costs
  • Update
  • Assignments
  • Miscellaneous

Chapter 9 Standard Cost Estimates

Chapter 9 explains how to create, mark, and release standard cost estimates in SAP Product Cost Controlling. Releasing a marked standard cost estimate updates the material's standard price and may trigger inventory revaluation, depending on the material's valuation settings and existing inventory, as illustrated in Figure 9.


Figure 9 Create Standard Cost Estimate

This chapter also covers marking allowances, costing runs, and the mass processing of standard cost estimates. Costing runs help organizations calculate, analyze, mark, and release cost estimates efficiently across large numbers of materials.

For more information about inventory valuation methods, see our guide to Choosing Standard or Moving Average Price in SAP S/4HANA.

 

Chapter 10 Preliminary Cost Estimates

Chapter 10 explains how preliminary cost estimates calculate planned manufacturing costs for production orders and product cost collectors. These estimates provide a basis for analyzing planned costs, comparing them with actual costs, and evaluating production performance, as illustrated in Figure 10.



 

 Figure 10: Change Product Cost Collector

Chapter 11 Unit Cost Estimates

Chapter 11 explores unit cost estimates used to plan and analyze costs during product development and early-stage costing. Unit costing enables detailed cost calculations based on manually entered items, quantities, and prices, supporting preliminary cost analysis before a complete quantity structure is available.


Figure 11 Unit Cost Estimate for Product Development

Unit cost estimates provide a flexible, spreadsheet-like interface for entering and adjusting costing items, quantities, and prices. This flexibility makes them particularly useful during product development, when detailed material and production specifications may still be evolving, as illustrated in Figure 11.

Part III: Cost Object Controlling

SAP Cost Object Controlling enables organizations to plan, collect, and analyze manufacturing costs for production orders and product cost collectors. It supports planned and actual cost analysis, work in process (WIP), variance calculation, and settlement to improve manufacturing cost transparency and period-end closing.

Planned and Actual Costs

In these chapters, we determine how to plan and post actual costs to cost objects:

Chapter 12 Preliminary Costing

Chapter 12 explains how preliminary costing calculates planned manufacturing costs for production orders and product cost collectors using order-specific configuration and quantity structures. These planned costs provide a basis for comparing actual manufacturing costs, analyzing production performance, and calculating variances, as illustrated in Figure 12.


 Figure 12: Preliminary Cost Estimate

Chapter 13 Simultaneous Costing

Chapter 13 explains how simultaneous costing collects actual manufacturing costs during production. Material goods issues, activity confirmations, and other production-related transactions post costs to production and process orders as manufacturing activities occur. These postings support actual cost analysis and subsequent variance calculation and settlement, as illustrated in Figure 13.


Figure 13 Goods Issue to Production Order

This chapter also covers default activity assignments, operation sequences, Margin Analysis, and detailed reporting to help analyze manufacturing costs posted to production orders.

 

Period-End Processing

Period-end processing in SAP Product Cost Controlling includes overhead calculation, work in process (WIP), variance calculation, and settlement. These activities help organizations allocate manufacturing costs, value unfinished production, analyze production variances, and complete period-end financial reporting. The following four chapters explain these processes.


 

Chapter 14 Overhead

Chapter 14 explains how actual overhead costs are calculated and applied to production orders and other cost objects during period-end processing. Overhead calculation uses costing sheets and configured overhead rates to allocate indirect manufacturing costs, building on the costing sheet configuration introduced in Chapter 5, as illustrated in Figure 14.


Figure 14 Overhead Calculation Results Screen

This third edition includes information on how SAP S/4HANA improves overhead processing.

Chapter 15 Work in Process

Chapter 15 explains how work in process (WIP) is calculated and accounted for during period-end closing in SAP Product Cost Controlling. WIP represents the value of production costs associated with unfinished manufacturing activities. The chapter examines WIP configuration and period-end calculation, as illustrated in Figure 15.


Figure 15  : Assign Cost Elements For WIP and Results Analysis

The new 3rd edition includes information on how SAP S/4HANA improves WIP processing.

 

Chapter 16 Variance Calculation

Chapter 16 examines production variance calculation in SAP Product Cost Controlling, including configuration, period-end processing, and variance analysis. Variance calculation compares actual manufacturing costs with target costs to identify differences such as input price, input quantity, resource usage, and remaining variances, as illustrated in Figure 16.


Figure 16 Variance Calculation Selection Screen


We also discuss how SAP S/4HANA improves variance calculation performance.

 

Chapter 17 Settlement

Chapter 17 explains how settlement transfers costs from production orders and other cost objects to appropriate receivers during period-end processing in SAP Product Cost Controlling. Settlement configuration includes settlement rules, settlement profiles, allocation structures, and PA transfer structures, which determine how costs and variances are assigned to receivers, including profitability segments in Margin Analysis, as illustrated in Figure 17.

Settlement Rule

Figure 17: Settlement Rule Parameters

The chapter also examines settlement transactions and functionality available in SAP S/4HANA, including improvements to period-end processing.

Chapter 18 Special Topics

Chapter 18 explores additional SAP Product Cost Controlling topics, including configuration, cost calculation, and period-end processing for the following scenarios:

  • Sales Order Controlling
  • Subcontracting
  • SAP Material Ledger

    Act Costs
    Figure 18 SAP Material Ledger Actual Costing Without Revaluation

 

SAP Material Ledger supports actual cost analysis by collecting and allocating price differences across material movements and inventory. Actual Costing can calculate periodic actual costs, with revaluation depending on the selected settings and processes, as illustrated in Figure 18.

This third edition includes information on how SAP S/4HANA improves sales order controlling, SAP Material Ledger processing, and reporting.

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Part IV explores reporting and analytical capabilities in SAP Product Cost Controlling, including cost estimates, manufacturing cost analysis, variance reporting, and SAP S/4HANA innovations. These capabilities help organizations monitor product costs, evaluate manufacturing performance, and improve cost transparency.

Chapter 19 Information System

Chapter 19 examines reporting capabilities for Product Cost Planning and Cost Object Controlling in SAP. Standard reports enable users to analyze product cost estimates, production order costs, cost elements, and manufacturing variances, with drilldown capabilities from summarized information to detailed line items. The chapter also covers the production order information system and Cost Center Accounting (CCA) reports, as illustrated in Figure 19.

Cost Center

Figure 19 Standard Cost Center Report 

The chapter also highlights SAP S/4HANA reporting improvements, including production order summarization and detailed line-item reporting, to support manufacturing cost analysis and financial transparency.


 

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Chapter 20 examines the evolution of SAP Product Cost Controlling, from SAP ERP Enhancement Packages (EHPs) and business functions to SAP S/4HANA innovations. It introduces the Universal Journal (table ACDOCA), which integrates financial and controlling information and provides a foundation for more consistent financial reporting and product cost analysis.

  • Explore four SAP ERP business functions related to Controlling (CO) and their historical role in extending functionality.
  • Understand how the SAP S/4HANA Universal Journal (table ACDOCA) integrates financial and controlling data, as illustrated in Figure 20.
  •  

 

Universal Journal

 Figure 20 Universal Journal Table ACDOCA

SAP S/4HANA integrates financial and controlling data through the Universal Journal (ACDOCA), providing a consistent foundation for financial reporting and product cost analysis. SAP Fiori applications provide role-based access to reporting and analytical capabilities.

Enhancement Packages and Business Functions

Before SAP S/4HANA, SAP ERP Enhancement Packages (EHPs) and business functions enabled organizations to introduce additional functionality without a complete system upgrade. Business functions could be activated selectively to support new capabilities in areas such as Product Cost Controlling. This approach helped organizations adopt improvements while managing the testing and change management requirements associated with SAP system enhancements.

One example of these historical enhancements is the FIN_CO_COGM business function, which extended valuation capabilities for Product Cost Controlling in SAP ERP.

1. FIN_CO_COGM: Multiple Valuation of Cost of Goods Manufactured

Introduced with SAP ERP Enhancement Package 5, the FIN_CO_COGM business function provided additional capabilities for multiple valuation of the cost of goods manufactured (COGM). It supported the use of different accounting principles in manufacturing cost calculations, including relevant depreciation and activity price valuations.

This functionality illustrates how SAP ERP evolved to support more complex product costing and financial reporting requirements before SAP S/4HANA.

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GLOSSARY

Activity Type

An activity type represents a service or activity provided by a cost center, such as machine hours or labor hours. In SAP S/4HANA, activity allocations charge costs to receiving objects, such as production orders, using secondary cost elements represented by G/L accounts.

Allocation Structure

An allocation structure defines how costs are grouped and assigned to settlement receivers during settlement. It maps source cost elements or cost element groups to settlement cost elements or G/L accounts, depending on the settlement scenario.

Automatic Account Assignment

Automatic account assignment enables SAP to derive default account assignments, such as cost centers, for relevant expense postings. Transaction OKB9 is used to maintain default account assignments for cost elements represented by G/L accounts in SAP S/4HANA.

Biil of Material (BOM)

A bill of material (BOM) defines the components and quantities required to manufacture or assemble a product. In SAP Product Cost Planning, BOMs provide the material quantities used to calculate material costs in product cost estimates.

Cost Center

A cost center is an organizational unit in SAP Controlling used to collect, plan, and monitor costs for a defined area of responsibility. Cost centers support cost allocation, activity pricing, and plan-versus-actual cost analysis.

Event-Based Costing

Event-based production cost posting in SAP S/4HANA enables work in process (WIP) and production variances to be recognized as relevant business transactions occur, rather than relying exclusively on traditional period-end processing. Availability and functionality depend on the SAP S/4HANA release and configuration.

FBL3N – G/L Account Line Item Display

Transaction FBL3N displays G/L account line items in SAP ERP and supported SAP S/4HANA environments. The report enables users to review individual postings for selected G/L accounts. In SAP S/4HANA, transaction FAGLL03 and SAP Fiori applications provide additional G/L line-item reporting capabilities.

F.13 - Automatic Clearing

Transaction F.13 performs automatic clearing of open items in G/L, customer, and vendor accounts based on configured clearing criteria. It helps automate reconciliation and period-end closing activities.

F.19 - Analyze GR/IR Account and Accrual

Transaction F.19 analyzes goods receipt/invoice receipt (GR/IR) clearing accounts to identify balances requiring adjustment at period-end. It supports the preparation of adjustment postings for goods received but not invoiced and goods invoiced but not received.

FS10N - G/L Account Balance Display

Transaction FS10N displays G/L account balances by posting period, including debit, credit, and cumulative balances. It helps users analyze account activity and review financial balances. In SAP S/4HANA, FAGLB03 and SAP Fiori applications provide additional balance reporting capabilities.

Goods Receipt

A goods receipt records the receipt of materials from a supplier, production order, or another source. Depending on the movement type and material valuation settings, the posting updates inventory quantities, inventory values, and relevant accounting documents.

GR/IR Account Maintenance

Transaction MR11 supports maintenance of goods receipt/invoice receipt (GR/IR) clearing account balances when differences between goods receipts and invoices cannot be resolved through normal follow-up postings. It can generate account maintenance postings to clear qualifying quantity differences.

Profit Center

A profit center is an organizational unit used to analyze revenues, costs, and profitability for a defined area of responsibility. In SAP S/4HANA, profit center information is integrated into the Universal Journal (ACDOCA), supporting financial reporting and profitability analysis by profit center.

Standard Cost Estimate

This is a material cost estimate used to calculate the standard price of a material. The cost estimate must be executed with a costing variant that updates the material master, and the cost estimate must be released. A standard cost estimate can be released only once per period and is typically created for each product at the beginning of a fiscal year or new season.

Standard Price

The standard price in the Costing 2 view determines the inventory valuation price if price control is set at standard (S). The standard price is updated when a standard cost estimate is released. You normally value manufactured goods at the standard price.

Statistical Key Figure

Statistical key figures define values describing cost centers, profit centers, and overhead orders such as the number of employees or minutes of long-distance phone calls. You can use statistical key figures as the tracing factor for periodic transactions such as cost center distribution or assessment. You can post both planned and actual statistical key figures.

Activity Type

An activity type identifies activities provided by a cost center to manufacturing orders. The secondary cost element associated with an activity type identifies the activity costs on cost center and detailed reports

Allocation Structure

An allocation structure allocates the costs incurred by a sender to specific cost elements or cost element groups, and it is used for settlement and assessment purposes. An assignment maps a source cost element group to a settlement general ledger account.

Alternative Hierarchy

An alternative cost center hierarchy groups cost centers for reporting and analysis independently of the standard hierarchy. Organizations can create multiple alternative hierarchies using cost center groups to support different management reporting requirements.

Assembly Scrap

Assembly scrap represents the expected percentage of finished or semi-finished assemblies that will not meet quality requirements during production. In SAP, assembly scrap can be maintained in the material master and considered in material requirements planning and product costing.

Automatic Account Assignment

Automatic account assignment enables you to specify a default cost center for each cost element within a plant using Transaction OKB9.

Availability control

Availability control monitors actual costs and commitments against defined budgets for relevant controlling objects, such as internal orders and projects. Depending on configuration, SAP issues warnings or errors when budget tolerance limits are exceeded.

Bill of Material (BOM)

A bill of material (BOM) defines the components and quantities required to manufacture or assemble a product. In SAP Product Cost Planning, BOMs provide the material quantities used to calculate material costs in product cost estimates.

Controlling Area Currency

The controlling area currency is the currency used for cost accounting within an SAP controlling area. It is defined in controlling area configuration and supports consistent cost planning, allocation, and reporting across assigned company codes.

Cost Center

A cost center is master data that identifies where the cost occurred. A responsible person assigned to the cost center analyzes and explains cost center variances at period end.

Cost Component

A cost component identifies costs of similar types, such as material, labor, and overhead costs by grouping together cost elements in the cost component structure.

Cost Component Group

Cost component groups allow you to display cost components in standard reports. In the simplest implementation, you create a cost component group for each cost component and assign each group to a corresponding cost component. You assign cost component groups as columns in cost estimate list reports and costed multilevel BOMs.

Cost Component Split

The cost component split refers to the combination of cost components that comprise the total cost of a material. For example, suppose you need to view three cost components— material, labor, and overhead —for your reporting requirements. In that case, the combination of these three cost components represents the split of these cost components.

Cost Component Structure

You define which cost components make up a cost component split by assigning them to a cost component structure. Within the cost component structure, you assign cost elements and origin groups to cost components.

Cost Component View

Each cost component is assigned to a cost component view. When you display a cost estimate, you can choose a cost component view, which filters the cost components displayed in the cost estimate.

Cost Element

Cost elements are included as part of a general ledger account. Primary cost elements identify external costs, while secondary cost elements identify costs allocated within controlling, such as activity allocations from cost centers to manufacturing orders.

Cost Estimate

A cost estimate calculates the plan cost to manufacture a product or purchase a component. It determines material costs by multiplying BOM quantities by the standard price, labor costs by multiplying operation standard quantities by plan activity price, and overhead by costing sheet configuration.

Costed Multilevel BOM

A costed multilevel BOM is a hierarchical overview of the values of all items of a costed material according to the materials costed quantity structure (BOM and routing). You display a costed multilevel Bill of Materials (BOM) on the left side of the cost estimate screen. You can also view a costed multilevel BOM separately with Transaction CK86_99.

Costing BOM

Costing BOMs are assigned a BOM usage of costing and are usually copied from BOMs with a usage of production. You can make adjustments to costing BOMs if you require them to be different from production BOMs. With system-supplied settings, standard cost estimates search for costing BOMs before production BOMs.

Costing Lot Size

The costing lot size should be set as close as possible to actual purchase or production quantities to reduce lot size variance. Unfavorable variances may result if you create a production order for a quantity that is less than the costing lot size. You need setup time to prepare equipment and machinery for production of assemblies, and that preparation is generally the same regardless of the quantity produced. Setup time spread over a smaller production quantity increases the unit cost. This also applies to externally procured items because vendors typically quote higher unit prices for smaller quantities.

Costing Run

A costing run is a collective processing of cost estimates, which you maintain with Transaction CK40N.

Costing Sheet

A costing sheet summarizes the rules for allocating overhead from cost centers for cost estimates, product cost collectors, and manufacturing orders. The components of a costing sheet include the calculation base (group of cost elements), overhead rate (percentage rate applied to base), and credit key (cost center receiving credit).

Costing Type

The costing type determines if the cost estimate can update the standard price.

Costing Variant

The costing variant contains information on how a cost estimate calculates the standard price. For example, it determines if either the purchasing info record price is used for purchased materials, or an estimated price is manually entered in the Planned price 1 field of the Costing 2 view.

Currency Type

The currency type identifies the role of the currency such as local or global.

Demand Management

Demand management involves planning the quantities and dates of assemblies, as well as defining the strategy for designing and producing or procuring a finished product.

Dependent Requirements

Dependent requirements are caused by higher-level dependent and independent requirements when running MRP. Independent requirements, created by sales orders or manually planned independent requirement entries in demand management, determine lower-level dependent material requirements.

Detailed Reports

Detailed reports display cost element details of manufacturing orders and product cost collectors. During variance analysis, you can drill down on cost elements to display line-item reports.

Distribution Rule

You maintain distribution rules in settlement rules, as well as in manufacturing orders and product cost collectors.

Enhancement Package

A collection of new and improved business functions for SAP Business Suite and SAP ERP.  These optional enhancement packages can be configured in a wholly modular fashion by activating only the latest features and functionalities customers want.

Event-Based Processing

As of SAP S/4HANA release 2022, event-based processing is available. Goods movements and confirmations represent events that trigger the calculation of overhead according to the costing sheet. Then, depending on the order's status, this triggers either the posting of a journal entry for the work in process (WIP) or the cancellation of any existing WIP and the calculation of production variances.

External Processing

An external vendor performs external processing of a manufacturing order operation. This is distinct from subcontracting, which involves sending material parts to an external vendor, who manufactures the complete assembly via a purchase order.

Goods Issue

A goods issue is the movement (removal) of goods or materials from inventory to manufacturing or a customer. When goods are issued, the stock in the warehouse is reduced.

GR/IR

GR/IR is the SAP process for executing the three-way match—purchase order, Material Receipt, and vendor invoice. You use a clearing account to record the offset of the Goods Receipt (GR) and Invoice Receipt (IR) postings. As soon as they are completely processed, the postings are added to the cleaning account balance.

Internal Order

An internal order monitors an organization's costs and revenue for short—to medium-term jobs. You can carry out planning at a cost element and detailed level and budgeting at an overall level with availability control.

Long-Term Planning

Long-term planning enables you to develop medium- to long-term production plans and simulate future production requirements using long-term MRP. You can determine future purchasing requirements for vendor RFQs, update purchasing info records, and transfer planned activity requirements to cost center accounting.

Margin Analysis

Margin Analysis is the refined version of Account-based COPA. The Universal Journal combines financial and managerial accounting, directly recording all dimensions, including custom fields. Margin Analysis provides consistent financial information without requiring reconciliation, along with a comprehensive financial audit trail. All innovations developed for the Universal Journal are immediately available within Margin Analysis. A consistent approach ensures the common usage of ledgers, currencies, valuations, predictions, and simulations, as well as their availability in planning and reporting.

Master Data

Master data is information that stays relatively constant over long periods. For example, purchasing information records typically contain vendor information, such as a business name, which remains relatively unchanged.

Material Master

A material master contains all the information required to manage a material. Information is stored in views, each corresponding to a department or area of business responsibility. Views conveniently group information together for users in different departments, for example, sales and purchasing.

Material Requirements Planning (MRP)

MRP ensures material availability by monitoring stock levels and generating planned orders for Purchasing and Production.

Process Order

A process order is a type of manufacturing order used in process industries. A master recipe and materials list are copied from the master data to the order. A process order contains operations that are divided into phases. A phase is a self-contained work step that defines the details of one part of the production process using a primary resource.
In process manufacturing, only phases are costed, not operations. A phase is assigned to a subordinate operation and contains standard values for activities, which are used to determine dates, capacity requirements, and costs.

Procurement Alternative

A procurement alternative represents one of several methods for procuring a material. You can control the level of detail in which the procurement alternatives are represented through the controlling level. Depending on the processing category, there are single-level and multilevel procurement alternatives. For example, a purchase order is a single-level procurement, whereas production involves multilevel procurement.

Production Order

A production order is used for discrete manufacturing. A BOM and routing are copied from master data to the order. A sequence of operations is supplied by the routing, which describes how to carry out work-steps.
An operation can refer to a work center at which it is to be performed. An operation contains planned activities required to carry out the operation. Costs are based on the material components and activity price multiplied by a standard value.

Product Drilldown Reports

Product drilldown reports allow you to slice and dice data based on characteristics such as product group, material, plant, cost component, and period. Product drilldown reports are based on predefined summarization levels and are relatively simple to setup and run.

Production Variance

Production variance is a type of variance calculation based on the difference between net actual costs debited to the order and target costs based on the preliminary cost estimate and quantity delivered to inventory. You calculate production variance with target cost version 1. Production variances are for information only and are not relevant for settlement.

Production Version

A production version determines which alternative Bill of Materials (BOM) is used, along with which task list or master recipe, to produce a material or create a master production schedule. You can have multiple production versions with varying validity periods and lot-size ranges for one material.

Purchase Price Variance

When raw materials are valued at the standard price, a purchase price variance will be posted during goods receipt if the goods receipt or invoice price differs from the material standard price.

Purchasing Info Record

A purchasing information record stores all the information relevant to procuring a material from a vendor. It contains the Purchase Price field, which the standard cost estimate searches for when determining the purchase price.

Profit Center

A profit center receives postings made in parallel to cost centers and other master data, such as orders. Profit Center Accounting (PCA) is a separate ledger that enables reporting from a profit center point of view. You normally create profit centers based on areas in a company that generate revenue and have a responsible manager assigned.

Invoice Receipt

You enter a vendor invoice in SAP with Transaction MIRO or via the menu path

Logistics - Materials Management - Logistic Invoice Verification - Document Entry - Enter Invoice

CKM3N - Material Price Analysis

Transaction CKM3N Material Price analysis report / Price History View report CKM3N/CKM3 is used to analyse the price consumed for a material in a plant along with overhead.

MB5S - List of GR/IR Balances

MB5S displays any difference between GR and IR quantities & their values.

ME23N - Display PO History

You use ME23N to display information about an existing purchase order to see whether the vendor invoice has been received and/or paid.

MR11SHOW - Display/Reverse MR11 document

MR11 documents can be reversed using MR11_SHOW or by clicking on Account Maintenance, which documents the PO history. Be cautious if more than one PO has been corrected in an MR11 document, as it may reverse the entire document.

Purchase Order

A purchase order (PO) is a formal document issued to a supplier specifying the materials or services to be purchased, quantities, prices, delivery dates, and other purchasing conditions. In SAP, the purchase order provides the basis for subsequent processes such as goods receipt and invoice receipt.

Standard Cost Estimate

This is a material cost estimate used to calculate the standard price of a material. The cost estimate must be executed with a costing variant that updates the material master, and the cost estimate must be released. A standard cost estimate can be released only once per period and is typically created for each product at the beginning of a fiscal year or new season.

Standard Price

The standard price in the Costing 2 view determines the inventory valuation price if price control is set at standard (S). The standard price is updated when a standard cost estimate is released. You normally value manufactured goods at the standard price.

Statistical Key Figure

Statistical key figures define values describing cost centers, profit centers, and overhead orders such as the number of employees or minutes of long-distance phone calls. You can use statistical key figures as the tracing factor for periodic transactions such as cost center distribution or assessment. You can post both planned and actual statistical key figures.

Tracing Factor

Tracing factors determine the cost portions received by each receiver from senders during periodic allocations, such as assessments and distributions.

SAP Universal Journal

The efficiency and speed of the SAP HANA in-memory database allowed the introduction of the Universal Journal single line-item tables ACDOCA (actual) and ACDOCP (plan). The Universal Journal allows all postings from the previous financial and controlling components to be combined in single items. The many benefits include the development of real-time accounting. In this book, we discuss both period-end and event-based processing.

Unit Costing

Unit costing is a method that does not typically use BOMs or Routings when developing new products. You create a preliminary structure of materials and activities in a view similar to a spreadsheet layout.

Valuation Class

The valuation class in the Costing 2 view determines which general ledger accounts are updated as a result of inventory movement or settlement.

Valuation Date

The valuation date determines which material and activity prices are selected when you create a cost estimate. Purchasing info records can contain different vendor-quoted prices for different dates. Different plan activity rates can be entered per fiscal period.

Valuation Grouping Code

The valuation grouping code allows you to assign the same general ledger account assignments across several plants with Transaction OMWD to minimize your work.
The grouping code can represent one or a group of plants.

Valuation Type

You use valuation types in the split valuation process, which enables the same material in a plant to have different valuations based on criteria such as batch. You assign valuation types to each valuation category, which specify the individual characteristics that exist for that valuation category. For example, you can valuate stocks of a material produced in-house separately from stocks of the same material purchased externally from vendors. You then select procurement type as the valuation category and internal and external as the valuation types.

Valuation Variant

The valuation variant is a costing variant component that allows different search strategies for materials, activity types, subcontracting, and external processing. For example, the search strategy for purchased and raw materials typically searches first for a price from the purchasing info record.

Valuation Variant for Scrap and WIP

This valuation variant allows a choice of cost estimates to valuate scrap and WIP in a WIP at target scenario. If the structure of a routing is changed after a costing run, WIP can still be valued with the valuation variant for scrap and WIP resulting in a more accurate WIP valuation.

Valuation Class

The valuation class in the Costing 2 view determines which general ledger accounts are updated due to inventory movement or settlement.

Valuation View

In the context of multiple valuation and transfer prices, you can define the following views:
- Legal valuation view
- Group valuation view
- Profit center valuation view