Standard Cost Estimate

What is standard cost estimate?

Standard cost estimate are created at the beginning of a fiscal year or a new season.  The standard cost estimate is then valid for the entire year or season.  It is used to determine a standard price for materials in this period.

The standard cost estimate will write the results of the cost estimate into the costing details screen of the material master record as the future standard price once it is marked.  This price is then active for internal material valuation.  For example, it can be used to valuate a material components in the cost estimate.

Once the cost estimate is released, the system transfers the result of the standard cost estimate into the material master record of the material as the standard price.  This price is then active for Financial Accounting and is used for valuation of the material until the next time a standard cost estimate is released.

In this period, all transactions involving products produced in-house in the Logistics module are valuated using the results of the standard cost estimate.  If a material with standard price control is delivered to stock, for example, inventories of this material are valuated with the standard price determined by the standard cost estimate.

The standard prices calculated in the standard cost estimate applies only for materials with S price control.

Cost Estimate with Quantitative Structure

The cost estimate is a tool for establishing prices for materials.  It is used to calculate the costs of goods manufactured and the costs of goods sold for each product unit.

In order to establish the cost estimate with quantity structure of a material, the bills of materials and routing of the material must exists for the materials to be costed.

The cost estimate with quantity structure uses the material master data to determine the material consumption and internal activities required to produce the product.

Costing calculates the cost of goods manufactured for each material made in-house in the BOM structure.

The materials in a BOM are called BOM components, these can consist of a material without its own BOM (material components), or a material with its own BOM (assembly).  If the product has a multilevel BOM, then the costs for the material components are calculated and taken into account when the next highest assembly is costed.  The structure of the BOM determines the sequence in which the materials are costed.  The BOM components with the largest low-level code (that is, the material components) are costed first, then the BOM components with the next low-level code and so on.

Costing can also determine the cost of goods manufactured for materials produced in another plant if the two plants are assigned to the same controlling area and the company codes of the plants use the same cost component structure.  In this case, the structure of the cost component split must be the same in both plants.

For raw materials, the system determines the procurement price using the entry in the material master record.  A cost component split is created automatically for the material costs.  You can add manually entered costs to the material costs by means of an additive cost estimate that contains separate cost components.  This enables you to include such costs as freight charges and insurance costs with raw materials or stock transfer costs with semi-finished products.  Other reasons for adding manually entered costs to the material cost estimate include missing routings or BOM components.

Normally, a multi-level production structure is costed using costing with a quantity structure.  The costs are rolled up automatically using the low-level codes.

  • The materials in the low-level code with the largest number (such as raw materials) are costed and the costs are assigned to cost components.
  • The materials in the next highest low-level code (such as semi-finished materials) are costed.  The costs for the materials costed first are rolled up and become part of the material costs of the next highest level.
This process is continued until the calculated costs of the highest material in the structure (such as the finished product) contain the costs of goods manufactured for every material in the structure.

Creating a cost estimate for a single material and its child parts with quantitative structure
Procedure

  • Transaction CK11
  • Enter PPC1 (standard SAP variant - configuration transaction OKKN) as the costing variant, material and plant.  If you do not enter a lot size, the system uses the costing lot size from the costing view of the material master record.
  • Hit Enter
  • The dialog box: Control Data appears
  • Check the proposed costing dates in the dialog box and the transfer control ID.  The transfer control would determine whether the cost estimates of the child parts supplied by other plants are to be recomputed or taken as its is without recomputation.  Use Transfer Control PC01 which would recompute.
  • Press Enter and the system will costs the material.
Result
  • The system creates and valuates the quantity structure and calculates overhead.  You can analyze and display the costing results.
  • After carrying out costing with quantity structure, you can see the costing results for the header material (the highest material) in the BOM.
  • Choose the desired view with costs -> disp.Cost components.
  • Click Save (Note the standard cost is still NOT updated yet at this point.
Marking a standard cost estimate for a single material master and its child parts
  • Transaction CK20
  • Enter the Material, plant, future posting period and fiscal year.  This period indicates the "from" date.
  • Click Save (Marking of standard cost estimate is being updated) is displayed.
  • The results of the standard cost estimate are updated as the futured standard price in the material master (accounting and costing view).  Note that marking does not affect the material stock value yet.
Releasing a standard cost estimate for a single Material Master and its child parts.
  • Transaction CK21
  • Enter the Material and Valuation Area.
  • Click Save
  • The corresponding future standard prices are updated as the current standard prices in the material master.  How often you release a standard cost estimate depends on its planned validity period.  If stocks of materials exist, the stock value changes and a document is created in Financial Accounting documenting the price change.
  • The system post to the inventory account with offsetting entry posted to the price difference account.
Costing Run Steps
  • CK41 - Create costing run
    Some Material
  • CK43/CK60 - Selection of materials and display results of selection
  • CK62 - Explode BOM
  • goto Continue
    All Material
  • CK43/CK60 - Material field left blank and display results of selection
  • goto Continue
    Continue
    Before this step you have to finished the step for either Some Material or All Material.
  • CK42 - Select the low-level code with the highest number
  • CK64 - Perform costing run for that low-level code
  • CK66 - Mark and review the results
    After getting approval for costing results from costing controller, you can finally post the cost estimate
  • CK68 - Release of standard cost estimate - Repeat the process for the next low-level code for All Material
    If Error
  • CKR1 - Delete cost estimate and start again.
Correcting the Cost Estimate
  • CKR1 - Delete cost estimate
  • Make necessary changes to BOM, material routing etc.
SOME material
  • CK41 - Create costing run
  • Repeat process start
  • CK43/CK60 - Selection of materials and display result of selection
  • CK62 - Explode BOM
  • CK42 - Select the low-level code with the highest number
  • CK64 - Perform costing run for that low-level code
  • CK66 - Mark and review the results
  • Get approval for costing results from the costing controller
  • CK68 - Release of standard cost estimate
  • Repeat the process for the next low-level code (goto Repeat process start)
ONE material
  • CK11 - Perform single material cost estimate
  • CK20 - Mark and review results
  • CK21 - Release of standard cost estimate
Costing Run

Costing run is used to process mass data.  The costing run enables you to cost more than one material at the same time, either online or in the background.  It reproduces the entire process of costing with a quantity structure.

Process Flow Overview

Create costing run

  • Company code
  • Posting parameters
  • Costing variants
  • Costing dates
Some material
Select specific assemblies for the costing run
Quantity structure determination for the selected assemblies

All materials
Select all assemblies for the costing run

After completing the steps for either Some material or All materials
Carry out costing run

Mark and release costing

The costing run involves separate steps, being the selection of materials for costing, determining material components via the BOM explosion, and then carrying out costing level by level.

BOM explosion is only necessary if a complete selection of materials is not carried out, such as the selection of finished products only.

Logs are generated for each step of the costing run, and can be printed out and saved in the system.  With Extras you can print the logs for selection and quantity structure determination, for costing and for marking and release (online or background mode).

Creating a costing run
Procedure

  • Transaction CK41
  • Enter a name identifying the costing run (i.e. test x and the (i.e. XX.XX.XX) on which the costing run is to be executed.
  • Press Enter.  This brings you to the general data for the costing run.
  • Enter the necessary data and press Enter.
  • The dialog box Costing Dates appears.
  • Check the proposed data's and make any necessary changes.  Press Enter.  The release is only possible within this period message is displayed.  Press Enter.
  • If costing across company codes has been activated in the Customizing for Product Cost Planning, the system displays the controlling area in which existing cost estimates from other company codes can be transferred.
  • Specify the Update Parameters.
  • Press Enter.
  • Specify the Print Parameters.
  • Press Enter and Save the costing run.
Selecting Materials for a costing run
Procedure
  • Transaction CK60
  • Goto -> Variants -> Get. Select the variant name.
  • Enter a range of material numbers and plant.  If the materials selected come from different plants, leave the plant field blank.
  • As a default value, the last costing run entered and its data are displayed.  You can change both as needed.
  • Click the Copy button.
  • To start the selection, choose Execute.  The release is only possible message is displayed. Press Enter.
  • After the selection, a list screen appears with information on the costing run and data on each material selected.
  • To check all messages that occurred during selection, choose Extras -> Log
  • Save the costing run.
Displaying the results of selection
Procedure
  • Transaction CK43
  • Enter the name and date of the costing run and press Enter.
  • Before carrying out any further steps, choose Extras -> Log -> For Selection.  The log provides an overview of the results of the selection and the option to correct possible errors before carrying out further steps.
  • Choose the desired view with Goto.
  • For example: Goto -> Material Overview.
Exploding BOMs for a costing run (only necessary if ALL materials are NOT selected)
Procedure
  • Transaction CK62
  • Enter the name and date of the costing run.
  • Choose Execute.
  • The release is only possible message is displayed.  Press Enter.
  • Choose Settings -> Field selection to obtain further information on this overview.
  • The dialog box List Field Selection appears.  You can specify that
    • information on special procurement is displayed
    • information on the BOM is displayed
    • the status of the selection is displayed
    • the number of messages is displayed
  • Choose Edit -> Sort to sort the list either by low-level code of by material number.  To view the system messages that were issued during the BOM explosion, choose Extras -> Log.
  • To save the materials selected under this costing run, choose Costing run -> Save.
Choose the selected materials or low-level codes for costing
Procedure
  • Transaction CK42
  • Enter the name and date of the costing run and press Enter
  • Choose Goto -> Low-level code overview.  The release is only possible message within this period is displayed.  Press Enter.  This would set the materials in the "low-level code" order.
  • Mark the low-level codes or materials and choose For costing. (**Remember that the lower low-level codes that is, the low-level codes with the highest numbers must be costed first.)
  • The system will display the number of low-level code(s) selected for cost estimate. Press Enter.
  • Save the costing run.
  • Perform transaction CK64 to execute costing run contains that low-level code.  Then save the costing run.
  • Perform transaction CK66 to mark the costing contains that low-level code.  Review the results and save.
  • Perform transaction CK68 to release the costing run contains that low-level code.
  • Repeat the process from step 2 to 9 for the next higher number of low-level code.
Executing a costing run
Procedure
  • Transaction CK64
  • Enter the name and date of the costing run.
  • Choose Execute.  Release is only possible within this period is displayed.  Press Enter.
  • When the costing run is finished, you come to the overview of the low-level codes.
  • Select Materials and choose Goto -> Detail screen.
  • The system displays the costs for the material as cost of goods manufactured, cost of goods sold, inventory costs and so on.
  • For detailed information on the costs, choose Costs -> Display cost components or Itemization or Cost element itemization or Costed BOM.
  • The system displays the costs for the material as cost of goods manufactured, cost of goods sold, inventory costs and so on.
  • For detailed information on the costs, choose Costs @ Display cost components or Itemization or Cost element itemization or Costed BOM.
  • Costing run -> Save.
Marking multiple standard cost estimates
Procedure
  • Transaction CK66
  • Enter the name and date of the costing run.
  • Choose Execute.  The release is only possible message is displayed.  Press Enter.
  • Choose Execute.  The release is only possible message is displayed.  Press Enter.
  • Check the  prices and save.
Releasing standard cost estimate
Procedure
  • Transaction CK68
  • Enter the name and date of the costing run.
  • Choose Execute.
  • Costing run -> Save.
  • The results of the standard cost estimate are updated in the material master record as the current standard price.  At this time, the stock value of the material is changed and the new standard price for valuating material movements is active.
  • Make sure the status is FR for all.  If not, call the consultant.
Deleting material cost estimates from the database
Procedure
  • Transaction CKR1
  • Enter a company code, plant, material number, costing variant, costing version, Interval for validity form and Interval for validity to or overwrite them.
  • Select the Current std cost estimates.
  • Specify whether the deletion should be simulated (Test run) or actually carried out (Reorganization).  Set the With log indicator if desired.
  • Choose Execute.
  • Save.  The system issues a message indicating the number of cost estimates deleted.
Status Management in costing

The costing status provides the following information:

  • informs you about the current processing status of the cost estimate
  • informs you about errors in the cost estimate
  • prevents incorrect data from being passed on
  • prevents a cost estimate from being released again
The status is set for each low-level code.  This means that you can release the costing results for specific low-level codes even though the costing run itself has the status KF.

The following costing status can be set by the system:

Status              Meaning
  • ER                   Opened
  • SE                    Selected without errors
  • SF                    Selected with errors
  • KA                   Costed without errors
  • KF                   Costed with erros
  • VO                   Marked without errors
  • VF                    Released with errors
  • FR                    Released without errors
  • FF                    Released with errors
  • FM                   Release through material ledger closing

Read Also

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