Product costing- Cost component Structure

[nagakumari]

I am learning product costing have one question,

while creating cost component structure we are mentioning Raw material , salaries etc cost elements. Does the cost flow from this cost elements? how does in work. can anyone explain in detail. do we need to give the same GL accounts which we maintain in OBYc for material in cost componenet structure. cn anyone clarify.

thanks

Naga

[former_member97678 · Accepted solution]

Hi Naga Bade,

While learning product costing, we need to clarify that the purpose of product cost planning is to know/strategize the cost of a specific material before it is consumed / produced / reproduced / reconsumed. It is part of product cost controlling in controlling section (management accounting of S/4HANA).

What you are mentioning is part of configuration in cost component structure, that is about cost element assignment in cost component.

The purpose of this assignment is to summarize and classify the costs according to your cost component criteria in cost component structure. The cost element records value movements and can be further classified according to their usage or origin (id est categorized, while choosing cost element category). In S/4HANA, it is simplified on GL Account. One of cost component we usually define in cost component structure is material cost component.

Let us pick a simple case, where you want to define Raw Material as your cost component. For this case, yes you need to give the same GL Account of raw material as you used in your raw material consumption account. It needs to be the same GL, because this is where we records the value movement of your consumption account to be used. This will also determine how the results of material costing are stored/updated. This account usually also be placed in material management automatic posting (group RMK) > offsetting entry for inventory posting (transaction GBB) > consumption for internal goods issues (in standard system: VBR account modifier). We can have long discussion for this automatic posting in separate section of question.

After you do that configuration and another configuration in cost component structure, this cost component structure then needs to be assigned to Costing Variant, so that you can get a benefit of this in product cost planning. One of the benefit is in Standard Cost Estimate case.

Take a sample when you are executing Standard Cost Estimate for a material using a specific costing variant, id est you are doing material cost estimate with quantity structure. This is where the bar is set. The system will calculate your material costing according to your costing variant (also costing version, transfer control, costing lot size, dates, quantity structure. More on those details in another section of question). The system will also show a report of its calculation, view, and itemization based on your configuration.

Please note that you can also strategize your material component value depending on your strategy and prioritization (this can also be detailed in another section of question).

For further detail, we also have an option from SAP to join S4F23 course.

Please also note that you can have various drive for other scenario and case later on while exploring Product Cost Controlling, even for the very specific area in product cost planning. I would advise to drive your client with the best practice according to activate methodology.

I really hope this can answer a small part of curiosity in our learning process.

Good luck.

[nagakumari · Accepted solution]

Thanks a lot Daniel for brief explanation . I understood clearly.