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Co-product : Two line items in production order -> cost analysis screen& Variance not calculated

Production order for header material has a component ( material A ) which is marked as co-product in BOM. In material master for component, MRP view has co-product tick.

Issue:

1. For co-product, relevant cost element is X ( COGM – Co Product ). In production order -> cost analysis screen, system is showing two line items for co-product in production order -> cost analysis. I want to know why this is happening ?

2. System is not calculating variance for co-product material. E.g. Target quantity & amount of co-product is 7.195 kg & 51.01 respectively. But GR for co-product against this production order is only 5kg with amount of 35.45. So I expect system to calculate variance for this co-product.

But in variance calculation, for co-product system is considering target cost same as actual cost. Hence no variance calculation. Why is this happening?

Please see attached screenshot and advise.

Regards

Kapil

variance-not-calculated-for-co-product.png

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4 Answers

  • Best Answer
    Oct 25, 2017 at 01:50 AM

    Hi KAPIL,

    1. Here the explanation from F1 help

    Fixed-Price Co-Product

    indicates the material as a fixed price co-product.

    Use

    A material marked as a fixed price co-product is not costed using a joint production process.

    If the material is an output material of a process with several co-products, the costs for the fixed price co-product are taken from the process costs using the net realizable-value method.

    Dependencies

    Set this indicator if the material is a co-product, but the costs are not to be determined using an apportionment method; instead, a preset price is to be used for the material.

    The price for the fixed price co-product is taken from a cost estimate without quantity structure; alternatively, a price from the material master is used.

    Dependencies

    You can only set this indicator if you have also set the co-product indicator for the material.

    Fixed-price co-products are shown in the itemization as items of category M (not A, as is the case with normal co-products), albeit with negative quantities and values.

    2. System showing 2 lines is due the fixed price, amount 51.01 is for planned qty 7.195 and amount 35.45 is for actual qty 5. If you remove the fixed price and run CO8B / CO8A. You should able to see one line and variance for this co product.

    3. for co product case, you have to run CO8B / CO8A to distribute the actual cost from production order header to production order items which are main product and co products. Without running this T-code you won't be able to see the variance. If there is delta change to the production order cost. you need to re-run this T-code otherwise, system won't show the correct variance. Production variance is actual cost minus standard cost. Hence, if fixed price is marked, actual cost for the co product is equal to standard cost so no variance for that co product. It is nothing to do with target quantity and actual quantity.

    Hope i answer your question.

    Thanks

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    • Hi KAPIL,

      2. I believe it is because if fixed price no variance is calculate. it is same as by-product. one line is during production order is save and release from preliminary costing. Another line is from actual GR.

      3. System won't calculate quantity variance. Check this this sap documentation:

      If you flag a product as a fixed-price co-product, the quantity produced is multiplied by a price from the material master or material cost estimate. The result is subtracted from the total joint production process costs by means of the net realizable-value method (as with by-products ). The remaining costs are allocated to the co-products via an apportionment structure.

      In the itemization , fixed-price co-products are shown as items of type M, albeit with negative quantities and negative values, as is the case with by-products.

      https://help.sap.com/saphelp_erp60_sp/helpdata/en/3e/97d7531a4d414de10000000a174cb4/frameset.htm

      Thanks

  • Oct 24, 2017 at 10:05 AM

    Hi KAPIL,

    Do you mark "fixed price" in MM03, costing 1 view?

    Thanks

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  • Oct 24, 2017 at 07:39 PM

    please remove this Fixed price tick and then check again. the purpose of this tick is to make sure that system will not take the price from the apportionment method but rather then from cost estimate without quantity structure or price from material master

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    • Dear Muhammad

      Yes, agree impact of this tick. To avoid apportionment, we maintained tick. Will try and inform you.

      Do you know why system is showing two line items ?

      Regards

      Kapil

  • Oct 25, 2017 at 01:12 AM

    Hi KAPIL,

    If you mark fixed price, system won't calculate variance for that co-product material. This is sap standard.

    Thanks

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    • Dear KK Lam

      Do we have any SAP Note or link that explains this behavior in detail, so that I can reference it for client discussion. Also do you know why system is showing two line items as I mentioned in my first post ?

      Even if system is considering standard cost from quantity structure, there is a difference in target qty ( bom ) and actual qty , so I expected variance to be calculated.

      Regards

      Kapil