Cost Component Structure

[Former Member]

When I am doing the settings of Product Cost planning, some areas become confusing to me. For example:

The material cost, labour cost, activity charges, etc. are picked as per the BOM, Routing etc.

But when we define the cost component structure, we give these heads and assign the cost elements. For example, we assign the raw material consumption cost elemnts against the material cost. So how the same should have to be in two places ? Please clarify me.

[Former Member]

OK. Let me see. Thanks to all

[Former Member]

Hi Nikhita,

You are absolutely correct in your understanding regarding material cost, labour cost, activity charges, etc. being picked up as per the BOM, Routing etc.

On the other hand if we want to have Product Cost report with Cost component break up , we need to assign respective Cost Elements in Cost Componenet Structure.The whole purpose of having Cost Component Structure is to have the Product Cost with detail break up ( Cost Element Wise). Mainataining Cost Componenet Structure in product cost estimate shows the Origin of the cast. This are useful for better analysis of the Product cost.

For example if look at Cost Sheet Format, the same will look like as follows-

Raw Material Consumption *

Direct Labour *

Chargeable Expenses *

*PRIME COST ***

Add :Factory OH *

*WORKS COST ****

Add:Admin OH *

*COP ****

Add:S&D OH *

*COS *****

Regards

Jaydip

[Former Member]

Thanks Jaydip.

Now my doubt goes likes this:

I have mentioned the labour cost elements in the Labour Cost item of the cost component structure. These are primary cost elements.

Labour is defined as an activity type and you know, in the activity type master we have to mention a secondary labour allocation cost element. Please clarify me, in the cost component structure, along with the primary labour cost elements, whether I should include the above activity secondary allocation cost element ?

[ajaycwa1981]

Hi Nikitha

there is no sense in maintaining primary labor cost ele in cost comp structure

Only the secondary cost ele from act type must be maintained....

the consumption accounts and the sub contracting charges account assigned in OBYC are the only primary cost ele that you assign in OKTZ

Rest all will be secondary cost ele from act type (Catg 43) / overhead cost elements (Catg 41)

Regards

Ajay M

[Former Member]

Ok..

One more doubt is: We calculate the overhead and define a credit key for crediting the Cost centre once we calculate the overhead and allocating it to the product. In our case, for example, admin overheads are incurred by 10 cost centres. So when we calculate the overhead and allocate it, should we assign the credit to 10 different cost centres ? How can we do it ? There is no cost centre grouping for assignment and hecne should I have to maintain 10 different line items ?

[ajaycwa1981]

Hi

You have 2 options...

1. Either have 10 credit keys

2. Create a 11th cost center.. Assess the costs from 10 cost centers into this 11th cost center... (Through KSU5).. And maintain overhead rate and credit key crediting this cost center

You can use this,, if overhead rate for all 10 cost centers is same

Regards

Ajay M

[Former Member]

If I am using the second option,viz. assessing all the cost centres to one cost centre, for calculation of overhead, I have to mention the assessment cost element only (for base) in the costing sheet, right ?

[ajaycwa1981]

Hi Nikitha

thats right!!

Regards

Ajay M

[Former Member]

But what I feel at this point of time is, the client has requirement to credit the cost centres differently with different percentages and I would require 10 different overhead keys and credit keys....It will be out of all proportions...I feel dumb..

[ajaycwa1981]

Hi

Then you have no choice, but to have 10 diff set of keys

Enjoy madi !!

Regards

Ajay M