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Nov 28, 2011 at 11:40 PM

Allocation of overhead cost to finished goods through vendors and raw mat.


We are trying to allocate a cost base in our purchasing department of around 200 mio dkk to our finished products. These products we manufacture ourselves. The cost represents salaries and external services

The outcome of an ABC study has been to allocate these costs, first on vendor level based on the total spent on each vendor and subsequently to the raw materials from each vendor based on value. The cost of purchasing should then be included in cost estimate of the raw material and hence in the cost of the finished goods through the bill of materials.

Our challenge now is to implement this algorithm into our product costing system in SAP.

The easy solution from the point of view of the SAP department is to have cost controllers doing the math of calculating the cost per material number in Excel and then allocate this rate through a costing sheet or a template.

But this solution on the other hand leaves the users with an extra manual task which again leaves room for error and it reduces transparency.

So has anyone tried implementing such a calculation scheme in product costing?