Doubt in Concept of WIP calculation

[Former Member]

Dear SAP Gurus,

I have doubt in the concept of WIP. Please help me clarify this.

My Understanding is that WIP = Actual Cost - Goods Receipt. (correct me if I am wrong). But while calculating WIP in  KKAX, the calculation considered only the Actual cost but not the goods receipt.

The details of the process are below;

Standard Cost component Structure - FG0001
Raw material cost (10 Qty from  BOM * 50 USD)			500
Material Overhead (10% of the Raw Mtl price			50
Production cost (2 Hrs from Routing * Price per activity from KSPI			40
Total			590

Preliminary Costing - FG0001
Production Order for Finished good FG3001		100	Qty
Raw Material (A001-RM) from BOM		100	Qty
Labor from Routing		20	Hrs
Preliminary Cost component Structure - FG3001 for 100 Qty
Raw material cost (10 Qty from  BOM * 50 USD)			5000
Material Overhead (10% of the Raw Mtl price			500
Production cost (2 Hrs from Routing * Price per activity from KSPI			400
Total			5900

1. Goods (Raw material) issue to Production order

As per the plan, the quantity of Raw material required is 100. To caluclate the varainvce we will move 105 Qty. So the amount will be 50 USD (price per qty of Raw Material) * 105 (actual qty of goods issue)

Accounting Entry
Raw Material Consumption	Debit	5250
Raw material Inventory	Credit	5250

2. Activity Confirmation Production order

The planned number of hours for producing 100 Quantities of finished goods is 20 Hrs. To understand the variance, let us change the number of hours to 24 Hours. So that he variance will be 4 hrs * 20 USD(hr prer activity Unit)= 80 USD

3. Partial Goods receipt from Production

out of 10 Quantities in PO we are moving only 6 quantities to calculate the WIP.The amount will be 6 Qty * Std price = 6*590 = 3540

3. Partial Goods receipt from Production

out of 10 Quantities in PO we are moving only 6 quantities to calculate the WIP.The amount will be 6 Qty * Std price = 6*590 = 3540

4. Calculation of WIP

Out of 10 Quantities inPO, 6 qty has been received into Finished good inventory. 4 Quantities are still in Production. Thus we have to calcutalte the WIP. WIP = Actual cost - Goods receipt.

Actual Cost (5250 + 480)	5730
Goods Receipt	3540
WIP	2190

But in the KKAX calculation, I am getting only 5730 and not 2190. Please let me know what I am missing.

Thanks

Kumar

[NiklasL · Accepted solution]

Hi Kumar

Please check your customizing. You need to assign your cost element for Goods Receipt to a line ID in transaction OKGB in the ReqToCap column. Then you have to define the update in transaction OKGA to category A (settled cost). That usually makes it work.

Kind regards,

Niklas

[Former Member · Accepted solution]

Hi Kumar,

Your conceptual understanding is correct. WIP = Debits to a production order(RM, activity confirmations) - credits to a production order(goods receipts). As niklas mentioned you simply have to ensure that your 'change is stock' cost element( or whatever you name it for the CE that credits along with GR) is maintained in the customization for WIP.

Best Regards

Vimal    

[Former Member]

Hi Kumar,

Are you using production order or process order?

WIP :

The WIP calculation process valuates the unfinished products (work in process).

In the Product Cost by Order component, the work in process is valuated at actual costs. Work in process is the difference between the debit and credit of an order that has not been completely delivered. This method determines the work in process for each production order by calculating the difference between the actual costs incurred and the actual costs settled (that is, the difference between the debits for goods issues, internal activity allocations, external activities, and overhead on the one hand, and the credits for goods receipts on the other). Once the last part of the order lot has been delivered to stock, any remaining work in process must be canceled so that the order costs can properly be settled to stock.

The status of the order determines whether WIP calculation creates or cancels the work in process.

     If the order has the status REL (released), the system can calculate work in process.

    Once the order receives the status DLV (Delivered) or TECO (Technically completed), the work in process calculated in a previous period is canceled.

for this you have calculate WIP for every order.

KKAX- this  T.code is used for single order process.

KKAO-this T.code is used for collective process,here you process by plant.

Hope this is helps you.

check this link also.

http://help.sap.com/saphelp_46c/helpdata/en/90/ba6a93446711d189420000e829fbbd/content.htm

Thanks,

Rau