Product Costing-Overhead inclusion in Inventory standard cost without PPV

[Former Member]

Dear Friends,

I have a requirement to include overhead cost in standard price of the material where only component is material cost which is purchased from oustide and sold without any operation so there is no routing or production order. It would be possible to load ovrehead cost along with material cost to include it in standard price of the material. But when overehead is included in standard price, when ever material is purchased, the difference between standard price and PO price will be posted as Purchase price variance. The overhead portion included in the standard price will distort value of Purchase price variance (PPV). Is there any option available in SAP which can allow loading overhead cost in standard cost of the material without affecting PPV value?

Thanks and regards,

Pinky

[ajaycwa1981 · Accepted solution]

Hi Pinky

That would not be possible. ONce you calculate std cost, you tell the system that inventory is to be valuated at this price.. Any PO price different than this will call for PPV.... You cant avoid this

In your case, since you are saying, you simply buy and sell the materials, why are you valuating them at Std cost.. Your price control should be V, so that inventory is valuated at actuals

And whatever overhead you incur to sell the product, should ideally be allocated as an overhead in COPA using assessment cycle KEU5.. Or else, you can use a costing sheet in COPA, do step-up your COGS by a certain % to account for the overheads... HOwever, I would personally not recommend this.... Reason being, Absorbing overheads in this way, will always lead to over or under absorption

I would prefer Price control V and then KEU5 as said above

Ajay M

[ajaycwa1981 · Accepted solution]

Hi

Also, you can keep price control V and still run CK11N for statistical purposes. This way, it wont result in PPV during GR from Purchase order and still apply overhead to the product.

If the RMC and overhead are separate cost components, you can map them to separate value field in COPA..

Map VPRS (Mvg Avg Price in this case) to a separate value field. This way, you wil be able to differentiate between COGS based on MAP and COGS based on Std cost inclusive of overhead

Ajay M