Cost estimates without reference to materials

Excerpt from SAP S/4HANA Product Cost Planning Configuration and Master Data by Tom King.

Early in the product life cycle, little is known about the costs of a material or even the specific components and operations required to manufacture that material. Costs can be manually specified in unit cost estimates to represent the costs in these early stages of product development. Using special material types, non-productive materials can be defined to represent reusable manufacturing processes and component lists for developing costs.

Purpose of cost estimates without reference to materials

Using the term “cost estimates without reference to materials” is a bit misleading. What is really intended is the ability to create a cost estimate without having to create a production material to go with it. The research phase of the product life cycle is a time of experimentation, and there is no compelling reason at this point to begin to create materials that will never make it into production. The desire at this stage is the ability to estimate the costs of creating a type of product. If the result is not deemed to be cost effective, then there is no need to move forward with creating a material. SAP provides alternative methods for generating cost estimates without requiring a production material.

Start reading now!

Dive into SAP Product Cost Planning (CO-PC-PCP) and explore in depth how costs are assigned to materials. Walk through SAP S/4HANA configuration tasks and how these decisions impact unit costing and cost estimates with quantity structure. Determine how to manually specify unit cost estimates during the early stages of product development. Find out how to use SAP Easy Cost Panning to estimate costs for a new product, before the material is created. Review cost component views and configuration to understand how this can be used to enrich the information displayed in cost estimates. Understand how material and manufacturing overhead costs are assigned to materials. Learn more about single and multilevel cost estimates, both with and without quantity structure. Evaluate your SAP CO options for defining product costs using cost estimates with quantity structure. Based on an example company, learn more about methods for generating raw material cost estimates. Obtain tips for updating the material master.

– Delve into configuration of costing variants and valuation variants
– Examples of how configuration choices affect costs
– Master data required for generating the cost estimates
– Types of costing supported in SAP Product Cost Planning

Author Tom King is a graduate of Northwestern University and recently retired as a senior business analyst with a focus in controlling and product costing. He has more than 10 years of experience with the SAP FI-CO modules, primarily as an internal consultant. Prior to that, he was involved with the modeling and design of an Activity Based Costing system using a different ERP system for his company’s European operations. He has spoken at conferences on several CO module topics and is the author of Practical Guide to SAP® CO Templates.