How to Transfer Material Ledger Detailed Actual Costing Results to CO-PA

  • by David Golan, Senior SAP CO/FM Professional Consultant, C-Value, LTD
  • December 8, 2015
Learn how to configure the transfer of a material ledger total actual cost, actual cost components split, and production quantities in multiple units of measure to Profitability Analysis (CO-PA).
Learning Objectives

After reading this article, you’ll know how to:

  • Activate an actual cost component split in the material ledger
  • Use standard material ledger reports to analyze an actual cost component split
  • Customize material ledger drill-down reports
  • Customize the transfer of a material ledger actual cost component split
  • Transfer production quantities to Profitability Analysis (CO-PA) in different units of measure (UOM)
Key Concept

Activation of actual costing is not a common practice. Typically, there are two main reasons to implement actual costing: a legal imperative to valuate materials inventory in actual values and a need to analyze actual costs of complex multi-level products’ bill of materials (BOMs). This task can be accomplished in Controlling-Product Costing (CO-PC) only through activation of an actual costing process in addition to activation of actual cost components. The entered actual costs of a material are optionally listed according to cost components.

SAP standard solutions provide you with tools to analyze the origins of actual production costs and the sources of costs variances. They help you understand gaps between your budget/standard (preliminary valuation) costs and actual production costs. Then you can easily examine your company's gross profitability by various product and customer dimensions. By transferring actual production costs to CO-PA you will be able to compare your target profitability with actual profitability by different market segments and therefore provide accurate cost and profitability data to management. This process will also help you eliminate differences between an FI P&L report and a Profitability Analysis (CO-PA) profit contribution report.

When actual costing is used along with CO-PA, you obtain advantages, such as:

  • Consistency between P&L reports in FI and profit and loss (P&L) contribution reports in CO-PA
  • Analysis of costs and profit contribution in detail or by high-level dimensions in total or by cost components and inter-product cost comparison through uniform units of measure (UOM)

As an expansion of the product costing component, the purpose of actual costing is to determine actual costs for externally procured materials and in-house produced materials. The actual costs calculation is performed on a total level and optionally also by cost components.

Production quantities are typically recorded in industry-specific UOM such as BOX in the beverages industry and ROL in the fabrics industry. These measures do not allow for an inter-product cost comparison. CO-PA allows the recording of actual quantities in standard UOM in order to carry out the comparison.

Material ledger reports are primarily useful for analysis of price and exchange rate variances. The transfer of actual production costs to CO-PA allows an aggregate analysis of costs by all product dimensions (product groups, product hierarchies, and other material characteristics). Periodic cost valuation of sales facilitates the creation of gross and operational profit contribution reports consistent with FI profit by all customer dimensions.

SAP standard material ledger reports and reporting tools allow for the analysis of a single material actual cost component split, or multiple materials analysis of total actual costs only. Single material actual total cost and cost components split analysis is available through standard SAP transaction code CKM3. Multiple materials total actual costs analysis can be available through the material ledger standard drill-down reporting tool. However, material ledger drill-down reporting does not include an option for actual cost components split analysis.

This article focuses primarily on the customizing needed to transfer actual production costs to CO-PA. However, in order to provide a complete picture, I provide a brief overview of the reports and reporting tools in the material ledger as well as the customizing needed to activate an actual cost component split.

David Golan

David Golan is a senior SAP CO/FM consultant at C-Value, LTD. He has more than 10 years of experience as a consultant and team leader and more than 13 years’ experience in ERP and IT. David holds a BA degree in economics and an MA degree in public administration. He has acquired experience and expert SAP consulting skills in various settings, including eight full-cycle projects in many industries, such as manufacturing, finance, public utilities (municipal), government, and defense. He has expert knowledge in the Funds Management functionality, Product Costing functionality - Standard and Actual Costing, including material ledger and alternative valuation/cumulative costing and Mill Products CO industry solution, FI Accounts determination (standard and extended), Profitability Analysis (CO-PA), Cost Centers and Internal Order Accounting (Overhead Management), Activity-Based Costing (ABC), and Profit Center Accounting (EC-PCA).

In addition to his SAP consulting experience, he has held positions as a QA team leader, a programmer in a large high-tech company, a financial software instructor, and assistant researcher in the Bank of Israel Research department.

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