Improve Your Analysis Capabilities with Product Cost Collectors

  • by John Jordan, ERP Corp
  • July 15, 2006
If you’re using costing based on production or process orders, consider the advantages of implementing product cost collectors instead. You can implement them with these guidelines.
Key Concept

Product cost collectors are available since SAP R/3 Release 4.5 for use with production orders, as well as in repetitive manufacturing. A product cost collector is a cost object that collects actual costs during the production of a material. Product cost collectors become the main cost object, instead of production orders, when linked. With product cost collectors, the system calculates what the value of work in process (WIP) should be based on the preliminary cost estimate, and the calculated value is posted as WIP at period- end. Any difference between calculated and actual WIP is posted as a production variance. Product cost collectors are relatively easy to implement, even if you are currently using production/process orders. When you value WIP at target based on preliminary cost estimates using the WIP valuation variant, you reduce WIP messages and production variances.

The use of product cost collectors with production orders as well as in repetitive manufacturing provides some advantages over costing based on production orders. They include easier reconciliation with financial accounting and more useful variance analysis based on product instead of production orders.

The method of calculating work in process (WIP) and variances for product cost collectors is different than for production orders. I’ll illustrate the differences by discussing WIP at actual based on production orders and WIP at target collected by cost collectors in detail, followed with a list of advantages of WIP at target. I’ll provide the configuration steps and give an example of the use of a WIP valuation variant to reduce error messages and postings to production variances.

John Jordan

John Jordan is a freelance consultant specializing in product costing and assisting companies gain transparency of production costs resulting in increased efficiency and profitability. John has authored bestselling SAP PRESS books Product Cost Controlling with SAP and Production Variance Analysis in SAP Controlling.

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Comments

7/14/2013 12:16:05 PM
Aparna

Hi John,

This is a very informative and well written article.

I have a question w.r.t Product cost collectors. I hope you wouldn't mind in answering the same.

Actual costing/Material ledger can be used in the case of product cost collectors only when the controlling level is "BOM & Routing / Production versions" and not at production plant/planning plant level. Is it correct?

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