Capture Usage Variances and Automatically Assign Them to Your POs

  • by Janet Salmon, Product Manager, SAP AG
  • November 15, 2006
You can use the distribution of usage variances function to simplify data collection for variance analysis and the valuation of inventory at actual costs, and avoid recording each transaction on its own. An example shows the steps and takes you through the process of what to do in Customizing.
Key Concept

Distribution of usage variances is a function that debuted in SAP R/3 Release 4.7 and is now available in mySAP ERP Central Component (ECC). It processes physical inventory (PI) documents and automatically assigns new values to the production orders reflecting accurate data captured in the PI document concerning the materials used in production.

When it comes to implementing Product Costing, there are two schools of thought. One says that if you want proper variance analysis and accurate stock valuation, especially if you are working with actual costs, then you have to make sure that your confirmations are as accurate as possible by recording machine time at operation level and posting goods issues to each production order individually. However, such accuracy requires effort to record the data — and, of course, some production processes quite simply refuse to submit to such a rigid approach.

The other school of thought prefers to confirm using backflushing. You make all goods issues and confirmations with standard values in the bill of material (BOM) and routing as you post the goods receipt. This accelerates the postings to the production orders, but if your BOMs and routings are less than perfect, you soon find that the inventory values in R/3 and the values of each stock count start to diverge.

Starting with Release 4.7, you can occupy the middle ground between accuracy and efficiency by recording the differences between the stock values derived from a physical inventory and the inventory values in R/3 Release 4.7 and mySAP ERP Central Component (ECC). You can use the distribution of usage variances function to assign these differences to the production orders in proportion to the quantities of goods issues to each order since the last stock count. That way, you can perform variance analysis and value inventory at actual costs without the inconvenience of having to record every transaction separately. For information about how costs can be distributed in previous versions, see the sidebar, “The Forerunner: Cost Object Hierarchy.”

Janet Salmon

Janet Salmon joined SAP in 1992. After six months of training on R/2, she began work as a translator, becoming a technical writer for the Product Costing area in 1993. As English speakers with a grasp of German costing methodologies were rare in the early 1990s, she began to hold classes and became a product manager for the Product Costing area in 1996, helping numerous international organizations set up Product Costing. More recently, she has worked on CO content for SAP NetWeaver Business Warehouse, Financial Analytics, and role-based portals. She is currently chief product owner for management accounting. She lives in Speyer, Germany, with her husband and two children.

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