Simultaneous Costing in SAP CO (Product Costing)

What is Simultaneous Costing in Product Costing?

Simultaneous Costing is again an important part of Product Costing in SAP. It comes in the process after the calculation of the standard cost.

Once we have calculated the Standard Cost, we will proceed with the process of actual costs.

Actual Cost debit/credit a product cost collector (or manufacturing order) during goods movements and activity confirmation during a period.

What’s important in Simultaneous Costing?

We have some important points under the process of Simultaneous Cost. These are majorly related to debit and credit entries in GL, handling of P&L, and also to the management of inventories. So let’s learn them in detail.

Goods Movement

Goods movements to and from the Production Orders result in debit or credit entries.

Debit – Simultaneous Costing

When you issue goods from inventory, you credit a General Ledger (G/L) balance sheet account. This also automatically debit a profit and loss consumption account.

A primary Cost Element with the same number as the inventory consumption account ensures that a parallel posting in controlling (CO) occurs at the same time as you issue components to production order.

Then the system automatically chooses the production order or product cost collector as the cost object.

Further, the system calculates the debit value by multiplying the standard price by the component quantity issued from inventory.

Here is an example – Goods issue Debit Production Order

Raw Material Inventory 100 Units => Raw Material Consumption 100 units => Production Order Raw Material Quantity 100 units

Here, you don’t need to manually enter G/L accounts during goods issues to production orders. This is because these accounts are already mapped during integration settings (i.e OBYC settings).

Credit – Simultaneous Costing

As you deliver finished goods from a production order into inventory, you debit an inventory balance sheet account and likewise credit a profit and loss production output account.

This is because a primary cost element corresponds to the production output account.

You also credit controlling cost objects. Likewise, Since you deliver the finished goods from the production order. Thus, the system automatically chooses the production order or product cost collector to receive the primary credit.

Subsequently, the system calculates the credit value by multiplying the standard price by the quantity of the finished goods delivered to inventory.

Example:-

	Production Order
Debit	1000 Raw Materials 600 Activity cost 100 Overhead Cost
Credit	1500 Finished Goods
Balance	200 Variance

The system determines the G/L account posted during the delivery of finished goods from the production order into inventory.

Further, the total variance is actually the production order balance or the difference between total debit and credit. Variance calculation at the period end divides the variance into categories based on the source of the variance. This further assists in determining corrective actions during variance analysis.

Then, at the period end, the production order receives a secondary credit equal to the variance during settlement resulting in a zero balance.

This finally results in total product cost collector and manufacturing order costs posted to Financials and Profitability Analysis (COPA).

Confirmations

Activity confirmations normally involve secondary postings within SAP CO. When you confirm production order activities during a period, the system debit the production order or product cost collector and credit a cost center.

Earlier in SAP ERP (ECC) financial G/L expenses account do not receive corresponding postings during activity confirmation.

Whereas now in SAP S/4 HANA Finance as FI-CO reconciled automatically for every activity confirmation there will be one FI document and GL postings will be there with reference to CO document (as part of S/4HANA Management Accounting).

CO document with Activity Confirmation

FI document

Update in Universal Journal- ACDOCA

Release

After you have created a production order, you need to carry out the release step before you collect any costs on the production order.

Operation Overview –Order # 1000267

Component Overview –Order # 1000267

Report Cost

Order # 1000266- Semi-finished Good

WIP -18481.07 INR

Order # 1000267-finished Good

WIP-1047.35 INR

Know Details for: SAP S/4HANA Finance 2020

Summary – Simultaneous Costing

In this blog, we looked at simultaneous costing involving goods movements and confirmations that generate postings during a period.

We also discussed how goods movements generate primary postings and how activity confirmations generate secondary postings in CO and FI-CO reconciliation also in Universal Journal.

There are lots of cost concepts in SAP Controlling. With this brief post, you should also have understood this thing. Product Costing is an important subject in Controlling which has simultaneous Costing as its important part.

Hence, you should learn Simultaneous Costing too.

Get Syllabus for: SAP S/4HANA Finance Training

Also Watch Video: SAP CO Assessment & Closing Activities

Pradeep