WIP in SAP – Understand Configuration requirements in S4 HANA System

WIP in SAP in S/4HANA Finance

WIP or Work in Progress for reporting and posting is a mapping exercise. The configurations of WIP in SAP S/4HANA for product cost by Period and Product cost by Order are similar.

We will look at the configuration for product cost by period and highlight the difference along the way.

Key configurations required in doing WIP in SAP S4 HANA Finance

1. First, Create the Result Analysis key and version
2. Then, Create Line IDs and map to source cost elements
3. Map line IDs to WIP or results analysis cost elements ( Type 31)
4. Finally, Create posting rules for settling WIP to SAP ERP Finance ( FI)

WIP calculation is a period end activity of Product cost by order calculation. So, now let us know what is exactly the product cost by order. And what we do in this to get the WIP calculation.

Product Cost by Order – The Platform for WIP in SAP

The Product cost by order scenario involves working with manufacturing orders. You will now look at the differences between WIP calculation for manufacturing orders and product cost collectors.

Relation of WIP to Product cost by Order

You can evaluate WIP at an actual cost in product cost by order. All order debits are WIP until valuated goods receipt into inventory occurs.

At the period end, you can determine the actual balance of incomplete manufacturing orders not fully delivered to inventory during WIP calculation.

During settlement, you post calculated WIP to a WIP balance sheet account and an offsetting profit and loss account.

Also read: Product Costing – All that you need to know

You can base SAP WIP calculation on the following manufacturing order status

1. REL- Released- Calculate WIP
2. DLV-Delivered-Cancel WIP
3. TECO-technically complete –Cancel WIP

You calculate WIP at each period end until the order status is set to “DLV” or “TECO”. Then the system cancels WIP and calculates the variance. Further, let’s take an example for a better understanding.

You may be interested in: SAP product Costing Interview Questions

Steps involved in Product Cost by Order to reach WIP Calculation

To understand the concept of Product Cost by order which finally leads to get WIP in the S/4HANA Finance system, here I have given a scenario where you can see the different steps that we take to perform this activity.

So let us go ahead.

Step 1: Create Production Order

Following image and description would help you understand the creation of Production Order

Material # 152 is to be produced in Plant No -1201. The total quantity is to be produced # 6 Units and 3 units delivered.

• Costing Variant for calculating Target Cost- Z201
• Costing variant for calculating Actual Cost –Z202
• Result Analysis Key for WIP calculation- MBMF01
• Used for Production Order Variance Analysis – Z00001

• You use Routing Data in Production Order – 50000013
• Likewise, you use BOM Data in production Order – 00000102

Important Post: Key Changes in SAP Profitability Analysis 2020

Step 2: Accounting Document for Raw Material Consumption

Step 3: Controlling Document created when activity confirmed

This controlling document is for Material # 152 and Production Order # 1000225.

Step 4: Finance document created in Universal Journal in S4 HANA

This is with reference to activity confirmation.

Step 5: Calculation of Actual Cost

Once you see the confirmation performing in the system, SAP will calculate and update the actual cost.

Total Cost – 46,045.21 (22,569.28+22573.08+902.85) out of this 3 items Production receipt done Cost – 41,486.58

Note- Since its a multi-level cost calculation. Thus no Raw material consumed for finished stock.

However, the Raw Material consumed with Semi-Finished stock.

With this, the system posted accounting document.

Step 6 (The End Result): WIP in SAP S/4HANA System

So, at the end of doing all these activities, the WIP value would be like this.

And its accounting document will be like this.

So, these are the key settings or configuration requirements that we do into the system. And thus, we get the WIP calculation. The whole process is very deep and involves careful handling in order to avoid errors.

These screen images and information in this article gives you a brief idea of the actual tasks that consultants do in real-time.

Related Article: Learn the Concept of Product Cost Planning

Also a Related Video: Business Process in SAP S/4HANA

EndNote

The Work in Progress calculation or WIP in SAP is an important part of the S/4HANA Finance configuration. One must not leave this subject while learning the SAP S4 HANA Finance.

WIP calculation and configuration is part of the job profile of SAP S4 HANA Finance consultants. Hence, if you wish to be a competent HANA consultant or if you already are one, make sure you have knowledge on this subject.

Also Read:
1. Detailed Guide on SAP material Ledger
2. Best Features of SAP Profitability Analysis (COPA)