Define Valuation Methods (Target Costs)

In this step you define a valuation method for the calculation of work in process.

This creates the link between the

results analysis key, the results analysis version, and the system status.

When you create new valuation methods, you specify whether the work in process should be valuated at:

Work in Process at Target Costs

In the Product Cost by Period component the work in process is valuated at target costs. The valuation is made on the basis of the quantities confirmed at the reporting points.

In each period the system determines the following:

In the period-end closing activities, the relevant quantities ( WIP quantities ) are valuated according to the valuation variant for work in process and scrap (target costs) and reported as work in process.

The valuation method for WIP calculation is technically linked to a system status.

In the Product Cost by Period component the system uses a reduced status management. The following status codes are relevant for WIP calculation in this component:

The order is partially released. An order is considered to be partially released when individual operations in the order are released.
The order is released.

If the status is PREL or REL, the system creates work in process in the Product Cost by Period component by multiplying the WIP quantity by the target costs in accordance with the valuation variant for work in process and scrap (target costs).

If you want to calculate work in process at target costs, create a valuation method for each combination of controlling area, results analysis version, and results analysis key for the statuses relevant to WIP calculation.

Proceed as follows:

Work in Process at Actual Costs

In the Product Cost by Order component the work in process is normally valuated at actual costs. The following status codes are relevant for WIP calculation in this component:

The order is partially released.
The order is released.
The order has been completely delivered.
The order is technically completed.

If the status is PREL or REL, the system creates work in process in the amount of the actual costs with which the order is debited.

If the status is DLV or TECO, the system cancels the work in process. The difference between the debit through actual costs postings and the actual credit of the order from goods receipts is interpreted as a variance with this status.

If you want to calculate the work in process at actual costs, create a valuation method for each combination of controlling area, results analysis version, and results analysis key for the statuses that are relevant to WIP calculation. This valuation method must specify the following:

If you valuate the work in process at actual costs, you must make sure that the work in process that is created and settled in a period can be canceled at a later time. You do this by defining valuation methods for the cancellation.

Proceed as follows:

Data calculated with a valuation method of results analysis type F is passed to Financial Accounting in accordance with the settings in the posting rules when you settle. In Financial Accounting this data is capitalized as unfinished products inventory.

Data calculated with a valuation method of results analysis type Z results in cancellation of the capitalized inventories of unfinished products in Financial Accounting when you settle.

The valuation method for the status TECO ensures that the work in process for orders can be canceled if the orders never reach the status DLV.

Transfer Prices

If you are using multiple valuation views in the Product Cost by Order component for the calculation of work in process at actual costs, the system automatically assigns the valuation method assigned to the results analysis version of the operational valuation view to the results analysis versions of the multiple valuation views referencing the operational results analysis version.

Requirements

You must already have processed the following steps:

You must have specified in the repetitive manufacturing profile that reporting point quantities can be collected.

Standard settings

The standard system contains predefined methods of WIP calculation.

Activities

Define new valuation methods as follows:

Specify the following: