Define Cost Components

Here you define the structure of the

cost components in material cost estimates and of product costing for the sales order item.

The cost components group the results of a cost estimate into raw materials, material overhead, external activities, setup costs, machine costs, labor costs, production costs, and other costs.

The cost components can be:

The cost components also serve as a filter for the costing results. They determine the following:

Structure of the Cost Components in a Cost Component Split

The cost components are listed in a cost component structure that can contain up to 40 cost components (cost fields).

The structure of the cost components is the same for each material in the BOM. This means, for example, that:

This way the product cost estimate shows you not only the total costs for the usage of a semifinished product but also what the costs are composed of. This is called a cost component split . The system updates a cost component split for each material in the BOM (including the raw materials). In contrast to the R/2 system, you do not have to create separate cost components for the semifinished materials.

You can identify the cost component split of the cost component structure as a primary cost component split.

In this case you can include the

primary costs from Cost Center Accounting and Activity-Based Costing in the cost estimate. Overhead that goes into the primary cost component split is still treated as secondary costs.

The primary cost component split and the cost component split for the cost of goods manufactured can exist in parallel to allow comparisons and analyses.

In this case you specify which cost component split is the main cost component split. Only the main cost component split can update of results of the standard cost estimate to the material master. The second cost component split (called the auxiliary cost component split) is used more for statistical information purposes and can be evaluated in Profitability Analysis, for example.

Assignment of Cost Elements to Cost Components

All costs in the All costs in the SAP system are assigned to cost elements . This assignment is made in the following way:

If costs arise for... then assignment is made through...
Materials account determination
Nonstock materials the BOM item
Internal activities the record
External activities the record or the operation
Overhead the costing sheet

Materials that are assigned to the same cost element through automatic account determination can be separated for controlling purposes through an origin group in the costing view of the material master record.

You can create cost components in the following ways:

For example, costs that are assigned to cost elements 400000 to 410000 are assigned to the same cost component.
For example, costs assigned to cost element 400000 are assigned to one cost component, while costs assigned to cost element 410000 are assigned to a different cost component.
For example, costs that are expected for materials of origin group EXTN are assigned to the same cost component (regardless of the cost element).
For example, costs assigned to cost element 400000 and origin group EXTN are assigned to the same cost component.
For example, costs assigned to cost elements 400000 to 410000 and that come from materials with origin group EXTN are assigned to the same cost component. Costs that are within this cost element interval but have a different origin group are assigned to a different cost component.
If you leave the entries Cost element from, Origin group and Cost element to blank, all costs in the cost estimate that were not assigned are assigned to the cost component with a blank entry. For example, this can be a cost component for "other costs".

Example of Assignments of Cost Elements to Cost Components

The costs in the itemization (such as material usage costs, internal activities, and overhead) are assigned to cost components as follows:

Itemization Cost elements Cost component
M Plant 01 RAW-1 -> 400000 -> 01 material costs
M Plant 01 RAW-2 -> 400000 -> 01 material costs
M Plant 01 RAW-3 -> 410000 -> 01 material costs
E CCenter 1 ACT-1 -> 610000 -> 02 internal activities
E CCenter 1 ACT-2 -> 611000 -> 02 internal activities
G material overhead -> 660000 -> 03 overhead

Material account determination selects an account (such as 400000, 410000) and a primary cost element for each material (item category M). These cost elements are assigned to cost component 01.

For each internal activity (item category E) there is an activity type defined in the CO module. The master record of this activity type points to a secondary cost element (such as 610000 or 611000). These cost elements are assigned to cost component 02.

Overhead (item category G) is calculated in Controlling in a costing sheet. The credit key in the costing sheet points to a secondary cost element (such as 660000). These cost elements are assigned to cost component 03.

Attributes of the Cost Components

When defining the cost components you must determine whether they:

When defining the cost components you must specify whether the cost component plays a roll in the creation of the different prices that are transferred into the material master record. You have the following options:

Costs that are flagged as relevant for stock valuation form part of the standard price if the results of the standard cost estimate are marked and released. These costs also serve as a basis for the following:
Costs that are flagged as relevant for inventory valulation for the purposes of commercial law form part of the commercial price. This price is calculated in an inventory cost estimate and can be written to the material master record.
Costs that are flagged as relevant for inventory valuation for the purposes of tax law form part of the tax price. This price is calculated in an inventory cost estimate and written to the material master record.
This category allows you to group together several cost components of a cost component structure.
If you use the functions of
multiple valuation in group costing, you can specify that costs that arise from supply relationships with other company codes and profit centers are updated under the cost component. You can specify this for one cost component for each cost component structure.

Proposals for the Update of Additive Costs

Here you can define which cost elements or cost elements and origin groups are proposed in cost estimates without quantity structure or when additive costs are entered when you enter a cost component.

In Customizing, you should make sure that the cost element proposed is actually in the cost element interval for the cost component.

Transfer structure

The transfer structure transfers the costs from the cost components of one cost component structure to the cost components of another cost component structure.

If you are using

primary cost component splits or activity types in Activity-Based Costing, you can pass this information on. If the cost component structure of the primary cost componen split differs from the cost component structue for materials, you can specify which cost components of the source cost component structure go into which cost components of the target cost component structure.

Cost component views

You can display the results of the cost estimate in the following views:

The cost component views are created using the attributes of the cost components in the cost estimate. For example, costs for cost components that are flagged as relevant for inventory valuation are shown in the cost component view "Stock valuation".

When you create a cost estimate, you can display the costs in the cost component views defined.

The cost component views are included in the calculation of overhead. In the costing type, you specify the calculation base (such as the cost of goods manufactured) on which the overhead for the semifinished products in the finished product are calculated.

These cost component views also determine how the costs are used in areas of the R/3 System:

Organizational levels of cost components

The costing type determines the level on which you can define the cost component structure.

Costing variants that specify the same costing type and valuation variant must use the same cost component structure.

You can also specify the following:

Cost Component Groups

From the maximum of 40 cost components, you can create cost component groups for example in order to group together all production costs or all raw material costs. These cost component groups can be evaluated in the costed multilevel BOM or in the custom-programmed reports.

For each cost component, you can assign two cost component groups.

Cost Compnents in the Information System

To be able to display the cost components in the information system, you must define cost component groups that define the row structure of the report. You can define these groups in the step Maintain cost component groups for the Report Writer. They are a copy of the cost component structure for the information system.

Absorption Costing and Variable Costing

You can represent your cost accounting system in the R/3 System as absorption costing or as variable costing. If you use variable costing, when you define the cost components you should only flag the variable portion of the activity types as relevant to inventory valuation. The effect of this is that with internal activity allocation, even if they are made in a confirmation, the relevant cost centers are only credited with the variable costs of the activity type prices. At the end of the period you can pass the fixed costs directly to Profitability Analysis (CO-PA) by means of assessment. The variable cost of sales is transferred to CO-PA at invoicing. Variances between the standard cost of goods manufactured and the actual cost of goods manufactured can be transferred from Cost Object Controlling to CO-PA at the end of the period.

Requirements

You must already have carried out the following steps in Customizing for G/L accounting:

You must already have carried out the following steps in Customizing for revenue element accounting:

If you want to define origin groups for the materials, you must already have carried out the step Define origin groups.

If you are using additive costs , make sure that the costing variants and the valuation variants for costing include the additive costs.

If you are using a primary cost component split for activity types, check the following settings:

Standard settings

The standard system contains a predefined cost component structure. If you want to use this cost component structure, you must do the following:

Recommendations

Activities

1. Create a cost component structure.
Enter an alphanumerical key and a name for the cost component structure, and specify whether the cost component structure is a primary cost component split.
2. Define the cost components.
Enter the cost component structure, a key and a name for the cost component. Define the attributes of the cost component.
3. Assign the cost elements, or cost elements and origin groups, to these cost components.
For each cost component, enter the cost component structure, the chart accounts, and the relevant cost element interval.
4. If you want to use additive costs, assign cost elements and origin groups to the cost components under which you want to update the costs.
5. If you want to transfer data from a primary cost component split in Cost Center Accounting and the primary cost component split uses a different cost component structure, assign the cost components of the source cost component structure to the cost components of the target cost component structure.
6. Check the supplied cost component groups.
7. Check the definition of the cost component views.
8. Assign the cost component structure to the relevant organizational units, and specify when the assignment is valid and whether you want to have an auxiliary cost component split in addition to the main cost component split.
9. When the cost component structure is no longer in the creation phase, activate it.

Further notes

For more information, see the document Product Cost Planning.

Costs that are flagged as sales and administration costs are not normally rolled up. For sales order costing, however, you should set the Roll up cost component indicator for these costs in order to avoid inconsistencies.

If you have calculated the sales and administration costs for a semifinished material and did not set the Roll up cost component indicator, then:

This means that the planned costs for the sales order item will not match the amount that is passed on to pricing as a condition value.