# Top 31 Sap Product Costing Interview Questions You Must Prepare 14.Jun.2024

The process of creating a Mixed cost estimate would be as follows:-

1. Create procurement alternatives for each of the production version.
2. Define Mixing ratios for the procurement alternatives
3. Select the configured quantity structure type and execute a material cost estimate based on the costing version.

The cost for the By-product is the net realizable value. This is manually maintained in the system for the by-product through transaction code MR21 Price change.

If you are calculating the work in process at actual costs, the system will create reserves for unrealized costs if the credit for the production order based on goods receipts is greater than the debit of the order with actual costs incurred. The Result analysis category RUCR (Reserves for unrealized cost) would need to be maintained. Normally this is not maintained in most of the companies.

A Co-product (primary product or by-product) is indicated by a tick in the costing view of the material master. In the BOM all the primary products are represented as an item with negative quantity. A primary product is also indicated as a co-product in the BOM of the leading coproduct.

For primary products the costs are calculated using the apportionment method, while for by-products the net realizable value method applies.

Mixing ratios are weighting factors assigned to the procurement alternatives. This weighting factor is obtained from the planning department based on the usage of the procurement alternatives during the planning year.

For e.g.

Procurement alternative 1 (production version 1) 40% will be manufactured

Procurement alternative 2 (production version 2) 35% will be manufactured

Procurement alternative 3 (production version 3) 25% will be manufactured

This % will be maintained as mixing ratios.

Thus when system calculates the mixed cost estimate, system will first cost each of the production version and then multiply each of the costs with the weighting factors.

Thus

240 (cost of prod. Vers 1) X 40 = 9600

210 (cost of prod. Vers 2) X 35 = 7350

160 (cost of prod vers 3) X 25 = 4000

Mixed costs 17350/100 = 173.5

In this case you need to the use simulation mode OMWB in MM and enter the material code plant and the movement type 261 (issue against production order). You will see the account modifier VBR and against which the GL code is available.

The following are the steps:-

1. Create procurement alternatives based on the valuation types for the material.
2. Maintain Mixing ratios for the procurement alternatives

Primary cost split is defined when you create a cost component structure. When you switch on this setting, the primary cost from the cost center are picked up and assigned to the various cost components.

The purpose of the cost roll up is to include the cost of goods manufactured of all materials in a multilevel production structure at the topmost level of the BOM(Bill of Material) The costs are rolled up automatically using the costing levels.

• The system first calculates the costs for the materials with the lowest costing level and assigns them to cost components.
• The materials in the next highest costing level (such as semifinished materials) are then costed. The costs for the materials costed first are rolled up and become part of the material costs of the next highest level.

SAP first costs the lowest level product, arrives at the cost and then goes and cost the next highest level and finally arrives at the cost of the final product.

All the costs or revenues which are collected in the Production order or Sales order for example have to be settled to a receiver at the end of the period. This receiver could be a Gl account, a cost center, profitability analysis or asset. Also read the question “What is a cost object “ in the section Controlling.

In order to settle the costs of the production order or sales order a settlement profile is needed. In a settlement profile you define a range of control parameters for settlement. You must define the settlement profile before you can enter a settlement rule for a sender.

The Settlement Profile is maintained in the Order Type and defaults during creating of order.

Settlement profile includes:-

1. the retention period for the settlement documents.
2. Valid receivers GL account, cost center, order, WBS element, fixed asset, material, profitability segment, sales order, cost objects, order items, business process
3. Document type is also attached here
4. Allocation structure and PA transfer structure is also attached to the settlement profile e.g. A1

Costing variant forms the link between the application and Customizing, since all cost estimates are carried out and saved with reference to a costing variant. The costing variant contains all the control parameters for costing.

The configuration parameters are maintained for costing type, valuation variants, date control, and quantity structure control. In costing type we specify which field in the material master should be updated.

In valuation variant we specify the following

1. the sequence or order the system should go about accessing prices for the material master (planned price, standard price, moving average price etc).
2. b) It also contains which price should be considered for activity price calculation and .
3. How the system should select BOM and routing.

Mixed costing is required when different processes are used to manufacture the same material. Mixed costing is required when you have different sources of supply for purchasing the material.

Let us take an example:-

There is a finished good Xylene which can be manufactured by 3 different processes.

The first process uses an old machine and labour. The processing time is 9 hrs to manufacture.

The second process uses a semi-automatic machine and labour. The processing time is 7 hrs to manufacture.

The third process uses a fully automatic machine and the processing time is 5 hrs. Thus cost of manufacture for the 3 processes is different. By using Mixed costing you can create a mixed price for the valuation of this finished good.

The transfer structure is what helps in settling the cost from one cost object to the receiver. It is maintained in the Settlement profile defined above.

The Transfer structure has 2 parts:

1. Source of cost elements you want to settle
2. Target receiver whether it is a Profitability segment or fixed asset or cost center

The configuration steps involved in split valuation:-

1. Activate split valuation – Configure whether split valuation is allowed for the company code.
2. Determine the valuation categories and valuation types that are allowed for all valuation areas.
3. Allocate the valuation types to the valuation categories
4. Determine the local valuation categories for each valuation area and activate the categories to be used in your valuation area.

In the Repetitive manufacturing you need to use the Costing BOM for the other co-product. Through arithmetical calculation you need to maintain the quantities in the costing BOM. This co-product will be shown as a negative item in the leading co-product.

The flow is as follows:

Sales order -> Requirement Type-à Requirement Class-> All settings for controlling

In a sales order you have a requirement type .In configuration, the requirement Class is attached to the requirement type and in this requirement class all configuration settings are maintained for controlling.

In the requirement class we attach the costing variant, we attach the condition type EK02 where we want the sales order cost to be updated, and the account assignment category. In the account assignment category we define whether the sales order will carry cost or not. In case if we do not want to carry cost on the sales order we keep the consumption posting field blank. We also define here the Results Analysis version which helps to calculate the Results Analysis for the Sales order if required.

Quantity Structure type for mixed costing must be configured. Here we specify the time dependency of the structure type .

The following options exist

1. You have no time dependency.
2. It is based on fiscal year
3. It is based on period

This quantity structure type is then assigned to the costing version.

Both of these are cost objects which collect production costs for manufactured product. Product cost collector is a single order created for a material. All the costs during the month for that material is debited to single product cost collector. No costing by lot size is required in case of product cost collector. The latter is where there are many production orders for a single material during the month. Costs are collected on each of this production order. Costing by lot size is the main requirement in case of production orders.

This is possible when you do a plan activity price calculation from SAP. The primary cost component structure is assigned to the plan version 0 in Controlling.

Component scrap is the scrap of a material that is expected to occur during production. When an assembly is produced with this component, the system has to increase the component quantity to enable to reach the required lot size. The component scrap can be entered in the BOM item or in the MRP 4 view of the material master

Scrap costs are assigned to the relevant cost component and can be shown separately for a material in the costed multilevel BOM.

The preliminary cost estimate is required for the following:-

• Confirm the actual activity quantities.
• Evaluate work in process
• Calculate production variances in variance calculation
• Evaluate the unplanned scrap in variance calculation

• Results Analysis Key – This key determines how the Work in Progress is calculated
• Cost Components - The break up of the costs which get reflected in the product costing eg. Material Cost, Labour Cost, Overhead etc
• Costing Sheets - This is used to calculate the overhead in Controlling
• Costing Variant - For All manufactured products the price control recommended is Standard Price. To come up with this standard price for the finished good material this material has to be costed. This is done using Costing Variant. Further questions down below will explain this concept better.

A By-product in SAP is defined as an item with a negative quantity in the Bill of Material. By-product reduces the cost of the main product. There is no Bill of Material for a By-product.

Yes it is possible. We create another cost component structure and assign it to the main cost component structure. This cost component structure is called Auxiliary cost component structure which provides another view of the cost component structure.

To prevent the system from calculating cost estimates for raw and packing material, you need to select the “No costing” checkbox in the costing view of the material master.

Yes. SAP calculates the cost estimate even for raw and packing material and stores it in the standard price field for information purposes

Scrap variance are calculated by valuating the scrap quantities with the amount of the actual costs less the planned scrap costs.

No. It is not possible to use the Standard Co-product functionality in repetitive manufacturing

The Result analysis category WIPR - Work in process with requirement to capitalize costs is normally maintained for WIP calculation