According to experts, product costing is used to value the internal cost of materials and production for profitability and management accounting. Many people avoid it due to complexity. This is why this tutorial will help to understand the importance and practicality to include it in the business.
Throughout a given period, actual expenses are recorded in SAP as purchases are made, payroll is processed, bills are paid, and production occurs. At month-end, work in progress, variance, and settlement are calculated. The variance between actual costs and standard costs can result in changes to product costing for the next period or year. Costs are settled, and the posting period is closed at the end of the month.
Product cost planning is a concept where the business can plan costs for materials or finished goods without references to orders and set prices for materials and other cost accounting objects.
Analyzing product costs helps provide answers to questions such as:
- What is the value added of a particular step in the production process?
- What proportion of the value added can be attributed to a particular organization unit?
- What are the material, production, and overhead costs?
- How can production efficiency be improved?
- Can the product be sold at a competitive price?
Beas offers the Pre-calculation functionality where product cost is planned. This function allows you to simulate the planned cost based on the information from the item master data (BOM and Routing). Also, this function allows you to check the structure of an item based on its cost structure.
This guide will show you how to set up the calculation schema, understanding the main fields in the master data used for product cost planning.