Costing Distributed Items

This document provides an overview of the process for distribution costing, that is, the costing of items received from other facilities within the company.

This process primarily describes the calculation of standard costs.

Outcome

The standard cost of the distributed item is calculated and displayed in 'Product Costing. Display' (PCS300) and 'Item. Connect Facility' (MMS003/E). For manufactured items, the direct material cost for distributed items that are part of the product structure is reflected in the product costing model.

Cost information can be provided to management

Use the cost information to:

Before you start

Follow these steps

Outline
  1. Review and Simulate Standard Cost

    You can review the cost in 'Product Costing. Display' (PCS300). From there you can access 'Costing. Display/Simulate Model' (PPS295), where you can review and simulate detail values for each costing element.

    Simulation of Standard Cost

    There are two ways of simulating a standard cost and checking the impact of changed parameters in different business scenarios:

    • In the first alternative, you simulate values for an item with an optional costing model directly in 'Costing. Display/Simulate Model' (PPS295). You can simulate the result in standard cost if you change any internal costs. You can simulate using other costing models. The values can also be simulated in another currency at a certain exchange rate. Your simulations are not saved once you exit the program.
    • In the second alternative, you simulate a costing run for a distributed item and an optional costing model in 'Purchase/Distribution Costing. Calculate' (PCS280) by selecting a different costing type than the one reserved for the standard cost that affects the inventory value. You can cost for selected facilities, items, item groups, and so on. The simulated standard cost is saved – in contrast to the first alternative – and displayed in 'Product Costing. Display' (PCS300). From there you can jump to 'Costing. Display/Simulate Model' (PPS295) to display the saved values.

    There is a separate information view for distribution costing in (PPS295), available only when the program is called from (PCS300).

    Running such simulations also helps you to identify any need to adjust the standard cost manually.

  2. Calculate Standard Cost

    You calculate a standard cost for purchased items, distributed items, and subcontracting operations in 'Purchase/Distribution Costing. Calculate' (PCS280). As mentioned above, the result of the calculation is displayed in 'Product Costing. Display' (PCS300).

    For purchased items and distributed items, another alternative is available: You can run a product costing program such as 'Product Costing. Calculate Selected Item' (PCS200) and select to include those two categories of items. However, you then lack some flexibility in changing the priority order for retrieving the costing base, for example.

  3. Follow Up Cost

    Account entries are created either at goods receipt or triggered in 'Internal Account Entry. Create' (CAS950). You can compare the calculated standard cost, as displayed in (PCS300), with the true cost for each distribution order in 'Internal Account Entry. Open' (CAS300).

    This activity can be carried out independently of the standard costing workflow.

    Note on Calculation of Average Cost and Actual Cost

    For distributed items with average costing or actual costing as the inventory accounting method, running (PCS280) is not required. When the goods are reported as received in 'Goods Receipt DO/RO. Report' (MWS440), cost transactions are created in the CINACC table for average-costed items and actual-costed items in each distribution order once 'Internal Account Entry. Create' (CAS950) is run. The transactions are available for follow-up in 'Internal Account Entry. Open' (CAS300).

    For actual-costed items, it is possible to simulate and analyze values by jumping to 'Purchase Costing. Simulate' (PPS295) from 'Product Costing. Update Manually' (PCS260).

  4. Manually Update Cost

    If you discover that an item has an incorrect standard cost or actual cost, you can change the cost manually in 'Product Costing. Update Manually' (PCS260). A requirement is that the cost to change is calculated on the current date or at a future date. Note, however, that if you change the cost, all detail values in the distribution costing model and the product costing model will be deleted.

    Average costs can be manually changed in 'Average Cost. Enter per Item/Facility' (CAS370).

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