11. Split of Cost of Goods Sold (COGS)

COGS – Distributed items

A distributed item can be associated with a product costing model in the delivering facility. There are two parameters that determine whether and how the cost per costing component is copied from the delivering facility to the receiving facility.

The first parameter, the '22 Split cost into costing components' check box on 'Settings – Product Costing' (PCS001/F), determines how the cost is saved in the costing. When this check box is selected, the values in the product costing model for the item in the delivering facility are copied per costing component to the receiving facility when costing the item in 'Purchase/Distribution Costing. Calculate' (PCS280). For a more detailed description of the consequences of selecting this check box, see Configure Basic Product Costing Settings.

The second parameter, the 031 field on 'Settings – Cost Accounting' (CAS900/E), determines how the split of the COGS is done for distributed items. Depending on the alternative selected, the costs can be followed up per costing component or as a total cost in the cost accounting.

There are four alternatives:

Alternative Description
0 No split.
1 Split per costing component on the highest product structure level, that is, regardless of where the cost is incurred in the product structure. This alternative requires that the 'Split cost into costing components' check box is selected on (PCS001/F).
2 As alternative 1, but the cost for each costing component is the total cost per component from all levels, that is, underlying costs in the product structure are included in the cost of semi-finished materials. This alternative requires that the 'Split cost into costing components' check box is selected on (PCS001/F).
3 Split per costing element in the distribution costing model.

Comment to alternatives 1 and 2

If you split the cost per costing component, the 'Split cost into costing components' check box must be selected on (PCS001/F).

If you select alternative 1 or 2 above, the product costing model for the item in the receiving facility must always contain an E costing component with cost driver 98 for the uplift cost (the difference in cost between the two facilities). If you want to store the distribution cost separately, there must also be a costing component with cost driver 97 (valid for costing components E01–E10 and A04–A05). Both costing components must be placed before the subtotal representing the standard cost in the model.

Example

Product costing model in facility FA1

Sequence number Costing component Description Highest level All levels
10 A01 Raw material 21.00 10.00
20 A04 Material overhead 15% 1.50 1.50
30 A05 Uplift cost (cost driver 98) _ _
40 B01 Direct labor 10.00 20.00
50 B02 Labor overhead 10% 1.00 2.00
60 E01 Distribution cost (cost driver 97) _ _
100 Total Total (=inventory value) 33.50 33.50

An item with this product costing model is distributed to facility FA2. The internal transfer price is 110% or the inventory cost in the delivering facility (FA1), which results in a total cost of 36.85.

Distribution costing model in Facility FA2

Sequence number Costing element Description Value
1010 NLP011 Costing base: Internal transfer price (110% of inventory cost) 36.85
1020 ILP201 Internal charge 3.00
1025 ILP041 Internal overhead: 10% 3.685
1999 NLP991 Total (=inventory value) 43.535

Results of selecting alternative 0 on (CAS900/E)

Accounting type Costing component COGS=0
971 43.54

Results of selecting alternative 1 or 2 on (CAS900/E) – No Cost Driver 97

Accounting type Costing component COGS=1 COGS=2
971 A01 21.00 10.00
971 A04 1.50 1.50
971 B01 10.00 20.00
971 B02 1.00 2.00
971 E01 (cost driver 98) 10.04 10.04

Results of selecting alternative 1 or 2 on (CAS900/E) – With Cost Driver 97

Accounting type Costing component COGS=1 COGS=2
971 A01 21.00 10.00
971 A04 1.50 1.50
971 A05 (cost driver 97) 6.69 6.69
971 B01 10.00 20.00
971 B02 1.00 2.00
971 E01 (cost driver 98) 3.35 3.35

Results of selecting alternative 3 on (CAS900/E)

Accounting type Costing element Description COGS=3
971 NLP011 Costing base: Internal transfer price 36.85
971 ILP201 Internal charge 3.00
971 ILP041 Internal overhead: 10% 3.69

COGS – Purchased items

The 032 parameter on 'Settings – Cost Accounting' (CAS900/E) determines how the split of the COGS is done for purchased items.

There are two alternatives:

Alternative Description
0 No split.
1 Split per costing element in the purchase costing model.

Purchase costing model in Facility FA1

Sequence number Costing element Description Value
971 NLP011 Costing base: Purchase agreement 36.85
971 ILP201 External charge 3.00
971 ILP041 Internal overhead: 10% 3.685
1999 NLP991 Total (=inventory value) 43.535

Results of selecting alternative 0 on (CAS900/E)

Accounting type Costing element COGS=0
971 43.54

Results of selecting alternative 1 on (CAS900/E)

Accounting type Costing element Description COGS=1
971 NLP011 Costing base: Purchase agreement 36.85
971 ILP201 External charge 3.00
971 ILP041 Internal overhead: 10% 3.69
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