1/6/2015

SAP & FINANCE: SAP FICO INTERVIEW QUESTIONS ­Product Costing 0

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SAP & FINANCE

SAP FICO INTERVIEW QUESTIONS ­Product Costing

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SAP FICO STUDY MATERIAL SAP IFRS

Product Costing

SAP SEPA SAP FICO INTERVIEW QUESTIONS

What are the important Terminologies in Product Costing?: 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. What are the configuration settings maintained in the costing variant? 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 a) the sequence or order the system should go about accessing prices for the material master (planned price, standard price, moving average price etc). b) It also contains which price should be considered for activity price calculation and . c) How the system should select BOM and routing. How does SAP go about costing a Product having multiple Bill of materials within it? 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. What does the concept of cost roll up mean in product costing context? 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. 1) The system first calculates the costs for the materials with the lowest costing level and assigns them to cost components. 2) 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. What is a settlement profile and why is it needed? 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

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period. This receiver could be a Gl , 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 , 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 The settlement profile created is then attached to the order type. What is Transfer or Allocation structure? 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: a) Source of cost elements you want to settle b) Target receiver whether it is a Profitability segment or fixed asset or cost center

So basically for settling the costs of a cost object you need to define the Transfer structure where you mention what are the costs you want to settle and the target receiver for that. This information you fit it in the settlement profile which contains various other parameters and this settlement profile is defaulted in the Order type. So every time a order is executed the relevant settlement rule is stored and at the month end by running the transaction of the settlement of orders all the cost is ed on to the receiver So to put in simple : a) You define your cost object which could be a production order a sales order for eg b) You collect costs or revenues for it c) You determine where you want to these costs or revenues to for eg if the sales order is the cost object all the costs or revenues of a sales order could be ed to Profitability Analysis What do you mean by primary cost component split? 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. How do primary costs get picked up from cost center into the cost component structure? 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 . Is it possible to configure 2 cost component structures for the same product in order to have 2 different views? Yes it is possible. We create another cost component structure and assign it to the main cost component structure. This cost component

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structure is called Auxiliary cost component structure which provides another view of the cost component structure. How do you go about configuring for the sales order costing? The flow is as follows: Sales order ­> Requirement Type­à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 assignment category. In the 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. There are 2 plants in a company code. First plant is the manufacturing plant and another plant is the selling plant. Finished goods are manufactured at the manufacturing plant and transferred to the selling plant. How is standard cost estimate calculated at the selling plant given the fact that the cost at both the plant should be the same? The special procurement type needs to be configured which specifies in which plant the system is to look up for cost. Here a special procurement key specifying plant 1 (manufacturing plant) should be configured. This special procurement type must be entered in the costing view or the MRP view of the Finished good material master record in plant 2. When you cost the finished good at plant 2, the system will transfer the standard cost estimate from plant 1 to plant 2 What is mixed costing in SAP? Give an example to explain. 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 semi­automatic 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. What configuration needs to done for using Mixed costing? Quantity Structure type for mixed costing must be configured. Here we specify the time dependency of the structure type . The following options exist a) You have no time dependency. b) It is based on fiscal year c) It is based on period This quantity structure type is then assigned to the costing version. Lets say for a product there exists three production versions. Explain the process how you would go about creating a mixed cost estimate? 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.

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What is Mixing ratios and why are they required to be maintained before creation of cost estimate? 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 There are Result analysis categories in WIP (Work in Process). What do you mean by the result analysis category Reserves for unrealized costs? 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. Which is the Result analysis category which is normally maintained for the WIP (Work in Process) calculation? The Result analysis category WIPR ­ Work in process with requirement to capitalize costs is normally maintained for WIP calculation How do you define a By­product in SAP? A By­product in SAP is defined as an item with a negative quantity in the Bill of Material. By­product reduces the cost of the main product. There is no Bill of Material for a By­product. How do you calculate the cost for a By­product in SAP? The cost for the By­product is the net realizable value. This is manually maintained in the system for the by­product through transaction code MR21 Price change. How do you define a Co­Product in SAP? A Co­product (primary product or by­product) 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 co­product in the BOM of the leading coproduct. For primary products the costs are calculated using the apportionment method, while for by­products the net realizable value method applies. Is it possible to use Standard SAP Co­product functionality in Repetitive manufacturing? No. It is not possible to use the Standard Co­product functionality in repetitive manufacturing How do you got about defining CO­Product functionality in Repetitive manufacturing? In the Repetitive manufacturing you need to use the Costing BOM for the other co­product. Through arithmetical calculation you need to maintain the quantities in the costing BOM. This co­product will be shown as a negative item in the leading co­product.

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You get an error while executing a cost estimate which says” Item no 1 (which is a raw material) is not assigned to the cost component structure? What could be the possible cause of error in this scenario? The consumption GL code for the material master is not assigned to the cost component structure. To find out how you can know which GL code to assign read the next question. In the above scenario how do you know which cost element is being called for? 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 modifier VBR and against which the GL code is available. You get an error while executing a cost estimate, which says” Item no. 1 (which is a raw material) is not assigned to the cost component structure? In this case everything is perfectly configured, what could be the possible error in this scenario? In the material master of the raw material the valuation class updated in the ing view will be incorrect. Is it possible to calculate standard cost estimate for a past date? No. It is not possible to calculate standard cost estimate for a past date. What is the difference between a product cost collector and production order? 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. What is the meaning of preliminary cost estimate for product cost collector? Preliminary costing in the product cost by period component calculates the costs for the product cost collector. In repetitive manufacturing you can create cost estimate for specific production version. Why is preliminary cost estimate required? The preliminary cost estimate is required for the following:­ Confirm the actual activity quantities. Valuate work in process Calculate production variances in variance calculation Valuate the unplanned scrap in variance calculation Is it possible to update the results of the standard cost estimate to other fields such as commercial price, tax price fields in the ing view? Yes. It is possible to update the standard cost estimate to other fields such as commercial price etc. in ing view. How do you configure that the results of the standard cost estimate are updated in other fields other than the standard price? The price update in the material master is defined in Costing type. This costing type is attached to the costing variant. What do you mean by Assembly scrap and how is it maintained in SAP? Assembly scrap is scrap that is expected to occur during the production of a material which is used as an assembly. If a certain amount of scrap always occurs during the production of an

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assembly, the quantities and activities used must be increased by the system so that the required lot size can be produced. To increase the lot size of an assembly you can enter a percentage, flatrate assembly scrap in the MRP 1 view of the material master record. This assembly scrap is reflected in all the subordinate components. The system increases the quantity to be produced by the calculated scrap quantity. This increases both the materials consumed and the activities consumed and consequently the cost. How are scrap costs shows in the standard cost estimate? Scrap costs are assigned to the relevant cost component and can be shown separately for a material in the costed multilevel BOM. How are scrap variances calculated? Scrap variance are calculated by valuating the scrap quantities with the amount of the actual costs less the planned scrap costs. What do you mean by Component scrap and how is it maintained in SAP? 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 What do you mean by Operation scrap and how is it maintained in SAP? Operation scrap is a scrap that is expected to occur during production. Operation scrap is used to reduce the planned input quantities in follow up operations and to calculate the precise amount of assembly scrap. Operation scrap can be maintained in % in the routing and in the BOM. What are the implications if the operation scrap is maintained in the routing and if it maintained in the BOM? If the operation scrap is maintained only in the routing, the costing lot size is reduced by this percentage. If the operation scrap is maintained in the BOM, the planned input (not the output quantity) is increased and any assembly scrap is reduced. What is the meaning of additive costs in SAP and why is it required? Additive costs are used to add costs manually to a material cost estimate when it cannot be calculated by the system. Examples of such costs are freight charges, insurance costs and stock transfer costs. What is the configuration required for additive costs? To include additive costs in the material cost estimate you need to set the indicator “Incl. additive costs” for each valuation strategy in the valuation variant. Further you also need to set in the costing variant to include additive costs. How do you configure split valuation? 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. What is valuation category and valuation type in split valuation? In split valuation the material stock is divided according to valuation category and valuation type. Valuation category determines how the partial stocks are divided according to which criteria. The following valuation categories are preset in the standard SAP R/3 system – B ­ Procurement type H – Origin type

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X – Automatic batch valuation Valuation type describes the characteristic of individual stock. e.g. EIGEN Inhouse production (SAP standard) FREMD External procurement (SAP standard) Valuation types are assigned to valuation categories. What are the steps involved before you run a cost estimate for a split valuated material? 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 How do you create a material master with split valuation? To create a split valuated material master proceed as follows:­ 1. First create a valuation header record for the material. Update the Valuation category field on the ing screen; leave the Valuation type field blank. In the Price control field, enter V (moving average price). When you save, the system creates the valuation header record. 2. Then create the material for a valuation type. Call up the same material in creation mode again. Due to the fact that a valuation header record exists, the system requires you to enter a valuation type for the valuation category. 3. Repeat Step two for every valuation type planned. When a standard cost estimate is run for a finished good does SAP calculate cost estimate for its components such as raw and packing material? Yes. SAP calculates the cost estimate even for raw and packing material and stores it in the standard price field for information purposes How do you prevent the system from calculating the cost estimate for raw and packing material when you run a standard cost estimate for the finished goods? 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. How is it possible to apply 2 different overhead rates for 2 different finished goods? It is possible through overhead groups. You configure 2 overhead keys. Define rates for each of this overhead key. These two overhead keys is then assigned to the two overhead groups. These overhead groups are attached in the costing view of the finished goods material  

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4 comments: ranjith reddy 12 February 2014 at 11:38 Great document.. Reply

Shashi Hitlalli 12 March 2014 at 22:11 Wonderful information.... sufficient..... Reply

Sathyadi ravi kishore 15 May 2014 at 00:20 very well explained Reply

Sankar Gonela 2 January 2015 at 00:57

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