Paul Ovigele, Ovigele Consulting
If you use the Cost Object Controlling submodule of Product Cost Controlling then you probably calculate Work-in-Process (WIP) on a periodic basis. WIP basically takes the difference between the debits and credits (if any) on an incomplete order and books the balance to a balance sheet account and an offsetting profit and loss account. I have used the term “Manufacturing Orders as a generic term that encompasses the different types of cost objects used in manufacturing such as production orders, process orders, cost collectors, etc. The standard logic for WIP calculation (using a “Product Cost by Order Scenario”) is as follows:
Status | Status Description | System Action |
PREL | Partially released | WIP is calculated on the basis of actual costs |
REL | Relea sed | WIP is calculated on the basis of actual costs |
DLV | Delivered | WIP is canceled and a variance is calculated |
TECO | Technically completed | WIP is canceled and a variance is calculated |
The above statuses are set on the manufacturing order at certain points during the production process. As shown, WIP is only calculated when an order has a status of (PREL) partially released or released (REL), otherwise a variance is calculated. Some companies however, want to have more control over the calculation of variances and therefore only want a variance calculation to take place when an order is set to the status TECO (technically complete). In order to achieve this you would therefore need to change the system action of the status DLV (delivered) so that WIP is calculated instead of a variance. To do this you need to go to transaction OKG3 or via the following menu path:
Controlling -> Product Cost Controlling -> Product Cost by Order -> Period End Closing -> Period End Closing -> Work in Process -> Define Valuation Method (Actual Cost).
Note however, that a limitation of the above IMG menu path is that you cannot drill into the different lines. You should therefore use the transaction code instead. You then see will see the screen “Change View “Simplified Maintenance of Valuation Methods”: Overview. Locate the relevant results analysis key for WIP calculation (the standard “product cost by order” results analysis key is:“000002 – WIP Calculation at Actual Costs”, but this could vary depending on the setup in your company so make sure you us the correct RA key that is linked to your order type - see transaction OKZ3). Double-click on relevant line (make sure you activate the “Expert Mode” indicator” if it is not active) and you will be taken to the screen “Change View Valuation Methods: Overview”, where you will see the four statuses mentioned above, assigned to the RA Key. Double-click on the line that has status DLV and you will be taken to the screen “Change View Valuation Methods: Details”. Go to the “RA Type” field in this screen and change it from “Z - Cancel Data of WIP Calculation and Results Analysis” to “F - WIP Calculation on Basis of Actual Costs” and save your settings. You will then be able to calculate WIP on manufacturing orders that have a status of DLV and only calculate variances on orders with a status of TECO.
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