John Jordan Production Variance Analysis in SAP Controlling ® Bonn � Boston Contents at a Glance 1 Initial Planning ....................................................................... 23 2 Cost Estimates ........................................................................ 45 3 Actual Postings ....................................................................... 97 4 Period-End Processing ............................................................ 111 5 Scrap Variance ........................................................................ 175 6 Reporting ................................................................................ 217 A Glossary .................................................................................. 253 B Bibliography ............................................................................ 273 C Additional Resources .............................................................. 275 D The Author .............................................................................. 279 Contents 1 Initial Planning ......................................................................... 23 1.1 1.2 Sales and Operations Planning .................................................... Long-Term Planning .................................................................... 1.2.1 Create Planning Scenario .............................................. 1.2.2 Long-Term Planning Run ............................................... 1.2.3 Transfer Requirements to Purchasing ............................. 1.2.4 Transfer Activity Quantities to Cost Center Accounting ... Cost Center Planning .................................................................. Summary .................................................................................... 24 25 26 28 32 35 38 44 Cost Estimates .......................................................................... 45 2.1 46 46 50 51 52 54 55 56 57 58 61 64 64 68 72 74 76 78 79 81 83 1.3 1.4 2 2.2 2.3 2.4 2.5 2.6 Master Data ................................................................................ 2.1.1 Material Master ............................................................ 2.1.2 Bill of Material .............................................................. 2.1.3 Routing ........................................................................ 2.1.4 Product Cost Collector .................................................. Overhead Costs .......................................................................... 2.2.1 Calculation Base ........................................................... 2.2.2 Overhead Rate .............................................................. 2.2.3 Credit Key ..................................................................... Cost Components ....................................................................... Costing Variant ........................................................................... Standard Cost Estimate ............................................................... 2.5.1 Create ........................................................................... 2.5.2 Mark and Release ......................................................... Costing Run ................................................................................ 2.6.1 Selection ....................................................................... 2.6.2 Structural Explosion ...................................................... 2.6.3 Costing ......................................................................... 2.6.4 Analysis ........................................................................ 2.6.5 Marking ........................................................................ 2.6.6 Release ......................................................................... 7 Contents 2.7 Preliminary Cost Estimate ........................................................... 2.7.1 Production Process ....................................................... 2.7.2 Transfer Control ............................................................ 2.7.3 Mass-Processing ........................................................... Mixed Cost Estimate ................................................................... 2.8.1 Quantity Structure and Costing Version ........................ 2.8.2 Create Procurement Alternative .................................... 2.8.3 Deine Mixing Ratios .................................................... 2.8.4 Create Mixed Cost Estimate .......................................... Summary .................................................................................... 85 87 87 90 90 91 92 93 94 96 Actual Postings ......................................................................... 97 2.8 2.9 3 3.1 3.2 3.3 3.4 3.5 3.6 4 97 97 98 99 99 100 101 101 102 103 103 104 106 108 109 110 Period-End Processing .............................................................. 111 4.1 4.2 8 Primary Costs .............................................................................. 3.1.1 Goods Issue to Production Order .................................. 3.1.2 Vendor Invoice Posting ................................................. Secondary Costs .......................................................................... 3.2.1 Assessment .................................................................. 3.2.2 Activity Conirmation .................................................... Credits ........................................................................................ 3.3.1 Primary Credits ............................................................. 3.3.2 Secondary Credits ......................................................... Post Actual Costs ........................................................................ 3.4.1 Create Production Order ............................................... 3.4.2 Conirm Activities ......................................................... 3.4.3 Default Activities .......................................................... 3.4.4 Operation Sequence ..................................................... Report Actual Costs .................................................................... Summary .................................................................................... Types of Variance Calculation ...................................................... 4.1.1 Total Variance ............................................................... 4.1.2 Production Variance ...................................................... 4.1.3 Planning Variance ......................................................... Variance Coniguration ................................................................ 4.2.1 Deine Variance Keys .................................................... 111 111 112 112 113 113 Contents 4.3 4.4 4.5 4.6 4.7 4.8 5 4.2.2 Deine Default Variance Keys for Plants ........................ 4.2.3 Deine Variance Variants ............................................... 4.2.4 Deine Valuation Variant for Scrap and WIP .................. 4.2.5 Deine Target Cost Versions .......................................... Variance Categories .................................................................... 4.3.1 Input Variances ............................................................. 4.3.2 Output Variances .......................................................... Period End .................................................................................. 4.4.1 Overhead ...................................................................... 4.4.2 Work in Process ............................................................ 4.4.3 Variance Calculation ..................................................... 4.4.4 Settlement .................................................................... Cost Center Variances ................................................................. 4.5.1 Information System ....................................................... 4.5.2 Target Cost Analysis ...................................................... 4.5.3 Variance Analysis .......................................................... 4.5.4 Actual Price Calculation ................................................ Purchase Price Variance .............................................................. 4.6.1 Master Data .................................................................. 4.6.2 Coniguration ................................................................ 4.6.3 Reporting ..................................................................... Actual Costing/Material Ledger ................................................... Summary .................................................................................... 115 115 117 118 122 123 125 128 128 130 136 144 147 147 151 154 158 163 164 165 166 172 172 Scrap Variance ........................................................................... 175 5.1 5.2 5.3 Scrap Basics ................................................................................ Assembly Scrap ........................................................................... 5.2.1 Assembly Scrap Deinition ............................................ 5.2.2 Effect of Assembly Scrap on Quantities ......................... 5.2.3 Assembly Scrap Master Data ......................................... 5.2.4 Planned Assembly Scrap Costs ...................................... 5.2.5 Actual Assembly Scrap Costs ......................................... 5.2.6 Variance Calculation ..................................................... 5.2.7 Assembly Scrap Target/Actual ....................................... Component Scrap ....................................................................... 5.3.1 Component Scrap Deinition ......................................... 5.3.2 Effect of Component Scrap on Quantities ...................... 5.3.3 Component Scrap Master Data ..................................... 175 177 177 177 178 179 181 182 183 187 187 187 188 9 Contents 5.4 5.5 5.6 6 189 190 193 193 197 197 198 199 200 202 203 204 208 208 209 209 211 212 212 215 Reporting .................................................................................. 217 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 10 5.3.4 Planned Component Scrap Costs ................................... 5.3.5 Actual Component Scrap Costs ..................................... 5.3.6 Variance Calculation ..................................................... 5.3.7 Component Scrap Target/Actual .................................... Operation Scrap .......................................................................... 5.4.1 Operation Scrap Deinition ........................................... 5.4.2 Effect of Operation Scrap on Quantities ........................ 5.4.3 Operation Scrap Master Data ........................................ 5.4.4 Planned Operation Scrap Costs ..................................... 5.4.5 Actual Operation Scrap Costs ........................................ 5.4.6 Variance Calculation ..................................................... 5.4.7 Operation Scrap Target/Actual ...................................... Combined Scrap .......................................................................... 5.5.1 Component Scrap ......................................................... 5.5.2 Component and Operation Scrap .................................. 5.5.3 Component, Operation, and Assembly Scrap ................ 5.5.4 BOM Item Operation Scrap .......................................... 5.5.5 Operation and Assembly Scrap ..................................... 5.5.6 Calculate Assembly Scrap .............................................. Summary .................................................................................... Summarized Analysis Reports ...................................................... 6.1.1 Product Drilldown Reports ........................................... 6.1.2 Summarization Hierarchy Reports ................................. Detailed Reports ......................................................................... Line Item Reports ....................................................................... Production Order Reports ........................................................... 6.4.1 Order Information System ............................................. 6.4.2 Order Selection ............................................................. Cost Center Reports .................................................................... Summary .................................................................................... Guide Summary .......................................................................... Looking Ahead ........................................................................... 218 220 227 235 237 239 239 242 244 246 247 249 Contents Appendices ..................................................................................... 251 A B C D Glossary ............................................................................................... Bibliography ......................................................................................... Additional Resources ............................................................................ The Author ........................................................................................... Index .................................................................................................... 253 273 275 279 281 11 5 Scrap Variance In Chapter 4, we analyzed all scrap categories in detail, except for scrap variance. Processing scrap and analyzing scrap variances has its own chapter because there is more involved in master data settings and cost estimate analysis than in any of the other variance categories. In this chapter, we’ll analyze scrap processing and scrap variance analysis in detail. We’ll discuss scrap basics, types of scrap, and master data settings; carry out plan and actual scrap postings; and then analyze scrap postings in detailed reports. The method we use for analyzing scrap variance in this chapter can be used as a model for analyzing variances in general. 5.1 Scrap Basics Because no production process is perfect, there is always some percentage of scrap produced. Assemblies or components that do not meet quality standards may either become scrap or require rework. Depending on the problem, cheaper items may become scrap, while more costly assemblies may justify rework. Case Scenario The mounting holes for a metal plate are accidentally drilled larger than they were supposed to be. Filling the holes with weld and re-drilling correctly sized holes would cost more than the plate is worth. The plate is scrapped, and a new plate is drilled correctly and delivered to inventory. Statistics show that 1 in every 10 plates is drilled incorrectly, so you plan 10% assembly scrap for the drilled metal plate. A drilled metal plate is issued from inventory as a component in a higher-level assembly, and during inspection, before production use, the mounting holes are found to be oversize. The plate is discarded, and another plate is issued from inventory. Statistics show that 1 in every 50 drilled plates issued from inventory is drilled incorrectly and discarded, so you plan 2% component scrap for the drilled metal plate. You enter both 10% assembly scrap and 2% component scrap in the material master MRP views of the drilled plate. 175 5 Scrap Variance If the plates were made of an expensive metal alloy that is not readily available, it may be cost effective to rework the oversize holes by welding and re-drilling. In this case, you do not plan scrap. Scrap is different from other losses during the manufacturing of a product because it can be analyzed and predicted. You can enter and store known scrap amounts in master data as planned scrap percentages. Scrap percentages increase the planned manufacturing costs of a product, via the released cost estimate and standard price. If actual scrap equals planned scrap, no variance occurs because postings are as planned. Beneits of planning for scrap include the following: EE Margin analysis is more accurate. EE Variances highlight processes that need analysis. EE Production resources can be more accurately planned. EE Cost of sales more accurately relect manufacturing costs. Target and actual scrap costs are calculated from plan scrap quantity and actual scrap quantity posted during activity conirmation. Scrap variance is calculated and subtracted from total variances and is displayed in a scrap variance column in cost reports. A requirement to display the scrap variance column is to activate scrap calculation and reporting in the variance key and variance variant, as we examined in Chapter 4. There are three different types of scrap that can be planned for: EE Assembly scrap This includes the entire cost of faulty or lost assemblies in the cost of sales. The plan quantity of the assembly is increased. EE Component scrap This includes the cost of faulty or lost individual components in the cost of sales. The plan quantity of components is increased. EE Operation scrap This optimizes the use of valuable components. The plan quantity of components in subsequent operations is decreased. Now that we’ve covered scrap basics, let’s discuss each of the three different types of scrap in detail. 176 Assembly Scrap 5.2 Assembly Scrap Assembly scrap includes the entire cost of faulty or lost assemblies in the cost of sales. If assembly scrap is not planned, all scrap costs post in other variance categories. Although variance can be included at a higher level in proitability reporting, planned assembly scrap is included at the material or gross proit level, as we discussed in Chapter 3. This results in more accurate analysis of proitability at the product level. 5.2.1 Assembly Scrap Definition Assembly scrap can be deined as the percentage of assembly quantity that does not meet required production quality standards. For example, planned assembly scrap of 25% means that in order to deliver 100 pieces of an assembly, you plan to produce 125. Planned assembly scrap also improves the MRP process by ensuring you start with an increased quantity in order to achieve the required product yield. Assembly scrap is considered an output scrap because it affects the planned output quantity of items in the production process. 5.2.2 Effect of Assembly Scrap on Quantities Scrap quantities are important because they cause scrap values. Let’s follow a simple example of how assembly scrap applied at the assembly level affects lower-level component and activity quantities. Example You plan to produce 100 inished printed circuit boards (PCBs). If planned assembly scrap is entered for the inished PCBs, all component and activity quantities are increased by 10%, as highlighted in the Quantity costed column in Figure 5.1. Finished PCBs Blank PCBs BIOS Operation 1 Processor Operation 2 Quantity no scrap Quantity costed Assembly scrap 100 PC 100 PC 100 PC 100 h 100 PC 100 h 100 PC 110 PC 110 PC 110 h 110 PC 110 h 0 PC 10 PC 10 PC 10 h 10 PC 10 h Figure 5.1 Effect of Assembly Scrap on Component and Activity Quantities 177 5.2 5 Scrap Variance By increasing the quantity of components and activities, assembly scrap increases the plan cost of producing the inished PCBs. MRP will propose a production quantity of 110 PC (pieces), with the expectation that 100 PC will be delivered to inventory, and 10 PC will be conirmed as scrap. Now that we know what assembly scrap is and how it affects scrap quantities, we’ll investigate how to plan assembly scrap in the next section. 5.2.3 Assembly Scrap Master Data You can plan assembly scrap in two different master data ields. The most commonly used ield is located in the MRP 1 view of the material master, which you access with Transaction MM02 or via menu path Logistics • Materials Management • Material Master • Material • Change • Immediately. Click on the MRP 1 tab to display the screen shown in Figure 5.2. Figure 5.2 Assembly Scrap Field in MRP 1 View Fill in the Assembly scrap (%) ield with a lat rate percentage determined by your production statistics of scrap rates, which is 10.00% in this example. You should update this ield prior to each costing run if the statistics change during the current year. Later, in Section 5.2, we’ll examine how assembly scrap affects standard cost estimates. Another master data ield that controls assembly scrap is located in the Basic Data tab of a BOM item. You can view or change BOM item details with Transaction CS02 or via menu path Logistics • Production • Master Data • Bills of Material • Bill of Material • Material BOM • Change. Double-click on a BOM item to display BOM item details, as shown in Figure 5.3. 178 Assembly Scrap Figure 5.3 Inspect Net ID Indicator of BOM Component You can select the Net ID checkbox to ignore assembly scrap for this component. This is useful if you need to enter a scrap percentage for a particular component that is different from the assembly scrap percentage of the assembly. In this case, select the Net ID checkbox, and ill in the percentage scrap for the component in either the Operation scrap in % or Component scrap (%) ields. If you make an entry in the Component scrap (%) ield without selecting the Net ID checkbox, assembly scrap is calculated irst, and then component scrap is calculated in addition, as discussed in detail in Section 5.3. 5.2.4 Planned Assembly Scrap Costs Planned assembly scrap costs are included in the standard cost estimate. Let’s compare two cost estimates, one without assembly scrap, and one with assembly scrap, to highlight the difference. To display the screen shown in Figure 5.4, use Transaction CK13N or menu path Accounting • Controlling • Product Cost Controlling • Product Cost Planning • Material Costing • Cost Estimate with Quantity Structure. Figure 5.4 Cost Estimate without Assembly Scrap 179 5.2 5 Scrap Variance The Total value of the STANDARD FG cost estimate without assembly scrap is 46,254.68. The igures in the Scrap and Scrap quantity columns indicate there is no planned output scrap. Now let’s display a cost estimate for material STANDARD FG with 10% assembly scrap planned, as shown in Figure 5.5. Figure 5.5 Cost Estimate with Assembly Scrap The Total value of the STANDARD FG cost estimate with assembly scrap is 50,880.14, which is 10% higher than the cost estimate without assembly scrap. This is because the quantity of all components has increased by 10%, illustrated by comparing the Quantity columns in both cost estimates. The increase in component quantities is shown in the Scrap quantity column, while the corresponding increase in value is shown in the Scrap column. While only material cost estimates are displayed in Figure 5.5, the quantity and value of all other cost estimate items, such as activities, are also increased by 10%. Tip To quickly determine if assembly scrap is included in a cost estimate, click on the cost estimate Qty Struct. (quantity structure) tab, which displays the screen shown in Figure 5.6. Figure 5.6 “Assembly Scrap Only” Text in Cost Estimate The Assembly Scrap Only text indicates assembly scrap is included in the cost estimate, without the need to refer to the MRP 1 view of the material master. Information text also appears in the same tab if operation scrap is included in the cost estimate, as discussed later in Section 5.4. 180 Assembly Scrap Now that we’ve looked at planning for assembly scrap with master data entries and the effect on cost estimates, let’s examine how actual scrap postings occur. 5.2.5 Actual Assembly Scrap Costs Actual scrap costs usually occur during production order activity conirmation. This is when activities are conirmed, and goods movements occur during backlushing and auto goods receipt, as discussed in detail in Chapter 3. We’ll now create a production order and carry out a conirmation to demonstrate how actual assembly scrap costs occur. You create a production order with Transaction CO01 or via menu path Logistics • Production • Production Control • Order • Create • With Material. The screen shown in Figure 5.7 is displayed. Figure 5.7 Production Order Quantity Increased by Planned Assembly Scrap The production order quantity is automatically increased by 10% due to assembly scrap in the material master MRP 1 view, as discussed in Section 5.2. MRP proposes a total quantity of 1,100.000, as shown in the Total quant. ield, even though only 1,000.000 are required. This is because a conirmed scrap assembly quantity of 100.000 is expected, as shown in the Scrap portion ield. Actual assembly scrap is posted during production order conirmation. In Chapter 3, we saw a conirmation per operation. In this example, we’ll follow a conirmation at the order header level with Transaction CO15 or via menu path Logistics • Production • Production Control • Conirmation • Enter • For Order. The screen shown in Figure 5.8 is displayed. 181 5.2 5 Scrap Variance Figure 5.8 Conirmation Screen and Conirmed Scrap Field A quantity of 100.000, due to planned assembly scrap, defaults in the Conirmed scrap ield in the Current conirm. column. If the default Conirmed scrap quantity is manually changed, a scrap variance will result. The expected scrap quantity of 100.000 is displayed in the Total to conirm column of the Conirmed scrap row. After scrap is conirmed, you will carry out variance calculation next, as we will discuss in the following section. 5.2.6 Variance Calculation You carry out variance calculation with Transactions KKS6 (individual) and KKS5 (collective) or via menu path Accounting • Controlling • Product Cost Controlling • Cost Object Controlling • Product Cost by Period • Period-End Closing • Single Functions: Product Cost Collector • Variances. The screen shown in Figure 5.9 is displayed following variance calculation. Note You carry out variance analysis for production and process orders with Transactions KKS2 (individual) and KKS1 (collective). Figure 5.9 182 Variance Calculation Scrap Output Screen Assembly Scrap Assembly scrap maintains the expected Actual qty (last column) delivered to inventory at 1,000.000 by increasing the manufactured quantity. After the planned assembly scrap quantity is actually conirmed as scrap, the output quantity is the quantity required. The unfavorable Scrap variance of 4,625.48 indicates that assembly scrap was posted but not planned for in this example. Scrap variance is subtracted from total variance during variance calculation, which simpliies the task of analyzing total variance. Click on the Scrap button (not shown) in the variance calculation output screen to display details of the scrap variance by cost element and operation. Now that we’ve examined how to plan and post actual scrap and calculate variance, let’s look at how to report and analyze scrap postings. 5.2.7 Assembly Scrap Target/Actual During a period, or at period end, you may need to carry out further detailed analysis of scrap variance. Before doing so, you should irst run a variance calculation to determine the target costs. You can display and analyze target versus actual costs in detailed product cost collector reports with Transaction PKBC_PKO or via menu path Accounting • Controlling • Product Cost Controlling • Cost Object Controlling • Product Cost by Period • Information System • Reports for Product Cost by Period • Detailed Reports. A similar report is available for production and process orders with Transaction PKBC_ORD. Let’s compare a series of three detailed reports to demonstrate how assembly scrap affects variance. Assembly Scrap Not Planned and Actual Scrap Posted The irst detailed report contains an unfavorable scrap variance because assembly scrap is not planned, while actual scrap is posted, as shown in Figure 5.10. Because assembly scrap is not planned, actual assembly scrap posts as an unfavorable scrap variance with a value of 4,625.48, as shown in the Scrap column. 183 5.2 5 Scrap Variance Figure 5.10 Assembly Scrap Not Planned and Actual Scrap Posted Activity and component quantities to make 1,100.000 STANDARD FG are issued from inventory, as shown in the Total act.qty column. This corresponds to the value of 50,880.14 in the Debit row and Ttl actual (total actual costs) column. A quantity of 1,000.000 STANDARD FG is delivered to inventory, as shown in the Total act.qty (last) column. This corresponds to the credit value of 46,254.68 in the Delivery row and Ttl actual column. Because the total actual debits of 50,880.14 are greater than the total actual credits of 46,254.68, an unfavorable variance of 4,625.46 results, as shown in the summary (last) row of the Total actual column. Now that we’ve looked at how posting assembly scrap without planning for it results in an unfavorable variance, let’s see the consequences of planning but not posting assembly scrap. Assembly Scrap Planned and Actual Scrap Not Posted Compare the report in the previous section with an unfavorable scrap variance to a report in this section with a favorable scrap variance that results from planning but not posting assembly scrap, as shown in Figure 5.11. Because assembly scrap is planned, all planned scrap that is not actually posted results in a favorable scrap variance, with a value of 4,625.50- as seen in the Scrap column in Figure 5.11. 184 Assembly Scrap Figure 5.11 Assembly Scrap Planned and Actual Scrap Not Posted Activity and component quantities needed to make 1,000.000 STANDARD FG are issued from inventory, as shown in the Total act.qty (last) column. This corresponds to the value of 46,254.68 in the Debit row and Ttl actual (total actual) costs column. A quantity of 1,000.000 STANDARD FG is delivered to inventory, as shown in the Total act.qty column. This corresponds to the credit value of 50,880.14- in the Delivery row and Ttl actual column. The credit value is based on the standard cost estimate, which contains the costs for making 1,100 assemblies, because assembly scrap is planned. Because total actual debits of 46,254.68 are less than the total actual credits of 50,880.14, a favorable variance of 4,625.46- is shown in the summary (last) row of the Total actual column. Now that we’ve looked at how posting assembly scrap without planning for it results in an unfavorable variance, and how planning assembly scrap and not actually posting it results in a favorable variance, let’s see the effect of both planning and posting assembly scrap. Assembly Scrap Planned and Actual Scrap Posted Compare the reports in the previous two sections with unfavorable and favorable scrap variances to the report in this section with no scrap variance, which results from planning assembly scrap and posting actual scrap, as shown in Figure 5.12. 185 5.2 5 Scrap Variance Figure 5.12 Assembly Scrap Planned and Actual Scrap Posted Because assembly scrap is planned and actual scrap is posted, only rounding differences of 0.04- remain in the Scrap variance column. Activity and component quantities needed to make 1,100.000 standard FG are issued from inventory, as shown in the SFG row and Total act.qty column. This corresponds to the value of 50,880.13 in the Debit row and Ttl actual (total actual costs) column. A quantity of 1,000.000 standard FG is delivered to inventory, as shown in the standard FG row and Total act.qty column. This corresponds to the credit value of 50,880.14- in the Delivery row and Total actual column. The credit value is based on the standard cost estimate, which contains the costs for making 1,100 assemblies, because assembly scrap is planned. Because total actual debits of 50,880.13 are nearly equal to total actual credits of 50,880.14, variance is nearly eliminated, as shown by the 0.01- in the summary (last) row of the Total tgt column. Total variance ideally should only include unplanned production costs. If you don’t plan scrap, all scrap costs will post as a scrap variance, as demonstrated earlier in Figure 5.10. When you plan assembly scrap based on production statistics, scrap costs are separated from variance, and only the difference between plan and actual scrap costs posts as a variance, as shown in Figure 5.12. Now that we’ve examined assembly scrap, let’s look at the next type of scrap: component scrap. 186 Component Scrap 5.3 Component Scrap Component scrap includes the cost of faulty or lost components in the cost of sales. A case scenario involving component scrap was presented in Section 5.1. If component scrap is not planned, all component scrap costs post as a variance. Although variance can be included at a higher level in proitability reporting, planned component scrap is included at the material or gross proit level as discussed in Chapter 3. This results in more accurate analysis of proitability at the product level. 5.3.1 Component Scrap Definition Component scrap can be deined as the percentage of component quantity that does not meet required production quality standards before being inserted in the production process. Planned component scrap is treated as additional consumption of the relevant component. Planned component scrap also improves the MRP process by ensuring that you start with an increased component quantity in order to achieve the required product yield. Component scrap is an input scrap because it is detected before use in the production process. 5.3.2 Effect of Component Scrap on Quantities Scrap quantities are important because they cause scrap values. Let’s follow a simple example of how component scrap applied at the component level affects component quantities. We’ll also examine the interaction between component and assembly scrap. Example When planning to produce 100 inished PCBs, assembly scrap is calculated irst, and component scrap is calculated second. Assembly scrap applied to the inished PCBs increases all component and activity quantities by 10%, as shown in the outlined Quantity costed column in Figure 5.13. Finished PCBs Blank PCBs BIOS Operation 1 Processor Operation 2 Quantity no scrap 100 PC 100 PC 100 PC 100 h 100 PC 100 h Quantity costed 100 PC 110 PC 110 PC 110 h 116 PC 110 h Assembly scrap 0 PC 10 PC 10 PC 10 h 10 PC 10 h Component scrap 0 PC 0 PC 0 PC 6 PC - Figure 5.13 Component Scrap Increases Component Quantities 187 5.3 5 Scrap Variance A component scrap of 5% applied to the Processor component increases the Quantity costed from 110 to 116, as shown in the outlined Processor row in Figure 5.13. Because component scrap is applied after assembly scrap, the Component scrap quantity is 6 PC. Assembly and component scrap increase the plan cost of producing inished PCBs by increasing the plan quantity of components and activities. MRP will propose a production quantity of 110 assemblies, with the expectation that 100 will be delivered to inventory and 10 conirmed as scrap. MRP will also propose the consumption of a quantity of 116 PC of the Processor component, even though only 100 would be needed without planned scrap. Now that we know what component scrap is and how it affects quantities, let’s look at how to plan component scrap. 5.3.3 Component Scrap Master Data You can plan component scrap in two different master data ields. The most commonly used ield is located in the MRP 4 view of the material master, which you can access with Transaction MM02 or via menu path Logistics • Materials Management • Material Master • Material • Change • Immediately. Navigate to the MRP 4 tab to display the screen shown in Figure 5.14. Figure 5.14 Component Scrap Field in the MRP 4 View of Component Fill in the Component scrap (%) ield with a lat rate percentage determined by your production statistics of scrap rates. You should update this ield prior to each costing run if the statistics change during the current year. Later in Section 5.3, we’ll examine how component scrap affects standard cost estimates. Another ield used to plan component scrap is located in the Basic Data tab of the BOM item. You can view or change BOM item details with Transaction CS02 or via menu path Logistics • Production • Master Data • Bills of Material • Bill of Material • Material BOM • Change. Double-click on a BOM item to display the BOM item details, as shown in Figure 5.15. 188 Component Scrap Figure 5.15 Component Scrap Field in BOM Item Details An entry in the Component scrap (%) ield in the BOM item takes priority over an entry in the material master, MRP 4 view. Fill in the Component scrap (%) ield with a lat rate percentage determined by your production statistics of scrap rates. Case Scenario A component is used in many assemblies, and generally the component scrap rate is 10%, which is entered in the material master MRP 4 view of the component. One assembly is manufactured close to the inventory store, and only 5% of components are lost or damaged on the way to production of this assembly. A component scrap rate of 5% is entered in the component BOM item for this particular assembly. The component scrap rate of 5% in the BOM item takes priority over the 10% component scrap rate entered in the material master MRP 4 view of the assembly. You should update this ield prior to each costing run if the statistics change during the current year. We’ll examine how component scrap affects standard cost estimates in the next section. 5.3.4 Planned Component Scrap Costs Planned component scrap costs are included in the standard cost estimate. Let’s compare two cost estimates, one without component scrap, and one with component scrap, to highlight the difference. To display the screen shown in Figure 5.16, use Transaction CK13N or menu path Accounting • Controlling • Product Cost Controlling • Product Cost Planning • Material Costing • Cost Estimate with Quantity Structure. 189 5.3 5 Scrap Variance Figure 5.16 Cost Estimate without Component Scrap The Total value of the standard fg cost estimate without component scrap is 46,254.68. The igures in the Scrap and Scrap quantity columns indicate that there is no planned output scrap. Now let’s display a cost estimate for material standard fg with 10% component scrap entered in the material master MRP 4 view, as shown in Figure 5.17. Figure 5.17 Cost Estimate with Component Scrap The Total value of the standard fg cost estimate with component scrap is 48,581.82, which is higher than the Total value of 46,254.68 of the cost estimate without component scrap. This is because the quantity of component SFG has increased by 10%, as shown by comparing the Quantity columns in both cost estimates. The Total value of component SFG has increased by 10% due to the increase in Quantity. The increase in component quantity is not shown in the Scrap quantity column. Component scrap is an input quantity variance, not an output scrap variance. Later in this section, we’ll explore how to analyze component scrap in detail. 5.3.5 Actual Component Scrap Costs Actual scrap costs usually occur during production order conirmation. This is when activities are conirmed and goods movements occur during backlushing and auto goods receipt, as discussed in detail in Chapter 3. Let’s now create a production order and carry out a conirmation to demonstrate how actual component scrap costs occur. 190 Component Scrap You create a production order with Transaction CO01 or via menu path Logistics • Production • Shop Floor Control • Order • Create • With Material. To display the component overview screen shown in Figure 5.18, from the initial production order header screen, select Goto • Overviews • Components from the menu bar. Figure 5.18 Production Order Component Quantities Increased by Planned Component Scrap Component SFG quantity is automatically increased by 10% due to component scrap in the material master MRP 4 view, as we discussed earlier in Section 5.3. MRP proposes a total quantity of 1,100.000, as shown in the Reqmts qty (requirements quantity) column in the SFG row, even though only 1,000 are required according to the BOM quantities. This is because it is expected that 100 of the components will be lost or damaged on the way to the production line or will not pass inspection for some reason. Actual component scrap is posted during production order conirmation. In Chapter 3, we looked at a conirmation per operation. In this example, we’ll look at a conirmation at the order header level with Transaction CO15, or via menu path Logistics • Production • Shop Floor Control • Conirmation • Enter • For Order. The screen shown in Figure 5.19 is displayed. 191 5.3 5 Scrap Variance Figure 5.19 Conirmation Screen with Component Scrap Planned Only output scrap, such as assembly or operation scrap, is entered in the Conirmed scrap ield. There is no expected output scrap to conirm, as shown at the Total to conirm column of the Conirmed scrap row. Click on the Goods movements button to display the goods movements screen shown in Figure 5.20. Figure 5.20 Conirmation Goods Movements Screen A Quantity of 1,100.000 for Material 300002252 (SFG) defaults from the production order. The production order quantity of component SFG was increased 10% due to component scrap entered in the material master MRP 4 view. If you manually adjust the default component quantity shown in Figure 5.20, you will introduce an unplanned input quantity variance. After scrap is conirmed, you carry out variance calculation, as discussed in the next section. 192 Component Scrap 5.3.6 Variance Calculation Variance calculation is done using Transactions KKS6 (individual) and KKS5 (collective) or via menu path Accounting • Controlling • Product Cost Controlling • Cost Object Controlling • Product Cost by Period • Period-End Closing • Single Functions: Product Cost Collector • Variances. The screen shown in Figure 5.21 is displayed following variance calculation. You carry out variance analysis for production and process orders with Transactions KKS2 (individual) and KKS1 (collective). Figure 5.21 Component Scrap Displays as Input Quantity Variance There is no scrap variance because component scrap is categorized as an input quantity variance, as shown by the 2,327.14 value in the Input qty var. (input quantity variance) column. Detailed variance analysis for component scrap occurs in product cost collector reports, as explained in the next section. 5.3.7 Component Scrap Target/Actual During a period or at period end, you may need to carry out further detailed analysis of scrap variance. Before doing so, you should irst run variance calculation to update the target costs. You can display and analyze plan versus actual costs in detailed product cost collector reports with Transaction PKBC_PKO or via menu path Accounting • Controlling • Product Cost Controlling • Cost Object Controlling • Product Cost by Period • Information System • Reports for Product Cost by Period • Detailed Reports. A similar report is available for production and process orders with Transaction PKBC_ORD. Let’s compare three detailed reports to demonstrate how component scrap affects variance. Component Scrap Not Planned and Actual Scrap Posted The irst product cost collector report contains an unfavorable scrap variance because component scrap is not planned while actual scrap is posted, as shown in Figure 5.22. 193 5.3 5 Scrap Variance Figure 5.22 Component Scrap Not Planned and Actual Scrap Posted Because component scrap is not planned, actual component scrap posts as an unfavorable input quantity variance, with a value of 2,327.14 in the Variance (total variance) and Qty variance (input quantity variance) columns. A component quantity needed to make 1,100.000 STANDARD FG is issued from inventory, as shown in the Total act.qty column. This corresponds to the value of 25,598.54 in the SFG row and Ttl actual (total actual costs) column. Because the standard cost estimate doesn’t contain planned component scrap, the component target value of 23,271.40 in the SFG row in the Total tgt (total target costs) column is 10% less than the component actual value of 25,598.54. This results in an unfavorable variance of 2,327.14, as shown in the Debit row of the Qty variance column. Overall, because total actual debits of 48,581.82 are greater than total actual credits of 46,254.68, the result is an unfavorable variance of 2,327.14 in the summary (last) row of the Total actual column. Now that we’ve looked at how posting component scrap without planning for it results in an unfavorable variance, let’s see the effect of planning but not posting component scrap. Component Scrap Planned and Actual Scrap Not Posted Compare the report in the previous section with an unfavorable variance to a report in this section with a favorable variance, which results from planning component scrap but not posting an actual increase in component quantity, as shown in Figure 5.23. 194 Component Scrap Figure 5.23 Component Scrap Planned and Actual Scrap Not Posted Because component scrap is planned, all planned scrap that’s not actually posted results in a favorable variance with a value of 2,327.14- in the Qty variance (input quantity variance) column. A component quantity needed to make 1,000.000 STANDARD FG is issued from inventory, as shown in the Total act.qty column, and there is no increase in component quantity. This corresponds to the component actual value of 23,271.40 in the SFG row and Ttl actual (total actual costs) column. This results in total actual debits of 46,254.68, as shown in the Debit row and the Ttl actual column. Because the standard cost estimate contains 10% planned component scrap, the component target value of 25,598.54 in the SFG row in the Total tgt (total target costs) column is 10% greater than the component actual value of 23,271.40. This results in a favorable variance of 2,327.14-, as shown in the Debit row and Qty variance column. Overall, because total actual debits of 46,254.68 are less than total actual total credits of 48,581.82, the result is a favorable variance of 2,327.14- in the summary row of the Total actual column. Now that we’ve looked at how posting component scrap without planning for it results in an unfavorable variance, and how planning component scrap and not actually posting it results in a favorable variance, let’s see the effect of both planning and posting component scrap. 195 5.3 5 Scrap Variance Component Scrap Planned and Actual Scrap Posted Compare the reports in the previous two sections with unfavorable and favorable variances to the report in this section with no variance, since component scrap is planned and actual component quantity is posted, as shown in Figure 5.24. Figure 5.24 Component Scrap Planned and Actual Scrap Posted Because component scrap is planned, and actual component quantities are posted as planned, no variances remain in the Variance or Qty var. columns. A component quantity needed to make 1,100.000 of STANDARD FG is issued from inventory, as shown in the Total act.qty column of the SFG row. This corresponds to the value of 25,598.54 in the Ttl actual (total actual costs) column of the SFG row. Because the standard cost estimate contains 10% planned component scrap, the component target value of 25,598.54 in the SFG row in the Total tgt (total target costs) column is the same as the component actual value of 25,598.54. This results in a value of 0.00 in the Qty variance column of the Debit row. Overall, because total actual debits of 48,581.82 are equal to total actual credits of 48,581.82, the result is a value of 0.00 in the summary row of the Ttl actual column. Total variance ideally should only include unplanned production costs. If you don’t plan scrap, all scrap costs will post as a variance, as demonstrated in Figure 5.22. When you plan component scrap based on production statistics, scrap costs are included in the cost estimate, and only the difference between plan and actual component scrap costs posts as an input quantity variance, as demonstrated in Figure 5.24. 196 Operation Scrap Now that we’ve examined assembly and component scrap, let’s look at the third type of scrap: operation scrap. 5.4 Operation Scrap Planned operation scrap includes the entire cost of faulty or lost assemblies in the cost of sales. If operation scrap is not planned, all scrap costs post as a variance. Although variances can be included at a higher level in proitability reporting, planned operation scrap is included at the material or gross proit level, as we discussed in Chapter 3. This results in more accurate analysis of proitability at the product level. 5.4.1 Operation Scrap Definition Operation scrap can be deined as the percentage of assembly quantity that does not meet required production quality standards. For example, planned operation scrap of 20% means that if you start an operation with 125 pieces, you will lose 20% (25 pieces) during the operation. One hundred pieces will be available for the subsequent operation. Operation scrap is an output scrap because it reduces the planned output quantity in the production process. Operation scrap has different effects on quantities, depending on whether it is entered in the routing, BOM item, or both. We’ll now discuss the three possible options in the following subsections. Operation Scrap in Routing Operation scrap entered in the routing ensures that faulty assemblies are discarded before valuable components are inserted. The output quantity of assembly operations is reduced by the operation scrap amount before valuable components are inserted in a subsequent operation. This reduces wastage of valuable components discarded in assemblies. Case Scenario A music CD packaging facility inspects a CD case for scratches in operation 010 and inserts a CD in the case in operation 020. Operation scrap of 20% is applied at operation 010. For every 100 CD cases inspected, 20 are discarded, and CDs are inserted in 80 CD cases in operation 020. Because CDs are more expensive than cases, damaged cases are discarded before inserting the CDs. 197 5.4 5 Scrap Variance However, the manufacturer still has a requirement to assemble 100 CDs in cases. Planned assembly scrap of 25% is added to the assembly material master. MRP generates a requirement for inspection of 125 cases in operation 010, and 20%, or 25 cases, are discarded due to operation scrap. One hundred cases are available for operation 020. Now that we’ve discussed operation scrap entered in routings, let’s see how operation scrap entered in BOM items works. Operation Scrap in BOM Item Operation scrap entered in the BOM item ensures the input quantity of valuable components inserted in an assembly is reduced. Assembly scrap entered in the material master of the assembly can be ignored by selecting a net checkbox. This allows close control over the planning and use of individual valuable components in an assembly. This may also be useful when a component can be salvaged and reused, even if the assembly does not pass quality inspection. If BOM operation scrap is not entered, assembly scrap from the material master is used. Operation Scrap in Operation and BOM Item Operation scrap entered in both the routing and BOM item reduces the output quantity of an assembly before valuable components are inserted in the next operation. It also controls the input quantity of individual valuable components in the assembly. Routing operation scrap refers to the activity quantity used, while BOM operation scrap refers to the material quantity used. 5.4.2 Effect of Operation Scrap on Quantities Scrap quantities are important because they cause scrap values. Let’s follow a simple example of how operation scrap applied at the operation level affects component and activity quantities. You begin a process with 100 inished PCBs. If planned operation scrap of 10% is entered in the irst operation, and 20% is entered in the second operation in the routing of the inished PCB, a quantity of 72 inished PCBs will be available at the end of the second operation, as shown in Figure 5.25. 198 Operation Scrap Plan: 100 PC Routing BOM Input quantity Blank PCBs BIOS 100 PC 100 PC For output of 100, enter assembly scrap in finished PCB Operation 100 scrap 10% -10 Operation 1 Install/test Operation scrap 20% (100 h) Component scrap 4 % Operation 2 Processor 104 PC Install/test Component quantity needs to be (90 h) reduced by BOM operation scrap 90 -18 Finished PCBs Figure 5.25 72 PC Operation Scrap Reduces Operation Output By decreasing operation output quantity, operation scrap increases the cost of producing the inished PCBs. MRP will propose a production quantity of 100 assemblies, with the expectation that 72 PC will be delivered to inventory, and 28 partial assemblies will be conirmed as scrap. No operation scrap is entered in the BOM item in this example. Now that we know what operation scrap is and how it affects scrap quantities, we’ll investigate how to plan operation scrap. 5.4.3 Operation Scrap Master Data You can plan operation scrap in two master data ields. The most commonly used ield is located in the routing operation details view. To enter operation scrap, as displayed in Figure 5.26, use Transaction CA02 or menu path Logistics • Production • Master Data • Routings • Routings • Standard Routings. Figure 5.26 Operation Scrap Field in Operation Details 199 5.4 5 Scrap Variance You enter operation scrap in the Scrap in % ield of the General data section of the routing operation details screen. Another ield used to plan operation scrap is located in the Basic Data tab of the BOM item. You can view or change BOM item details with Transaction CS02 or via menu path Logistics • Production • Master Data • Bills of Material • Bill of Material • Material BOM • Change. Double-click on a BOM item to display BOM item details, as shown in Figure 5.27. Figure 5.27 Operation Scrap Field in BOM Item You enter operation scrap in the Operation scrap in % ield of the Basic Data tab of the BOM item. The Net ID checkbox is selected to ignore assembly scrap, and it must be selected if you enter operation scrap. For a particular component, operation scrap allows you to enter a different scrap percentage, usually less than the assembly scrap percentage. 5.4.4 Planned Operation Scrap Costs Planned operation scrap costs are included in the standard cost estimate. Let’s compare two cost estimates, one without operation scrap, and one with operation scrap, to highlight the difference. To display the screen shown in Figure 5.28, use Transaction CK13N or menu path Accounting • Controlling • Product Cost Controlling • Product Cost Planning • Material Costing • Cost Estimate with Quantity Structure. 200 Operation Scrap Figure 5.28 Cost Estimate without Operation Scrap The Total value of the STANDARD FG cost estimate without operation scrap is 46,254.68. The igures in the Scrap and Scrap quantity columns indicate there is no planned output scrap. Now let’s display a cost estimate for material STANDARD FG with 10% operation scrap entered in the irst operation of the routing, as shown in Figure 5.29. Figure 5.29 Cost Estimate with Operation Scrap The Total value of the STANDARD FG cost estimate with operation scrap is 46,254.68, the same as without operation scrap. However, the output Quantity of the cost estimate with operation scrap is reduced by 10%, from 1,000.000 without operation scrap, to 900.000 with operation scrap. It costs the same to produce 900.000 with operation scrap as it does to produce 1,000.000 without operation scrap, so per unit cost is increased by operation scrap. Tip To quickly determine if operation scrap is included in a cost estimate, click on the cost estimate Qty Strct. (quantity structure) tab, which displays the screen shown in Figure 5.30. Figure 5.30 Operation Scrap Only Text in Cost Estimate 201 5.4 5 Scrap Variance The Operation Scrap Only text indicates that operation scrap is included in the cost estimate, without the need to refer to operation details. Information text also appears in the same tab if assembly scrap is included in the cost estimate as discussed in Section 5.2. Now that we’ve looked at planning for operation scrap with master data entries and how it affects cost estimates, let’s examine how actual operation scrap postings occur. 5.4.5 Actual Operation Scrap Costs Actual scrap costs usually occur during production order conirmation. That is when operation output is either conirmed as yield or as scrap. We’ll now create a production order and carry out a conirmation to demonstrate how actual operation scrap costs occur. You create a production order with Transaction CO01 or via menu path Logistics • Production • Shop Floor Control • Order • Create • With Material. From the production order header screen, select Goto • Overviews • Operations from the menu bar to display the operations overview screen. Then double-click on the operation in which you entered operation scrap in Section 5.4 to display the production order operation detail screen shown in Figure 5.31. Figure 5.31 Production Order Operation Scrap Field Operation Scrap defaults from the routing, as discussed in Section 5.4. Production order total quantity is unchanged by planned operation scrap. MRP proposes 202 Operation Scrap a quantity of 1,000, with plan yield of 900 and an operation scrap quantity of 100. Actual operation scrap is posted during production order conirmation. A conirmed scrap ield is available, and planned operation scrap defaults from the production order when using conirmation Transaction CO11N or menu path Logistics • Production • Shop Floor Control • Conirmation • Enter • For Operation • Time Ticket, as shown in Figure 5.32. Figure 5.32 Production Order Conirmation Screen Includes Scrap Field The Planned total yield quantity of 1,000.000 is reduced by default operation Scrap quantity of 100.000, resulting in a default Yield quantity of 900.000. If the default operation Scrap quantity is manually changed, a scrap variance will result. After scrap is conirmed, you carry out variance calculation, as discussed next. 5.4.6 Variance Calculation Variance calculation is done using Transactions KKS6 (individual) and KKS5 (collective), or accessing menu path Accounting • Controlling • Product Cost Controlling • Cost Object Controlling • Product Cost by Period • Period-End Closing • Single Functions: Product Cost Collector • Variances. The screen shown in Figure 5.33 is displayed following variance analysis. You carry out variance analysis for production and process orders with Transactions KKS2 (individual) and KKS1 (collective). 203 5.4 5 Scrap Variance Figure 5.33 Variance Calculation Output Screen Operation scrap has reduced the expected Actual qty delivered to inventory to 900.000 from 1,000.000. Operation scrap doesn’t increase the manufactured quantity, so after the planned operation scrap quantity is actually conirmed as scrap, the output quantity is less than the quantity required. You need to plan assembly scrap as well as operation scrap in order to output the required quantity, as described in the case scenario in Section 5.4. The unfavorable Scrap variance of 4,625.48 indicates that operation scrap was posted but not planned in this example. Scrap variance is subtracted from total variance, which simpliies the task of analyzing total variance. Click on the Scrap button (not shown) in the variance calculation output screen to display details of the scrap variance by cost element and operation. Now that we’ve examined how to plan and post actual scrap and calculate variance, let’s look at how to report and analyze operation scrap postings. 5.4.7 Operation Scrap Target/Actual During a period or at period end, you may need to do further detailed analysis of scrap variance. Before analysis during a period, you should irst run variance calculation to update the target costs. You can display and analyze target versus actual costs in detailed product cost collector reports with Transaction PKBC_PKO or via menu path Accounting • Controlling • Product Cost Controlling • Cost Object Controlling • Product Cost by Period • Information System • Reports for Product Cost by Period • Detailed Reports. A similar report is available for production and process orders with Transaction PKBC_ORD. Let’s compare a series of three detailed reports to demonstrate how operation scrap affects variance. Operation Scrap Not Planned and Actual Scrap Posted The irst report contains an unfavorable scrap variance, which results from not planning operation scrap, while posting actual scrap, as shown in Figure 5.34. 204 Operation Scrap Figure 5.34 Operation Scrap Not Planned and Actual Scrap Posted Because operation scrap is not planned, actual operation scrap posts as an unfavorable variance with a value of 4,625.48 in the Scrap variance column. Activity and component quantities needed to make 1,000.000 STANDARD FG are issued from inventory, as shown in the Total act.qty column. This corresponds to the value of 46,254.68 in the Ttl actual (total actual costs) column of the Debit row. A quantity of 900.000 STANDARD FG is delivered to inventory, as shown in the Total act.qty column. This corresponds to the credit value of 41,629.21- in the Ttl actual column of the Delivery row. Because total actual debits of 46,254.68 are greater than the total actual credits of 41,629.21, an unfavorable variance of 4,625.47 results, as shown in the summary row of the Total actual column. Now that we’ve looked at how posting operation scrap without planning for it results in an unfavorable variance, let’s see the effect of planning but not posting operation scrap. Operation Scrap Planned and Actual Scrap Not Posted Compare the report in the previous section with an unfavorable scrap variance to a report in this section with a favorable scrap variance, which results from planning component scrap but not posting actual scrap, as shown in Figure 5.35. 205 5.4 5 Scrap Variance Figure 5.35 Operation Scrap Planned and Actual Scrap Not Posted Because operation scrap is planned, all planned scrap not actually posted results in a favorable scrap variance, with a value of 4,625.47- in the Scrap column. Activity and component quantities needed to make 900.000 STANDARD FG are issued from inventory, as shown in the Total act.qty column. This corresponds to the value of 41,629.22 in the Ttl actual (total actual costs) column of the Debit row. A quantity of 900.000 STANDARD FG is delivered to inventory, as shown in the Total act.qty column. This corresponds to the credit value of 46,254.68 in the Ttl actual column of the Delivery row. The credit value is based on the standard cost estimate, which contains the costs for making 1,000 assemblies because operation scrap is planned. Because total actual debits of 41,629.22 are less than the total actual credits of 46,254.68, a favorable variance of 4,625.46- is shown in the summary row of the Ttl actual column. Now that we’ve looked at how posting operation scrap and not planning for it results in an unfavorable variance, and how planning operation scrap and not actually posting it results in a favorable variance, let’s see the effect of both planning and posting operation scrap. 206 Operation Scrap Assembly Scrap Planned and Actual Scrap Posted Compare the reports in the previous two sections with favorable and unfavorable scrap variances to the report in this section with no scrap variance, which results from planning operation scrap and posting actual scrap, as shown in Figure 5.36. Figure 5.36 Operation Scrap Planned and Actual Scrap Posted Because operation scrap is planned and actual scrap is posted, scrap variance is eliminated, as shown in the summary row of the Scrap variance column. Activity and component quantities needed to make 1,000.000 STANDARD FG are issued from inventory, as shown in the Total act.qty column. This corresponds to the value of 46,254.67 in the Ttl actual (total actual costs) column of the Debit row. A quantity of 900.000 STANDARD FG is delivered to inventory, as shown in the Total act.qty column. This corresponds to the credit value of 46,254.68- in the Ttl actual column of the Delivery row. The credit value is based on the standard cost estimate, which contains the costs for making 1,000 assemblies because operation scrap is planned. Because the total actual debits of 46,254.67 are nearly equal to the total actual credits of 46,254.68, variance is nearly eliminated, as shown by the 0.01- in the summary row of the Ttl actual column. Ideally, total variance should only include unplanned production costs. If you don’t plan scrap, all assembly and operations scrap costs will post as a scrap variance, as was demonstrated in Figure 5.34. When you plan operation scrap based on production 207 5.4 5 Scrap Variance statistics, scrap costs are separated from variance, and only the difference between plan and actual scrap costs post as a variance, as demonstrated in Figure 5.36. Now that we’ve carried out a detailed analysis of each of the three types of scrap, let’s see an example with all three types of scrap combined. 5.5 Combined Scrap In this section, we’ll follow an example beginning with component scrap, and then progressively combine all three types of scrap in the following subsections. 5.5.1 Component Scrap Component scrap increases input component quantity, as shown in Figure 5.37. Routing Plan: 100 PC 100 Operation 1 100 Install/test BOM Input quantity Blank PCBs Processor 100 PC 100 PC (100 h) BIOS 100 Operation 2 100 Install/test 104 PC Component scrap 4 % (100 h) Finished PCBs Figure 5.37 100 PC Component Scrap Increases Component Input Quantity The BOM requires 100 blank PCBs, 100 processors, and 100 BIOS assemblies to manufacture 100 inished PCBs. The routing for the inished PCBs contains two operations that consume production activities. The blank PCBs and processors are assembled in operation 1, and the BIOS assemblies are added in operation 2. To manufacture 100 PCBs, 104 BIOS assemblies are required. You can plan 4% component scrap in the BIOS assembly material master, BOM item, or both. The component scrap that you enter in the material master applies to all materials containing the BIOS assemblies as components. The component scrap that you 208 Combined Scrap enter in the BOM item takes priority over the component scrap that is entered in the material master. 5.5.2 Component and Operation Scrap Next we need to establish that an operation scrap of 10% occurs in operation 1, and 20% occurs in operation 2. You plan for operation scrap in the routing operation details, which reduces the activity quantity corresponding to the yield from the previous operation. Let’s look at an example as shown in Figure 5.38. Routing Plan: 100 PC 100 Operation 1 -10 Install/test 90 -18 BOM Input quantity Blank PCBs Processor 100 PC 100 PC (100 h) BIOS Operation 2 Install/test 104 PC Component scrap 4 % (90 h) Finished PCBs Figure 5.38 72 PC Operation Scrap Reduces Output Quantity Output scrap reduces the operation output yield. In this example, the operation scrap of 10% reduces operation 1 output from 100 PC to 90 PC. The operation scrap of 20% reduces operation 2 output from 90 PC to 72 PC. You can plan routing operation scrap in the operation detail screen previously shown in Figure 5.26. 5.5.3 Component, Operation, and Assembly Scrap Let’s now look at a scenario involving the manufacture of 100 PC inished PCBs instead of 72 PC. You need to increase the input quantity of components and subassemblies to manufacture 100 inished PCBs. You achieve this by entering 38.89% assembly scrap in the inished PCB material master MRP 1 view. Let’s analyze how assembly scrap increases the quantity of inished PCBs in Figure 5.39. 209 5.5 5 Scrap Variance Routing Plan: 100 PC Operation scrap 10% 139 Operation 1 - 14 Install/test Operation scrap 20% (100 h) 125 Operation 2 -25 Install/test BOM Input quantity Blank PCBs 139 PC Processor 139 PC BIOS 145 PC Component scrap 4 % (90 h) Assembly scrap 38.89% Figure 5.39 Finished PCBs 72 PC Assembly Scrap Corrects Output Quantity Plan assembly scrap of 38.89% increases the output quantity of inished PCBs from 72 PC to 100 PC. Assembly scrap also increases the input quantity of components from 100 PC to 139 PC. Because 4% component scrap is also planned for the BIOS, the input quantity is increased from 104 PC to 145 PC. The BIOS quantity of 145 PC is calculated as follows: 1. Assembly Scrap The planned assembly scrap of 38.89% entered in the inished PCB material master MRP 1 view increases the BIOS quantity from 100 PC to 139 PC. 2. Component Scrap The planned component scrap of 4% entered in the BIOS material master MRP 4 view, or the BOM item details screen, increases the BIOS quantity from 139 PC to 145 PC. Note You can automatically calculate the assembly scrap required to compensate for a reduced production output due to operation scrap by scheduling the routing and transferring the assembly scrap into the material master, which we‘ll discuss later in Section 5.5.6. We‘ve corrected the output quantity of inished PCBs with plan assembly scrap. However, the input quantity of BIOS is 145 PC, while the required quantity is 125, which enters operation 2 from operation 1 as shown in Figure 5.39. 210 Combined Scrap Let’s now explore how to correct the component quantity with BOM item operation scrap. 5.5.4 BOM Item Operation Scrap Operation scrap entered in the routing reduces the activity quantity, rather than the component quantity. You also need to enter operation scrap of 20% in the BOM item in order to ensure that the correct quantity of BIOS assemblies is removed from inventory. The resulting quantities are shown in Figure 5.40. Routing Plan: 100 PC Operation scrap 10% 139 Operation 1 - 14 Install/test Operation scrap 20% (139 h) 125 Operation 2 -25 Install/test BOM Blank PCBs 139 PC Processor 139 PC BIOS Figure 5.40 Finished PCBs 125 PC Component scrap 4% Operation scrap 20% (125 h) Assembly scrap 38.89% Input quantity 100 PC Net ID selected BOM Item Operation Scrap Corrects Component Quantity BOM item operation scrap reduces the BIOS input quantity from 145 PC, shown in Figure 5.39, to 125 PC as shown in Figure 5.40. This number corresponds with the quantity of 125, which enters operation 2 from operation 1. You plan BOM item operation scrap as previously shown in Figure 5.27. The BIOS quantity of 125 PC shown in Figure 5.40 is calculated as follows: 1. Net ID Checkbox When you plan BOM item operation scrap, you‘re required to select the Net ID checkbox, which ignores assembly scrap. At this stage, the component quanitity is 100 PC. 2. Operation Scrap Plan operation scrap entered in the BOM item increases the component quantity by 20%. At this stage, the component quantity is 120 PC. 211 5.5 5 Scrap Variance 3. Component Scrap Plan component scrap entered in the BOM item increases the component quantity by 4%. At this stage, the component quantity is 125 PC. By following these steps, we removed the assembly scrap of 38.89% from the BOM item, replaced it with operation scrap of 20%, and then increased the quantity by 4% component scrap. 5.5.5 Operation and Assembly Scrap Let’s now analyze our scenario without component scrap to help further illustrate how plan scrap affects quantities. Component plan scrap has been removed from the scenario shown in Figure 5.41. Routing Plan: 100 PC Operation scrap 10% 139 Operation 1 - 14 Install/test Operation scrap 20% (139 h) 125 Operation 2 -25 Install/test BOM Blank PCBs 139 PC Processor 139 PC BIOS Figure 5.41 Finished PCBs 120 PC Component scrap 0% Operation scrap 20% (125 h) Assembly scrap 38.89% Input quantity 100 PC Net ID selected Operation and Assembly Scrap without Component Scrap We have selected the Net ID checkbox, which ensures assembly scrap is ignored for the BIOS component. Operation scrap of 20% then increases the BIOS quantity from 100 PC to 120 PC. Let’s look at how you can automatically calculate the assembly scrap required to compensate for reduced production output due to operation scrap. 5.5.6 Calculate Assembly Scrap Plan operation scrap records how many products will be lost or damaged in an operation. It reduces the output of an operation into subsequent operations. You 212 Combined Scrap can enter plan assembly scrap in the material master MRP 1 view to achieve the required production output in combination with plan operation scrap. If operation scrap occurs in many operations and in many assemblies, it can be time-consuming to manually calculate the required assembly scrap. You can automatically calculate assembly scrap and have the system populate the corresponding material master ield. Assembly Scrap Formula Let’s follow an example to illustrate how assembly scrap is calculated. EE EE EE Operation scrap reduces operation output quantity: EE Input quantity 1,000 units EE Operation 10 contains 20% operation scrap: Output quantity 800 units EE Operation 20 contains 20% operation scrap: Output quantity 640 units Assembly scrap required to produce 1,000 assemblies: EE Input quantity 1,562 units achieved with assembly scrap of 56.25% EE Operation 10 contains 20% operation scrap: Output quantity 1,250 units EE Operation 20 contains 20% operation scrap: Output quantity 1,000 units The system calculates assembly scrap with the following formula: Assembly scrap = 1 / (1 – operation scrap) × 1 / (1 – operation scrap) – 1 EE You calculate assembly scrap in this example with the following values: Assembly scrap = 1 / (1 – 0.2) × 1 / (1 – 0.2) – 1 = (1.25 ×1.25) – 1 = 0.5625 = 56.25% Now that we’ve examined the formula to calculate assembly scrap, let’s see how you get the system to automatically calculate assembly scrap. Assembly Scrap Calculation You calculate assembly scrap automatically with Transaction CA97 or via menu path Logistics • Production • Master Data • Routings • Extras • Material 213 5.5 5 Scrap Variance Master • Schedule Material Master. The selection screen shown in Figure 5.42 is displayed. Figure 5.42 Transfer Scheduling Results to Material Master This transaction allows you to transfer scheduling results from routings to material masters. You can transfer setup and teardown time, processing time, inter-operation time, assembly scrap, and base quantity. The transfer ensures consistency of scheduling data between routings and material masters, which is mandatory for requirements and detailed planning. Select the Update with assembly scrap checkbox to update the Assembly scrap ield in the material master MRP1 view with the automatically calculated assembly scrap. Note If scheduling does not calculate an assembly scrap value, then the material master assembly scrap value is overwritten with the value zero. Type in your entries in the selection screen in Figure 5.42 and press (Enter) to display the results screen shown in Figure 5.43. 214 Summary Figure 5.43 Transfer Scheduling Results Output Screen The results screen lists the material masters that were selected and displays the success of the update. Now that we’ve discussed how to automatically calculate assembly scrap, we’ve reached the end of this chapter on scrap variance. Let’s review what we covered. 5.6 Summary In this chapter, we discussed scrap basics, including the difference between scrap and rework, and presented a case scenario involving the interaction between assembly and component scrap, and the decision of whether to scrap or rework. We also briely looked at the deinition of the three types of scrap: assembly scrap, component scrap, and operation scrap. We then analyzed each of the three types of scrap at a detailed level and looked at diagrams to help you understand the effect of scrap on quantities and costs. We also looked at how to plan scrap by making master data entries, and we examined the priorities if two entries are made. We analyzed the effect of plan scrap on cost estimates by analyzing cost estimates before and after the plan scrap entries. We also looked at a shortcut for determining if assembly and/or operation scrap inluence a cost estimate: clicking on the cost estimate quantity structure tab. We explained how actual scrap postings occur, by irst creating a production order and then carrying out conirmations involving scrap. We then carried out variance calculation and analyzed the output results screen. 215 5.6 5 Scrap Variance We then examined three detailed reports for each type of scrap: EE First, we analyzed the effect of not planning scrap and then posting actual scrap, and the resulting unfavorable variance. EE Second, we saw the effect of planning for scrap but not actually posting scrap, and the resulting favorable variance. EE Third, we examined the ideal scenario of planning for scrap and then posting the planned amounts of scrap. One of the main beneits of this scenario is the reduction in total variance, making it easier to analyze other variance categories, as described in Chapter 4. Finally, we followed scenarios combining the three types of scrap, and then examined how to automatically calculate assembly scrap. In Chapter 6, we’ll walk through the many excellent standard reports available for CO reporting in general and for variance reporting in particular. 216 Index A Activity Confirmation, 52, 97, 100, 104, 110, 176 Consumption, 154, 157 Price, 36, 42, 66 Quantity, 36, 152, 154, 177, 198 Rate, 41, 51 Rates, 150 Type, 40, 155 Activity-dependent planning, 152, 154 Activity-independent costs, 154, 155 Activity previously conirmed, 107 Activity scheduled quantity, 23 Actual Cost, 23, 119, 183, 193, 204, 236 Credit, 119 Debit, 151 Scrap, 16, 114, 176 Actual assembly scrap, 181 Actual costing, 172, 253, 259 Actual cost splitting, 155 Actual price calculation, 158, 162 Actual price indicator, 160 Actual procurement lot size, 48 Actual scrap, 16 Allocated actual cost, 156 Alternate summarization hierarchy, 227 Alternative cost estimate, 121 Alternative methods of manufacture, 52 Actual, 181 Analysis, 183 BOM item, 178 Confimation, 181 Cost estimate text, 180 Definition, 177 Example, 177 Master data, 178 Material master, 178 Output scrap, 177 Plan, 179 Quantity, 177 Without planning, 184 With planning, 184 Assessment, 150 Auto goods receipt, 181 Automatic goods receipt, 105 B Backlushing, 105, 181 Balance sheet account, 131, 271 Base, 55 Bill of material (BOM), 26, 45, 50, 50, 87 Alternative, 137 Lowest-level, 51 BOM item, 51, 178, 188, 200 Bulk material, 51 Quantity field, 51 Relevancy to costing indicator, 51 Bottom line, 102 Building lease, 54 Bulk material, 51 C Calculation base Cost element, 55 Cost element group, 56 Overhead, 55 Rows, 55 Change in WIP, 133 Collective processing time, 139 Company assets, 131 Component, 25, 98 Lower-level, 35 Purchasing requirements, 38 Component scrap, 176, 187 Actual, 190 Analysis, 193 281 Index BOM item, 188 Case scenario, 189 Definition, 187 Field, 179 Input quantity variance, 190 Master data, 188 Material master, 188 Plan, 189 Priority, 189 Quantity, 187 Without planning, 190 With planning, 190 Component standard price, 98 Condition technique, 221 Conirmation, 181, 190 Activity, 143 Default yield, 106 Expected quantity, 106 Labor, 143 Per operation, 108 Production order, 104, 108 Quantities, 106 Screen, 143 Time event, 105 Time ticket, 105 Conirmed scrap, 182, 203 Conirmed yield, 134 Consumption account, 97 Control costs, 119, 137, 143 Controlling, 97 Area, 219 Level, 87 CO-PA, 111, 144, 150 CO product group, 222 Assign materials, 223 Create, 222 Hierarchy, 223 Corrective action, 122 Cost Activity, 38 Activity-independent, 40 Actual, 119 Labor, 26, 38, 52 Material, 51 Overhead, 52, 54 282 Primary, 38 Target, 131 Unit, 127 Variable, 38, 40 Cost center, 51, 100 Activity quantity, 44 Actual costs, 155 Actual/plan reports, 147 Analyze balance, 147 Assessment, 101 Assignment, 166 Balance, 147, 149, 154, 155 Credit, 55 Credits, 149, 157 Debits, 149, 158 Fixed cost variance, 158 Functional area, 258 Input price variance, 156 Input quantity variance, 156 Input variance, 156 Line items, 150 Manager, 38 Output variance, 157 Overhead, 99 Plan credits, 150 Plan debits, 149 Planned costs, 26 Planning, 38 Primary planning, 38 Production, 150, 154 Profit center, 264 Purchasing, 165 Remaining input variance, 157 Report, 42, 149 Resource-usage variance, 157 Target cost analysis, 147, 154 Target costs, 151 Under/over absorption, 102, 107 Under/overabsorption, 147 Variance, 42, 154, 173 Variance analysis, 147, 154 Variance calculation, 155 Cost center accounting, 23, 35, 37 Cost component, 58 Available, 60 Index Component material cost, 59 Configuration, 59 Labor, 58, 60 Material, 58 Overhead, 58 Roll up costs, 59 Split, 58 Structure, 59 Cost component structure, 60 Costed multilevel BOM, 66 Cost element, 38, 55, 155 Button, 141 Category, 97 Change, 164 Default account assignment, 164 Group, 155 PPV, 166 Primary, 97 Secondary, 99 Cost estimate, 141 Alternative material, 121 Finish date, 66 Itemization, 138 Mixed, 125 Modified standard, 122 Preliminary, 16, 44, 112, 117, 131, 137 Release, 138 Released, 176 Standard, 16, 112, 117, 137, 138 Start date, 66 Costing lot size, 48, 65, 127, 168, 170 Costing run, 16, 72, 117, 163, 171 Analysis, 79 Background processing, 77 Company code, 81 Costing, 78 Costing level, 78 Costing variant, 81 Costing version, 81 Create, 72 Dates tab, 74 Edit, 74 Execute column, 75 Flow step column, 74 Log, 77 Log by costing levels, 78 Marking, 81 Master data errors, 72 Material overview, 76 Other prices, 83 Parameter, 74 Print log, 77 Release, 83 Release date, 72 Rerun, 81 Selection, 75 Selection screen, 73 Structural explosion, 76 Costing sheet, 52, 54, 128 Available, 54 Base, 55 Calculation rate, 56 Components, 54 Configuration, 54 Cost element, 55 Credit key, 57 Dependency, 56 Example, 54 Fixed cost, 56 Maintenance, 58 Origin group, 56 Overhead rate, 56 Percentage rate, 56 Variable cost, 56 Costing status, 71 Costing step, 78 Costing type, 62 Costing variant, 15, 53, 61 Components, 62 Configuration, 44, 61 Costing type, 62 Date control, 66 Permitted, 69 PPC2, 121 Transfer control, 65 Costing version, 65, 94 Costing view, 47 Cost object, 97 Cost object hierarchy, 122 Actual costs, 122 283 Index Equivalences, 122 Target cost version 3, 122 Cost of sales, 154, 176, 187 Costs Actual, 97, 253 Cost center, 107 Primary, 97 Production order, 98 Report actual, 109 Secondary, 97 Costs based on ield, 67 Create production order, 103 Credit, 55 Credit key, 57 Actual overhead debit, 58 Cost center, 57 Fixed costs, 58 Plan overhead cost, 58 Secondary cost element, 58 Variable costs, 58 Current planned price, 49 Customer, 219 D Data collection, 219, 224, 231 Hierarchy node, 232 Objects, 233 Product drilldown, 225 Results screen, 225, 233 Summarization time frame, 232 Date control, 66 Dates tab, 65 Debit, 98 Default Account assignment, 164, 165 Activities, 107 Activity quantity, 106 Assembly scrap, 182 Quantities, 106 Yield, 106 Variance key, 115 Deletion lag Activate, 135 284 Revoke, 135 Dependency ield, 56 Dependent requirements, 26, 28 Detailed analysis, 109 Detailed report, 16, 217, 235 Cost element details, 235 Drilldown, 235 Source document, 236 Detail list checkbox, 139, 145 Drill down, 110 Drilldown functionality, 217 Drilling down, 143, 172 E Edit costing run, 72 Electricity, 128 Equivalence numbers, 155 Error messages, 45 Estimated purchase price, 49 Exception message, 30 Exception rules, 140, 217, 235 Expected cost, 111 Expense account, 98 External activity, 149 External business transactions, 97 External procurement, 26, 32, 47 External vendor, 98 F Final conirmation, 105 Final operation, 106 Financial accounting, 98, 110 Finished good, 51 Finished product, 172 Fiscal period, 128 Fiscal year, 38 Fixed component, 154 Fixed cost variance, 158 Flow step column, 74 Future planned price, 49 Future purchasing requirements, 34 Index G General ledger account, 110 Goods issue, 123 Goods movement, 106, 110, 192 Goods receipt, 52, 123, 138, 163, 265 Quantity, 134 Valuated, 143 GR/IR, 98 Account, 163 Gross proit, 102, 177, 187 H Highest-level report, 217 History tab, 89 I Incremental debit, 159 Information system, 155 In-house production, 26 Initial planning, 38, 110 Input price variance, 156 Input quantity variance, 107, 143 Input variance, 156 Insurance, 54 Internal order, 97 Inventory, 97, 101, 111, 138 Valuation, 45, 98, 117 Revaluation, 71, 81 L Labor allocation, 100 Legacy system, 41 Line item details, 110, 142, 237 Line item postings, 166 Line item report, 16, 145, 146, 217, 237 Activity confirmations, 239 Goods receipt, 239 Material documents, 239 Posting date, 238 Quantity, 239 Source documents, 239 Logistics master data, 44 Long-term MRP, 32, 35 Long-term planning, 23, 25, 36, 43, 44 BOM, 29 Collective run, 29 MRP list, 30 Planning horizon, 29 Planning scenario, 26 Processing key, 29 Run, 28 Simulative dependent requirements, 29 Simulative planned orders, 29 Version active indicator, 26 Lot size, 127 Lower-level cost estimate, 89 M Maintain Version Coniguration, 159 Manually insert operation, 108 Manufacturing company, 59 Manufacturing order, 143 Efficiency, 52 Margin analysis, 102, 154, 176 Gross profit, 102 Net profit, 102 Operating expenses, 102 Operating profit, 102 Pretax profit, 102 Profit margin, 102 SG & A, 102 Mark cost estimate, 70 Marking allowance, 68 Master data, 15, 46, 123, 178, 188 BOM, 45 Fields, 46 Logistics, 46 Material master, 50 Routing, 45 Stable, 46 Statistical key figure, 268 285 Index Material consumption, 172 Material document, 110, 168 Material group, 217, 222 Material ledger, 16, 172 Material master, 46, 50, 61, 70, 115 Material movement, 97 Material origin, 217 Material origin checkbox, 138 Material overhead, 55 Material overview, 76 Material Requirements Planning (MRP), 26, 175 Message analysis, 145 Metal plate, 175 Mixed Cost estimate, 90, 91, 94, 125 Costing, 90, 91 Costing checkbox, 95 Price, 90, 125 Price variance, 91, 125 Procurement costs, 90 Mixing ratio, 90, 93 Modiied cost estimate, 122 Modiied product, 49 Mounting holes, 175 MRP, 26, 178, 187, 188, 202, 218 Exception message, 30 Long-term, 32 Operative, 26 N Net ID checkbox, 179, 200 Net proit, 102 Nonrecurring expense, 150 O Operating proit, 102 Operating rate, 152 Operation, 52, 105, 131 Operation details, 199 Operation scrap, 176, 197, 261 Actual, 202 286 Analysis, 204 Assembly scrap, 198 BOM item, 198 Confirmation, 203 Cost estimate text, 202 Definition, 197 Field, 179 Master data, 199 Operation details, 199 Operations overview, 202 Output scrap, 197 Plan, 197, 200 Quantity, 198 Routing, 198 Subsequent operations, 176 Valuable components, 176 Without planning, 201 With planning, 201 Operation sequence, 108 Operative MRP, 26, 35 Order Category, 242 Fully delivered, 143 Manufacturing, 143 Quantity, 106 Status, 137, 143 Order information system, 106, 218, 239 Layout, 240 MRP controller, 239 Operation, 239 Order header, 240 Production supervisor, 239 Order-related manufacturing, 52 Order selection, 242 Order category, 242 Order type, 243 Original transaction, 110, 143 Origin group, 56 Other prices, 83 Output price variance, 157, 158 Output quantity, 127 Overhead, 45, 127 Calculation, 100, 128 Cost, 54 Cost center, 99 Key, 56 Index Overhead rate, 55, 57 Calculation base, 56 Date-dependent, 57 Dependency, 56 Percentage, 57 Percentage factor, 56 Overhead rates, 23 P Partial assembly, 134 Payroll, 128 Period, 43 Period-end closing, 52 Period-end process, 128 Plan Activity, 43 Activity quantity, 42, 150 Capacity quantity, 42 Component scrap, 188 Cost, 23, 97 Cost center, 23, 36 Debit, 154 Depreciation, 38 Fixed costs, 40 Payroll, 38 Primary cost, 38 Production, 23, 38 Reconciliation, 38, 44 Sales, 23, 38 Scrap, 16 Version, 32 Planned assembly scrap, 181, 191 Planned independent requirements, 25 Consume, 28 Sales order, 28 Version, 29 Planned price 1, 49, 64 Planning horizon, 29 Planning layout, 39 Planning performance, 121 Planning scenario, 26 Planning variance, 112, 121, 262 Plan operating rate, 158 Plant manager, 217 Possible entries Operation sequence, 108 Order category, 242 Order type, 243 Process category, 92 Procurement type, 46 Summarization characteristics, 230 Posting origin, 97 Posting Period, 145 PPV, 163 Preliminary cost estimate, 85, 112 Controlling level, 87 Costing Data tab, 87 Mass processing, 90 Production version, 87 Transfer control, 87 Pretax proit, 102 Previous planned price, 49 Price Accuracy, 254, 263 Break, 171 Revaluation, 154 Unit, 68, 263 Price control, 50 Moving average, 123 Standard, 123 Primary cost, 41 Element, 38, 59, 97, 98, 101 Planning, 44, 150 Printed circuit boards, 177 Process category, 92 Processor, 188 Process order, 106, 109 Procure components, 45 Procurement alternative, 90, 92, 94, 125 Procurement type, 46 Product Cost by Order, 52, 113, 136 Product Cost by Period, 52, 90, 113 Product cost collector, 47, 52, 84, 112, 226 Analysis report, 142 Analyze, 109, 141 Create, 138 Deletion flag, 138 Settlement, 144 Variance key, 138 Product development, 72 287 Index Product drilldown Configuration, 220 Control parameters, 220 Cumulative, 226 Data collection, 224 Improve performance, 226 Periodic, 226 Period range, 226 Reports, 220 Run report, 225 Product group, 24, 221 Product hierarchy, 220, 221 Production Control, 52, 118 Cost center, 38, 100, 150 Costs, 130 Efficiency, 120 Line, 118 Order, 47, 101 Output, 151 Output account, 101 Performance, 120 Plan, 24, 38, 44 Process, 54, 87, 137 Quantity, 25 Run, 118 Variance, 112, 120, 122, 173 Version, 53, 87, 90 Production order Activity confirmation, 104, 110 Automatic goods receipt, 105 Backflush, 105 BOM, 103 Confirmation, 105, 106 Costs, 98 Create, 103 Credit, 101 Details, 106 Information system, 106 List, 106 Material, 103 Operation sequence, 108 Personnel, 217 Primary credit, 101 Release, 104 Resource, 176 Routing, 103 288 Secondary credit, 102 Statistic, 188 Status, 118 Type, 107 Variances, 102 Proitability analysis, 102, 267 Proitability reporting, 177 Proit and loss account, 131, 271 Proit margin, 102 Propose activities, 107 Purchased items, 25 Purchase order, 169 Price, 35, 163 Quantity, 35 Value, 34, 35 Purchase price, 23, 163 Variance, 163 Purchase requisition, 32 Purchasing department, 35 Performance, 163 Purchasing info record, 25, 32, 44, 45, 163, 169 Conditions, 169 Price, 61 Scale, 170 Validity periods, 170 Purchasing information system, 23, 32, 38 Purchasing requirements, 34, 44 Q Quality inspection operation, 108 Quality standards, 177 Quantity structure, 87, 120, 201 Date, 66 Tab, 180 Type, 91 R Raw material, 51, 163 Inventory, 98 Reconciliation, 131 Redundant messages, 145 Reference quantity, 134 Index Release, 84 Cost estimate, 71 Production order, 103 Step, 84 Relevancy to costing indicator, 52 Remaining input variance, 157 Remaining variance, 115, 127, 158 Repetitive manufacturing, 52, 118 Replacement parts, 157 Reports Cost center, 244 Line item, 217, 237 Product drilldown, 220, 264 Production order, 239 Source documents, 244 Standard, 217 Summarization hierarchies, 227 Summarized, 220 Request for quotation (RFQ), 32 Revaluation, 162 Rework, 175 ROH, 51 Roll up, 51 Rounding differences, 127 Routing, 45, 51, 87, 108, 117, 137, 197 Structure, 117 S Sales and operations planning (SOP), 23, 44 Sales order, 28, 219 Sales plan, 24, 44 Sales scenario, 23 Scenario analysis, 65 Scenario testing, 36 Scheduled activity quantity, 42 Scheduled activity requirements, 26 Scrap, 137, 175, 176 Actual, 16, 114, 176 Amounts, 176 Assembly, 176, 177, 183 Calculation, 176 Checkbox, 114, 116 Component, 187, 189 Confirmed, 192 Costs, 176 Input, 187, 255 Operation, 192, 197 Output, 177, 192, 197, 253, 261 Percentage, 176, 179 Plan, 16 Planned, 114, 176 Target, 176 Valuate, 120 Value, 114, 177, 187 Variance, 114, 115, 116, 176, 186 Variance checkbox, 127 Secondary cost element, 59 Type 41, 42, 43, 99, 100 Select Layout Icon, 141 Settlement, 102, 111, 112, 144, 267 Basic list, 145 Current period, 143, 145 Error messages, 145 Line item report, 145 List of values, 146 Period-end, 144 Prior periods, 145 Processing time, 145 Reversal, 145 Rule, 138 Selection parameters, 146 Selection screen, 146 Sequential, 138 Type, 138 Settlement type FUL, 143 Full, 143 PER, 138 Periodic, 138 Setup time, 48, 127 Shop loor control, 239 Simulative planned order, 32 SOP, 24 Sort line items, 143 Source document, 110, 168, 217, 228 Specialized activities, 98 Special procurement type, 47 Splitting rules, 155 Standard activity time, 51 Standard cost estimate, 45, 64, 68, 117, 179, 189, 200 Costing run, 72 289 Index Costing status VO, 70 Costing variant PPC1, 64 Costing version, 69 Current, 89 Future, 89 History tab, 89 Mark, 49, 68 Marking allowance, 68 One per material, 87 Previous, 89 Previously released, 49 Release, 45, 49, 71 Status FR, 84 Status VO, 83 Valuation variant, 68 Standard hierarchy, 245 Standard price, 163, 176, 180 Finished goods, 101 Standard report, 16, 217 Standard value ield, 52 Status Deletion flag, 135 Determine automatically, 143 Determine manually, 143 Fully delivered, 136 Released, 136 Technically complete, 135, 136 Selection profile, 229, 231 Stock/requirements list, 31 Stock valuation, 64 Strategy sequence, 64 Structural explosion step, 76 Subcontracting, 64 Substitute components, 124 Summarization Analysis, 218 Level, 227 Report, 217, 230 Time frame, 225 Summarization hierarchy ALV format, 230 Data collection, 231 Exception rules, 235 Hierarchy levels, 229 Material, 230 290 Order number, 230 Plant, 230 Profit center, 230 Selection profile, 231 Single objects, 235 Status selection profile, 229 Summarized analysis, 16 Summarized reporting, 139 System messages, 45 T Target cost, 97, 111, 114, 118, 119, 131, 137, 138, 152 Button, 141 Configuration, 143 Version, 139, 159 Version 0, 111, 119, 268 Version 1, 112, 120 Version 2, 113, 121 Version 3, 116, 121 Target debit, 154 Target quantity, 157 Task list, 51 Tax, 102 Tear-down time, 127 Test run checkbox, 155 Total variance, 64, 111, 269 Total WIP, 133 Trafic light symbols, 235 Transactional data, 46 Transfer control, 36, 65, 87 U Under/overabsorption, 147, 269 Unfavorable variance, 48 Unit cost, 48, 127 Unplanned consumption, 157 User entry, 68 Index V Valuable components, 197 Valuation, 23 Class, 50 Date, 66 Valuation variant, 63, 117, 120, 270 Activity types/processes, 64 External processing, 64 Scrap and WIP, 118, 131 Subcontracting, 63 Value ield, 112 Variable component, 154 Variable quantity, 157 Variance Analysis, 45, 47, 63, 102, 111, 123, 217 Button, 141 Calculate, 114 Calculation, 16, 101, 111, 114, 122, 126, 136, 138, 154, 155, 182, 192 Categories, 271 Categories, 101, 115, 122, 136, 155 Collective, 139 Column, 140 Component, 138 Configuration, 113 Cost center, 147 Cumulative, 143 Debit, 149 Favorable, 149 High, 140 Individual materials, 140 Input, 123 Input price, 112, 123 Input quantity, 107, 124, 141, 143, 193 Key, 47, 53, 113, 116, 138, 176 Keys default, 115 Largest, 140 Lot size, 112, 127 Manufacturing, 102 Mixed-price, 125 Original cause, 143 Output price, 126 Planning, 112, 121, 137, 262 Plant manufacturing, 217 Price, 71 Process order, 109 Product cost collector, 102 Production, 71, 112, 120, 137, 264, 269 Production order, 109 Recalculate, 140 Reconcile, 146 Reconciliation, 131 Reduce, 71 Remaining, 115, 127 Remaining input, 125 Reporting, 16 Requirements, 143 Resource-usage, 124 Scrap, 137, 193 Sequence, 144 Sort, 140 Source, 102 Total, 101, 111, 136, 139 Unfavorable, 48, 140, 234 Variant, 115, 116 Write line items, 114 Variance analysis, 39 Variance Category Columns, 141 Variance Key, 47, 53 Vendor information, 46 Vendor quotation, 25, 35, 45, 163, 170 Version, 36 Version 0, 36 Version coniguration, 159 W Work center, 35, 87, 100, 137 Load, 44 Work in Process (WIP), 131 At target, 131 Calculate, 118, 136 Cancel, 135, 136, 144 Explanation, 133 Target, 118 Unsettled, 143 Workload, 98 291 Index Y Z Yield, 105, 134 Default, 106 Previously confirmed, 106 Propose, 106 To be confirmed, 106, 107 Total, 107 Zero balance, 102 292