07/09/2022, 23:12 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

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Hrusikesh Dalai
November 25, 2013
| 5 minute read

Basics of Standard Costing –

Understanding the Cost Component
Structure-Part 3
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This document is in continuation of my second document
http://scn.sap.com/docs/DOC-49167 –Basics of SAP Standard Cost estimate-
 RSS Feed understanding costing variant-Part 2 and 3rd in the series

This document explains the Cost Component Structure (CCS) and components
assigned to CCS.  Explaining various settings in background as previous part.

Cost Component Structure (CCS)

The cost component structure determines how the results of material costing are
updated. The cost component structure groups the costs for each material
according to cost component (such as material costs, internal activities, external
activities, and overhead). If the material is used in the production of another
material, the cost component split (which breaks down the costs according to
material costs, internal activities, external activities, overhead, and so forth)
remains in the system when the costs are rolled up.

In the cost component split, you also define the following for material costing:

Which part of the costs are fixed costs

Which costs are costs of goods manufactured and what are sales and
administration costs
Which costs are relevant for stock valuation, commercial inventory valuation
and tax inventory valuation

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When the cost component structure is assigned to the organizational units,

you can specify that two cost component splits are created:

Main cost component split

This is the principal cost component split, meaning that it is used in the standard
cost estimate, which can be used to update the material master. The main cost
component split can be a cost component split for cost of goods manufactured
or a primary cost component split.

Auxiliary cost component split

this can exist in addition to the main cost component split, and is not used in the
standard cost estimate. It can be used for analysis purposes, in that it can be
displayed with the cost estimate and passed on to Profitability Analysis.

Step 1 – T Code OKTZ

Screenshot 1

I have created Z1 and Z2 CCS for our analysis purpose. You can use two cost
comp structure for reporting purpose and different reporting need.

Material cost estimates are created in the Product Cost Planning component.
Sales order cost estimates and order BOM cost estimates are created in Product
Cost by Sales Order component. The cost components separate the results of a
cost estimate into raw materials, material overhead, external activities, setup
costs, machine costs, labor costs, production costs, and other costs.

Display the cost components in the cost estimate

  T code ck13- view of Cost estimate Cost element and cost component like Mat, Labor,
OH etc.

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                         Screenshot 2

The above screen shows the distribution of cost as per the Cost component
structure

T-code OKTZ

In Cost Center Accounting, the cost component structure determines how the
results of the activity price calculation are updated. The cost component
structure groups the costs for each activity type of the cost center according to
cost components (such as material costs and labor costs). If an internal activity
allocation is carried out, the cost component split (which breaks down the costs
according to material, labor costs, and so forth) is retained at cost rollup.

If the cost component split is not to be retained, you can create a switching
structure for the cost component structure for Cost Center Accounting. In the
switching structure, you specify which sender cost component goes into which
receiver cost component

See below

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     Screenshot 3

From screenshot 2 you will notice there is a Column called cost element. We get
those from settings in Cost component structure setting by assigning cost
elements for respective cost component.

     Screenshot 4

Different Settings in Cost component Structure in see below.

Control

Cost Share- which includes Variable, Fixed and variable Cost

Indicator for Roll up Cost Component

This indicator determines whether the costing results of a cost component are
rolled up into the next-highest costing level (cost roll up).

You can specify which cost components are rolled up into the next-highest
costing level according to the criteria specific to your organization.

Example

If the sales and administration costs and the cost of goods manufactured are to
be costed simultaneously in a costing level, you can proceed as follows:

You set this indicator for the cost components identified as the cost of goods manufactured.
These costs are rolled up into the next-highest costing level.

You do not set this indicator for the cost components identified as sales and administration
costs. These costs remain on the costing level on which they were originally calculated.

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     Screenshot 5

Also the filter criteria for itemization are important for example anything which
we wanted for statistically analysis purpose we can check not relevant for
inventory valuation.Some examples below shows based on the settings how the
result will affect. Below screen you will see the cost element separated by the
Material, Labor and Overhead as we defined in CCS.

Cost estimate itemization view (T CODE-CK13n)

     Screenshot 6

Target/Actual Comparison: Cumulative report (T CODE- KKO0), there is

additional configuration required in OKKN. You can build your own report using

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report painter too.The cost components we defined in CCS will flow into these
reports based on our section in Report painter.

Screenshot 7

In this document i tried to explain in a simple manner the use of cost component
structure. This is a basic and beginners understanding of cost component
structure. In my Next series of documents i will try explaining Costing
Sheet,Activity Planning,and Summary of Standard Costing and its integration
with production Planning.

Refer next document here-

http://scn.sap.com/docs/DOC-49880- Basics of Standard Costing-

Alert Moderator
Understanding Overhead cost Flow.

Refer to previous Document here-

Assigned Tags
http://scn.sap.com/docs/DOC-49167 –Basics of SAP Standard Cost estimate-
FIN Controlling understanding costing variant-Part 2

FIN (Finance)
http://scn.sap.com/docs/DOC-48908– Basics of SAP Standard Cost estimate-
Understanding the flow of cost settings-Part 1
MAN Production Planning (PP)

SAP Business Process Management

Best Regards
SAP ERP
Hrusikesh Dalai
accelerator

accounting

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53 Comments

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Former Member
November 25, 2013 at 7:26 pm

Hrusikesh,

Nice document easy to follow. Good job keep it up.

I hope you will write many more documents in SCN

Thanks

Fransisco

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Hrusikesh Dalai | Blog Post Author

November 25, 2013 at 7:38 pm

Thank you for reading it Fransisco, I appreciate your feedback. 🙂

Best Regards

Hrusikesh

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Former Member
November 26, 2013 at 2:08 pm

Hrusikesh,

I am loving your series, eagerly waiting for your next document. 🙂

Well done again

Thank You

David

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Rajneesh Saxena
November 27, 2013 at 4:33 am

Dear Hrushi

Very good going. Keep it up and maintain the same pace. I suggest you also to incorporate common
problems which we face during whole Co process, may be at the last document of this series.

Regards

Rajneesh Saxena

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Hrusikesh Dalai | Blog Post Author

December 2, 2013 at 3:09 pm

Rajneesh,

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07/09/2022, 23:12 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

Thank you for your suggestion, i will try to include those in my series.

BR

Hrusikesh

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Former Member
November 27, 2013 at 2:24 pm

Incredible !! you are doing good job. Keep it up

Best Regards

Prasad

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Hrusikesh Dalai | Blog Post Author

December 2, 2013 at 3:10 pm

I appreciate your comment and thank you for the motivational words.

Best Regards

Hrusikesh

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Lakshmi Sama
November 29, 2013 at 10:41 am

Hello Hrusikesh,

This is really a nice doc and you did a great job. Thanks for sharing your knowledge and keep sharing 🙂

Regards,

Lakshmi S

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Hrusikesh Dalai | Blog Post Author

December 2, 2013 at 3:11 pm

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07/09/2022, 23:12 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

Thank you Lashmi for your comments. I am glad you like it.

Appreciate your kind words.

BR

Hrusikesh

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Venkata V
November 29, 2013 at 11:37 am

Dear Hrushikesh,

Its very helpful. Great work.

A post on Product Costing will be very useful. Awaiting your further posts.

Regards,

Sravan.

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Hrusikesh Dalai | Blog Post Author

December 2, 2013 at 3:13 pm

Sravan,

Thank you for kind words, A post on product costing is already there in five part series in
Controlling Space. i will try to summarize at the end of the series.

BR

Hrusikesh

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Dawood Khalid
December 2, 2013 at 5:41 pm

Very well explained 🙂

Like 0 | Share

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Hrusikesh Dalai | Blog Post Author

December 3, 2013 at 7:11 pm

Thank you Dawood 🙂

Like 0 | Share

Former Member
December 3, 2013 at 4:20 am

Good one...Thanks for your efforts.

BR,

Naresh K.

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Hrusikesh Dalai | Blog Post Author

December 3, 2013 at 7:11 pm

I appreciate your feedback Naresh.

Thank You

Hrusikesh

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Former Member
December 4, 2013 at 1:34 am

Hi Hrusikesh Dalai

great work, wishing for more postings.

Regards

Srini

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Hrusikesh Dalai | Blog Post Author

December 4, 2013 at 1:45 am

Thank you Srini, i appreciate your feedback.

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07/09/2022, 23:12 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

Best regards

Hrusikesh

Like 0 | Share

Former Member
December 4, 2013 at 11:54 am

This document realy give exhautive knowledge on stardard cost estimation. I wish Hrusikesh

to complete his next postings.  

Like 0 | Share

Mohsin Abbasi
December 6, 2013 at 10:57 pm

Hi Hrusikesh,

Such a nice Presentation...............:P

Best Regards

Mohsin Abbasi

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Hrusikesh Dalai | Blog Post Author

December 9, 2013 at 2:37 pm

Hi Mohsin,

I am glad you like it. Thank you for rating it.

BR

Hrusikesh

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sravanreddy kalledi

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December 13, 2013 at 9:38 am

Nice presentation, keep it up..........

regards

sravan k

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Hrusikesh Dalai | Blog Post Author
December 13, 2013 at 1:51 pm

Sravan,

Thanks for rating it. I am glad you like it.

regards

Hrusikesh

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Former Member
December 14, 2013 at 4:23 am

Hi Hrusikesh,

Well done. documented & explained nice way. Expecting more from you 🙂

Keep it up.....

Thanks & Regards,

VINOD.V

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Hrusikesh Dalai | Blog Post Author

December 16, 2013 at 4:05 pm

Vinod,

Thank You for your valuable comment and appreciation.

please refer some more documents of the series here

Refer next document here-

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 13/22
07/09/2022, 23:12 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

http://scn.sap.com/docs/DOC-49880- Basics of Standard Costing-Understanding Overhead cost

Flow.

Refer to previous Document here-

http://scn.sap.com/docs/DOC-49167 -Basics of SAP Standard Cost estimate- understanding costing

variant-Part 2

http://scn.sap.com/docs/DOC-48908- Basics of SAP Standard Cost estimate- Understanding the

flow of cost settings-Part 1

BR

Hrusikesh

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Former Member
January 8, 2014 at 4:00 am

Hi Hrusikesh,

Good work keep it up.....

Regards,

Ravisankar

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Hrusikesh Dalai | Blog Post Author

January 8, 2014 at 1:55 pm

Thank You Ravisankar. I appreciate your valuable comments.

BR

Hrusikesh

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Dibyendu Patra
January 9, 2014 at 5:32 am

Hmm....

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07/09/2022, 23:12 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

Got a very clear idea about cost component structure..

Thanks Hrusikesh.

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Hrusikesh Dalai | Blog Post Author
January 10, 2014 at 5:41 pm

Thank You Dev, I appreciate your feedback.

Thanks

Hrusikesh

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Sampat Kumkar
January 15, 2014 at 11:59 am

Hi Hrusikesh

Thanks for sharing Part III document, cleared now how the costs are getting updated in CK13...

Regards

Sampat

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Hrusikesh Dalai | Blog Post Author

January 15, 2014 at 5:26 pm

Hello Sampat,

I am glad you like it. Thank you for the comments

BR

Hrusikesh

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Former Member
January 21, 2014 at 8:49 pm

Very clear and simple

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07/09/2022, 23:12 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

Bravo!

PB Ducharme

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Hrusikesh Dalai | Blog Post Author
January 22, 2014 at 1:34 pm

Hello Mr PB Ducharme,

i am glad you like it and thanks for rating it. It motivates when fellow members appreciates the
documents.

Thanks

Hrusikesh

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Sheryl Perry
January 22, 2014 at 12:08 am

Hrusikesh,

Today I was handed the responsibility of supporting costing and then asked to make a change.  Your series
has become my "How-to Manual".  It is very succinct yet very thorough.  Having screenshots helps
immensely.

Thank you very much,

Sheryl P.

Like 0 | Share

Hrusikesh Dalai | Blog Post Author

January 22, 2014 at 1:36 pm

Hello Sheryl,

Congratulation for your new assignment you will love your new assignment and i am glad this
document helped you anyway.

I appreciate your comment and feedback.

Thanks

Hrusikesh

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Mariks .
January 24, 2014 at 10:18 am

Thanks for sharing valuable knowledge...

Like 0 | Share

Former Member
February 14, 2014 at 9:10 am

Dear Hrusikesh Dalai thank you for sharing knowledge.. 🙂

Regards

Sada Bandla

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Hrusikesh Dalai | Blog Post Author

February 14, 2014 at 6:42 pm

Thanks you for your appreciation.

Like 0 | Share

Former Member
February 19, 2014 at 12:26 pm

hi,

Those are five star series,

Devendra

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Hrusikesh Dalai | Blog Post Author

April 3, 2014 at 3:54 pm

Thank you

Like 0 | Share

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Rudra Prasanna Mohapatra

August 27, 2014 at 2:31 pm

Hi Hrusikesh,

Very nice document . Thanks for sharing . Just a query on Primary Cost Component Structure. Is it that
this structure should just contain the primary cost elements?

In system, it allows to include even secondary cost elements over here? Request you to please throw some
light on the same.

Regards

Rudra

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Hrusikesh Dalai | Blog Post Author

August 28, 2014 at 2:16 pm

Rudra,

Yes in the config as per the business requirement you need to define that.  System will allow any
cost element there.

Refer

Primary Cost Component Splits - Product Cost Planning (CO-PC-PCP) - SAP Library

Thanks

Hrusikesh

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Rudra Prasanna Mohapatra

September 2, 2014 at 12:12 pm

Hi Hrusikesh,

Thanks for answering my question regarding primary cost component split.

I was expecting, that this cost component will show just the primary costs, like material
components and depreciation (as mentioned in sap documentation.)

and this would skip the activity costs , that are the secondary costs. But it does not do that
and allows all the cost elements, both primary and secondary.

My question is , what is the significance of the tick . Is it , that this tick is just to remind the
configurer to add just the primary cost elements in this cost component split ?waiting for
your answer.

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Regards

Rudra

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Hrusikesh Dalai | Blog Post Author

December 18, 2014 at 10:33 pm

Yes your understanding is correct.I think you kind of know the answer,Significance
of the tick is to show  primary cost component split is an alternative way of showing
the cost of goods manufactured of a product.

SAP is a system it will behave the way you want it to behave , SAP  will not stop
you from adding secondary cost element to the split but question should be why you
wanted to do that? what is the business case?

Thanks

Hrusikesh

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Mukthar Ali Ahamed N

August 28, 2014 at 10:37 am

Good explanation...

Regards,

Mukthar

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Hrusikesh Dalai | Blog Post Author

December 18, 2014 at 10:34 pm

Thanks for the rating, will probably work hard to get the 5 😉

Like 0 | Share

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Amarendra M
November 20, 2014 at 6:07 pm

Great Work & Explanation ... Thanks..

Like 0 | Share

Hrusikesh Dalai | Blog Post Author

August 27, 2015 at 1:37 pm

Thanks Amarendra

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Former Member
December 15, 2015 at 7:20 am

Thanks Amarendra But if there is some special issue like finish goods 's standard cost is variable to output
valus ,how can we do it in sap, lst 's say

Like 0 | Share

FICO Application Team

February 8, 2016 at 7:33 am

If i have multiple Cost component structures assigned to the Company codes which one to be assigned to
OKN0.

Like 0 | Share

Michael Kozlowski
February 13, 2016 at 6:24 pm

really good work!

Best regards

Michael

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Arvind Pereira
November 29, 2017 at 9:25 am

Hi Hrusikesh,

The document is quite detailed, good work.

regards

Arvind Leo Pereira

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Farhad Mohamadzadeh
January 11, 2020 at 8:10 am

Hrusikesh,

Nice document easy to follow.

Do you have any document like this That explan relation between Sales Condition and CO-PA Value Fields ?

this is Very vital for me.

Thanks

Farhad

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Cristiane Franca da Silva Magalhães

March 13, 2020 at 7:36 pm

Nice presentation!!!

I Would like you showed about Purchase Order x OKTZ, used como report the transaction CKM3N in the 
vision CV - Cost Components.

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I have dificult to understand this integration between CO x MM.

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