Product costing integrates with so many other modules in SAP, yet users in other areas tend to know so little about product costing processes. To the disbelief of many, product costing is not magic! It is a highly complex area of the system, but I find that with patience and re-search, anyone can understand the basics. The first thing to know about product costing is that it only exists in companies that actually manufacture something. Someone once told me they performed product costing at a large bank, which was a clear indi- cation that they did not know what they were talking about! The idea is calculating the cost of a produced product for internal management reporting and inventory valuation.
The controlling module design depends on the process decisions made by other areas of the company. For this reason, product costing configurators and business users must have an understanding of the entire design of the SAP system, with focus on production execution, warehousing, sales, distribution, purchasing, payroll, and maintenance.
Let’s start with why we perform product costing. We cost products for 3 reasons:
- To determine how much products cost to produce.
- To develop reports used by sales, marketing, and executives.
- To build financial statements for internal and external reporting
(both profit and loss statement and balance sheet).