Standard Cost Calculation in SAP

S/4HANA
Concept, Functionality, Process, and
Advantages
Rajesh Rabari – SAP FICO Solution Architect

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 Overview of Standard Costing in SAP S/4HANA

• Standard Costing is a cost accounting method used to assign

predetermined costs to products.
• It helps in budgeting, cost control, and variance analysis.
• In SAP S/4HANA, standard costing is integrated with
Production planning, financial accounting and controlling
modules for accurate financial management and reporting

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 Core Functionalities of Standard Costing in SAP

• Cost Component Splitting: Breaks down costs into material, labor, and overhead.
• Costing Variants and valuation variant: Determines cost estimates based on
valuation parameters.
• Costing sheet : Determines overhead costs
• Activity type : Activity Types in SAP play a crucial role in standard costing, particularly
within Controlling (CO) – Cost Center Accounting (CCA) and Product Costing (CO-PC).
They define the types of activities performed in a cost center and help allocate costs to
cost objects such as production orders, processes, and products.
• Integration with PP: SAP Production Planning (PP) and Standard Costing (CO-PC)
are tightly integrated to ensure accurate product costing, cost control, and variance
analysis. This integration allows businesses to capture production costs, allocate them
to cost objects, and analyze variances between planned and actual costs.
• Integration with CO-PA (Profitability Analysis): Enables profitability tracking for
COGS, COGS splitting, production price difference splitting, material revaluation and
purchase variances.
• Periodic Cost Roll-ups: Ensures accurate standard cost updates.

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 Process Steps of Standard Cost Calculation in
SAP
1. Enter Activity Prices (Transaction: KP26 / Manage Cost Rates - Plan)
2. Set Up Master Data: Create the required material master, bill of materials
(BOM), work centers/resources, routings/recipes, production versions, and
overhead rates.
3. Update Costing sheet Rate: (Transaction Code: KZZ2)
4. Change Mixing Ratios – (Transaction Code: CK94)
5. Create Additive cost: (Transaction Code : CK74N)
6. Create Costing Run (Transaction Code: CK40N / Manage Costing Runs for
Estimated Costs)
7. Execute Costing Run: Includes selection, structure explosion, costing, marking,
and release.
8. Review Costing Results (Fiori App: Display Material Value Chain - Estimated
Costs)
9. Mark and Release Standard Cost Estimates – for Single material (Transaction
code: CK24)

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 Process flow of Standard Costing in SAP
1.Cost data is defined for material master
records.

2.The system determines estimated costs

using predefined parameters from costing
variants, valuation variants and costing
run date, along with master data related
to materials, BOM, Routing/recipe,
activity type rates, and costing sheet
rates.

3.The computed standard cost is marked

and released for inventory valuation at
the plant, material, and valuation type
levels, incorporating multiple currencies
such as company code valuation, group
valuation, and profit center valuation.

4.The actual costs incurred are compared

with standard costs to assess production
variances at the process order, production
order, or product cost collector level
(Plant, material and valuation type).
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 Advantages of Standard Costing in SAP

✓ Provides a stable benchmark for Internal cost, overhead cost

control and variance analysis.
✓ Facilitates financial planning and performance measurement.
✓ Enhances reporting accuracy in SAP FI/CO and CO-PA.
✓ Streamlines cost updates and integration with Universal
Parallel Accounting.

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 Standard Cost Calculation Using Universal Parallel
Accounting

• Ensures cost visibility across multiple ledgers.

• Supports ledger-specific cost estimations.
• Enhances financial reporting accuracy in a multi-GAAP
environment.

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Key Transactions code to setup master data for Standard Costing 1/2

SAP transaction codes to set up various master data elements related to material costing,
production, and overhead calculation:
✓ Material Master & Pricing:
• Material Master Setup – MM01/MM02/MM03
• Maintain Plan Price 1 in Material Master – MM02
• Price change- MR21

✓ Procurement & Info Record:

• Create Info Record – ME11/ME12/ME13

✓ Costing & Overhead:

• Cost Center Creation – KS01
• Secondary Cost Elements/ GL – FS00
• Activity type – KL01
• Statistical key figure – KK01
• Activity Type Rate Maintenance – KP26
• Cost template – CPT1
• SKF Planning – KP46 (For plan allocation cycle)
• Cost center planning – KP06 (for Plan allocation cycle)
• Costing Sheet Rate for Overhead Calculation – KZS2/KZZ2
• Maintain Costing Variant – OKKN
• Edit Procurement Alternatives – CK91N (For mix costing)
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Key Transactions code to setup master data for Standard Costing 2/2

✓ Work Centers & Resources:

• Create Work Center – CR01
• Create Resource (in PP/DS or APO) – CRC1/CRC2/CRC3

✓ Routing & Production Version:

• Create Routing – CA01
• Create Recipe (Process Industry - PP-PI) – C201/C202/C203
• Create Production Version – C223

✓ Special Procurement Key:

• Material Master Costing View 1– MM02

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 Key Transactions & Fiori Apps for Standard
Costing
• KP26 – Enter Activity Prices
• F1865 – Manage Costing Runs
• F4898 – Display Material Value Chain
• CK40N – Costing Run Execution
• CK11N – Material Cost Estimate
• CK24 – Mark and Release
• MM03- Display Material Master

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 Key Reports of Standard Costing

• S_ALR_87099930 - Results of Costing Run

• S_ALR_87099931 - Price vs Cost Estimate
• S_ALR_87099932 - Variances Between Costing Runs
• S_P99_41000111 - Analyze/Compare Material Cost Estimates
• CKAPP01 - Display Materials to be Costed
• S_ALR_87013046 - Material Cost Estimate vs. Preliminary
Order Cost Estimate
• CK86_99 - Costed Multilevel BOM
• CK80_99 - Cost Components
• CK84_99 - Itemization

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 Conclusion

• Standard Costing in SAP S/4HANA helps in financial control

and planning.
• It ensures accuracy, cost visibility, and compliance with
accounting standards.
• Integration with Universal Parallel Accounting enhances global
reporting.
• Integration with production planning, Finance and overhead
accounting.

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