Product cost

pc

FACT >> Forward

Fertilizers and Chemicals Travancore

Ltd
Udyogamandal, Cochin, India

BUSINESS BLUEPRINT
CO Product Cost Planning

SAP ECC 6.0

Document Version 1.0

BUSINESS BLUEPRINT
SAP ECC 6.0
Version NN.rr1.0

June 2009

SAP India Pvt Ltd

Prepared by : Atul Siddam
 Notice

This is a controlled document. Unauthorised access, copying, replication

or usage for a purpose other than for which it is intended, are prohibited.

All trademarks that appear in the document have been used for
identification purposes only and belong to their respective companies.

Confidential i
Document Release Note

Notice No.: 1.1

Customer: FACT Ltd

Project: FACT >> Forward

Document details

Name Version no. Description

BBP_ CO_Product Cost Planning V1.0 SAP ECC 6.0 Business Blueprint for the
process, CO - Standard Costing

Revision details

Action taken Previous New page Revision description

(add/del/change) page no. no.

Change Register serial numbers covered:

The documents or revised pages are subject to document control.

Please keep them up-to-date using the release notices from the distributor of the
document.

These are confidential documents. Unauthorised access or copying is prohibited.

Approved by: Authorised by:

Date: Date:

CO - Standard Costing/Actual Costing SAP Customer Confidential

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Document Revision List

Customer: FACT Ltd

Project: FACT >> Forward

Document Name: SAP Business Blueprint for CO Product Cost Planning

Release Notice Reference (for release)

Rev Revision Revision Page Previou Action Addenda / Release

. date description no. s page taken New page notice
No. no. referenc
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CO - Standard Costing/Actual Costing SAP Customer Confidential

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About this Document

Purpose
This document depicts the SAP enabled TO-BE version of the business process of FACT.
The document contains how the process under reference will be handled in the TO-BE
SAP scenario along with the business benefits and organisational changes required to
implement the SAP enabled business processes. The document also highlights
customisation requirement as applicable and covers the reporting requirements of FACT
with respect to the process under reference.

These are evolved based on the detailed study of the business processes and functions of
FACT and with the inputs from the series of Business Blueprint Workshops conducted for
this purpose.

Intended Users
This document will help:
The team of FACT to understand and approve the requirements and design of the
proposed application, as adequate for meeting its stated business needs
The SAP team to design and develop the application using the requirements as
the basis, as well as to plan and manage all project resources thereof.
The acceptance testing team to develop test data and to test the application
The maintenance and support team to understand all aspects of the process,
application, and maintain it.

Organization of the Document

Information in this manual has been organised as follows:

Table 1: Organisation of this document

Chapter Description

Chapter 1 Business Process Introduction & Overall business requirements

Chapter 2 Business Process in SAP

Chapter 3 Changes to Existing Organization & Improvements

Chapter 4 Process steps not covered in SAP (GAPS and Solutions)

Chapter 5 Master Data and Master Records

Chapter 6 Integration/Interface Considerations

Chapter 7 Reporting Considerations

Chapter 8 Development Considerations (FRICEW objects)

Chapter 9 Authorisation Roles

Chapter 10 Data Migrations

Confidential iv
References
Blue Print Documents

How to Use this Document

All users of this document should carefully read it, and ensure the following:
All requirements have been listed and detailed
Functionality described in this document is clear and unambiguous.

Note: It is essential that problems with the basic structure of the proposed software be identified
as early as possible, before this document is finalised and signed-off. It may be difficult to
incorporate changes to overcome shortcomings later.

Change Management
Changes to this document, after it has been accepted and signed-off, will be through
appropriate Change Management Procedures, as described in the contract.

CO - Standard Costing/Actual Costing SAP Customer Confidential

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Contents
1 BUSINESS PROCESS INTRODUCTION AND OVERALL BUSINESS REQUIREMENTS.............1
1.1 BUSINESS PROCESS OVERVIEW................................................................................................ 1
1.2 BUSINESS DRIVERS.................................................................................................................. 6
1.3 BUSINESS PROCESS DESCRIPTION........................................................................................... 7
1.4 BUSINESS UNIT APPLICABILITY.................................................................................................. 8
1.5 REQUIREMENTS SUMMARY....................................................................................................... 8

2 BUSINESS PROCESS IN SAP..................................................................................................................10

2.1 KEY DESIGN DECISIONS......................................................................................................... 10
2.2 TO-BE BUSINESS PROCESS FLOW......................................................................................... 14
2.3 SOLUTION IN SAP.................................................................................................................. 15
2.4 SYSTEM CONFIGURATION CONSIDERATIONS............................................................................19

3 CHANGES TO EXISTING ORGANISATION.......................................................................................20

3.1 KEY PROCESS CHANGES........................................................................................................ 20
3.2 DESCRIPTION OF IMPROVEMENTS........................................................................................... 20

4 PROCESS STEPS NOT COVERED IN SAP...........................................................................................21

4.1 FUNCTIONAL DEFICITS AND APPROACH TO COVERING THE FUNCTIONAL DEFICITS.......................21

5 MASTER DATA AND MASTER RECORDS..........................................................................................22

5.1 KEY MASTER DATA REQUIREMENTS FOR THE PROCESS...........................................................22
5.2 KEY MASTER RECORDS REQUIREMENT FOR THE PROCESS......................................................22

6 INTEGRATION/INTERFACE CONSIDERATIONS.............................................................................23
6.1 INTEGRATION CONSIDERATIONS.............................................................................................. 23
6.2 INTERFACE CONSIDERATIONS.................................................................................................. 23

7 REPORTING CONSIDERATIONS..........................................................................................................24
7.1 SAP STANDARD REPORTS...................................................................................................... 24
7.2 CUSTOM REPORTS................................................................................................................. 24

8 DEVELOPMENT CONSIDERATIONS...................................................................................................25

9 AUTHORISATION ROLES......................................................................................................................26

10 DATA MIGRATION...................................................................................................................................27

The total number of pages in this document, including the cover page, is 36.

Confidential vi
List of Abbreviations

Table 2: Abbreviations and Acronyms

Abbreviation/
Expansion
Acronym

ABAP Advanced Business Application Programming

BI Business Intelligence

CALM Container and Logistics Management

CIN Country India Version

CO Controlling

Customer Customer

FI Financial Accounting

GUI Graphical User Interface

HR Human Resources

MM Materials Management

PM Plant Maintenance

PP Production Planning

PS Project Systems

SAP Systems Applications and Products in Data Processing

SD Sales and Distribution

XI Exchange Infrastructure

OEM Original Equipment Manufacturer

BG Bank Guarantee

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1 Business Process Introduction and
Overall Business requirements
1.1 Business Process Overview

FACT has two manufacturing divisions namely Udyogamandal complex

and Cochin division. The Udyogamandal complex consists of the
Udyogamandal Plant and the Petrochemical Plant.
Annual targets for the End Products and period of Annual Turn Around
(ATA) are decided by the corporate management, based on the past
performance of the company.
This is forwarded to the Divisional Production planning departments for
preparing the divisional production plans. The finished products targets
fixed in the corporate annual production plan are taken as an input and
detailed month wise divisional production plans are prepared for
finished products, co- products , raw materials , fuel and major
utilities. Approval for this month wise divisional production plan is
prepared by the Chief Engineer(Corporate Planning)/Director(Technical).
The divisional production plans are compiled and the corporate
planning department prepares a corporate production plan. A brief
Description of the plant and input materials are as follows.

1.1.1 Udyogamandal Complex

Udyogamandal Division is the parent division of FACT and it produces

FACTAMFOS and Ammonium sulphate. It caters the intermediary requirements of
other divisions also. It supplies Ammonia, Synthesis gas, Sulphur Di Oxide,
Oleum and Carbon dioxide for the production of Caprolactam. It also supplies
Ammonia and Sulphuric Acid to cochin division.

1.1.1.1Utilities:
The Division treats / produces the following utilities for the use of the division.

A) Raw Water : Division treats water for the use production operations. The
cost element incurred for this operation includes cost of Power and
Chemical

B) De mineralised Water: With the treated water from raw water plant the
division produces de mineralised water for the requirement of Boilers. The
input materials are raw water, chemicals and power.

C) Steam : The Division produces steam for the requirement of Captive

Power Plant and the process heating. Furnace Oil is used as the fuel for
the production of steam. Apart from Furnace Oil, power is also used for
the running of the plant.

D) Captive Power Plant: The Division is also producing Electricity with

Steam in addition to the power purchased from Electricity Board. Major

Confidential 1
 share of the captive power is consumed in ammonia plant. The input
material is steam from the steam plant.

1.1.1.2Intermediaries:
The Division produces the intermediary requirements of the Division as well
as the requirements of other Divisions. The Division produces the following
intermediaries.

A) Ammonia Plant: The ammonia Plant produces Synthesis Gas and

Ammonia for the requirements of the entire FACT. The input material for
the production is Naphtha. It also consumes Furnace Oil, Steam, Captive
Power and other Chemicals. Catalysts are also used for the chemical
reaction. The plant also produces Carbon Dioxide as by product.

B) Sulphuric Acid Plant : Sulphuric Acid Plant produces Sulphuric Acid and
Oleum. The Raw material for the products is Sulphur. Some Chemicals
and power also used for the operation. Vanadium Pent oxide Catalysts
are also used for the chemical reaction. The plant also produces low
pressure steam by heat absorption technology and the steam is supplied
to the other plants.

C) Sulphur Di Oxide Plant: Sulphur Di oxide and Sulphuric Acid are

produced in the plant. The Raw material for these product is Sulphur.
Some Chemicals and power also used for the operation. Vanadium Pent
oxide Catalysts are also used for the chemical reaction. The plant also
produces low pressure steam by heat absorption technology and the
steam is supplied to the other plants.

D) Phosphoric Acid Plant : The Division also produces phosphoric acid for
the requirement of the complex fertiliser production. The Raw Materials
for the production of phosphoric acid are Rock Phosphate and Sulphuric
Acid. Chemicals and Power also used for the operation of the plant.

1.1.1.3Finished Products:
The division produces Ammonium sulphate and Factamfos (Ammonium Phosphate
sulphate 20:20:0:13).

A) Ammonium Sulphate : Ammonium sulphate can be produced by two

route, i.e., with the Ammonium sulphate Solution from Caprolactam
operation and through direct nutralisation of Ammonia and Sulphuric Acid.
Normally the plant is operated with Ammnium sulphate Solution. The
crystaliation operation require power, steam and some chemicals apart
from the Ammonium Sulphate Solution from Petrochemical Division.
Ammonia and Sullphuric Acid are used for Direct Nutralisation operation
which also require steam, Power and Chemcials. Bags are also used for the
packing of the products as per the Fetiliser Control Order.
B) Factamfos : The Raw Material Requirements of Factamfos are Ammonia,
Phosphoric Acid and Sulphuric Acid. Furnace oil is used for drying the
products. Power, Steam and chemicals are also used for the production.
Bags are also used for the packing of the products
C) Bio Fertilisers: The division also produces Bio Fertiisers .

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1.1.2 Cochin Division
This Division of FACT Produces Urea and FACTAMFOS. The urea production
is suspended due to uneconomic operation. The operations of the Division
are briefly described as follows:

1.1.2.1Utilities:
The Division treats / produces the following utilities for the use of the division.

A) Raw Water : Division treats water for the use production operations. The
water is supplied by the Irrigation Department of Government of Kerala.
The cost element incurred for this operation includes cost of Water, Power
and Chemicals.

B) De mineralised Water: The division has two De Minieralised water

plants, one is attached with Thermal plant and the other is With Sulphuric
Acid plant. From the treated water from raw water plant, the division
produces de minaralised water for the requirement of Boilers. The input
materials are raw water, chemicals and power.

C) Steam : The Division have two Boiler Plants, one consists of 3 nos of 60
TPH boiler and other plant with one 80 TPH Boiler. The plant produces
steam for the requirement of Captive Power Plant and the process heating.
Furnace Oil is used as the fuel for the production of steam. Apart from
Furnace Oil, power is also used for the running of the plant.
D) Captive Power Plant: The Division is producing power with Steam in
addition to the power purchased from Electricity Board. There are two
captive power plants, one having a capacity of 14 MWH and other with a
capacity of 12 MWH. The 14 MWH plant is having a low pressure steam
recovery unit. Major share of the captive power was consumed in
Ammonia plant. The input material is steam from the steam plants.
E) Intermediaries: The Division produces the following intermediary
products for the requirement of the Division.
F) Ammonia Plant: The ammonia Plant produces Ammonia for the
requirements of Urea Production. The input material for the production is
Naphtha. It also consumes Furnace Oil, Steam, Captive Power and other
Chemicals. Catalysts are also used for the chemical reaction. The plant
also produces Carbon Dioxide as by product.
G) Sulphuric Acid Plant : Sulphuric Acid Plant produces Sulphuric Acid .
The Raw materials for the product is Sulphur. Some Chemicals and power
also used for the operation. Vanadium Pent oxide Catalysts are also used
for the chemical reaction. The plant also produces low pressure steam by
heat absorption technology and the steam is supplied to the other plants.
H) Phosphoric Acid Plant : The Division also produces phosphoric acid for
the requirement of the complex fertiliser production. The Raw Materials
for the production of phosphoric acid are Rock Phosphate and Sulphuric
Acid. Chemicals and Power also used for the operation of the plant.

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1.1.2.2Finished Products:
The division produces Urea and Factamfos (Ammonium Phosphate sulphate
20:20:0:13).

A) Urea : The division has the facility to produce Urea. The input material
for the urea production are ammonia and carbon Di oxide. It also require
Steam, Power and Chemicals. The operation of the plant is presently
suspended.

B) Factamfos : The Raw Material Requirements of Factamfos are Ammonia,

Phosphoric Acid and Sulphuric Acid. Furnace oil is used for drying the
products. Power, Steam and chemicals are also used for the production.
Bags are also used for the packing of the products
1.1.3 Petro Chemical Division:
The Petro Chemicals division is producing Caprolactam, an input material for
Nylon industry. Production operation is briefly described as follows.

A) Benzene Hydrogenation Plant : The basic raw material for the

production of caprolactam is Benzene. The benzene is converted into
Cyclohexane by Benzene Hydrogenation plant. This operation also require
Synthesis Gas and Catalysts apart from Power, Steam and operating
chemicals. The output of the plant is Cyclohexane.

B) Oxidation Plant: The cyclohexane is converted into Cyclohexanone.

This opeation require Caustic Soda as input material. The operation
consumes power, chemicals and steam. The cyclohexane initially
converted into cyclohexanol and then to Cyclohexanone. It also produces
Soda Ash as by product.

C) Hydroxilamine sulphate Plant: Hydroxilamine Sulphate is also required

for the production of Caprolactam. The input material required for the
production of Hydroxilamine Sulphate is Ammonia, Sulphur di Oxide and
carbon di oxide. The operation consumes power, chemicals and steam.
This operation also produces Nitric Acid as by product.

D) Oxymation and Lactam Plant: Molton lactam is produced in this plant.

Cyclohexananone and Hydaroxilamine sulphate are the main inputs for
caprolactam production. Oleum and Ammonia are also used for
converting the residual material into Ammonium Sulphate Solution. The
output material from this plant are Caprolactam and ammonium Sulphate
solution. The amonium Sulphate solution is valued based on the material
content in the solution, i.e., Ammonia, Sulphur dioxide and Oleum. No
process cost is allocated to the Ammonium sulphate Sollution.

Molton lactam is flaked and bagged which is stored inside and outside the
plant.

The method of costing adopted in all the above products are Process
costing.
This is being a continuous process operation; there was direct lobour and

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 machine hour allocation for the products as the entire equipment is
exclusively used for the operations.

1.1.4 FEDO and FEW :

FACT engineering and Design Organisation (FEDO) is engaged in the Consultacy
services and FACT Engineering Works (FEW) engaged in the Fabrication and
Engineering jobs. The job costing method is adopted for the costing of the jobs
of these divisions.
1.1.4.1Sources of Raw Materials:

A) Naphtha : From India Oil Corporation / Barat Petroleum corporation or

Import

B) Sulphur & Rock Phosphate : Import (some quantity of sulphur can be

procured from refinaries)

C) Sulphuric Acid : Captive Generation, local purchase and import

D) Phosphoric Acid : Local Purchase, Import and Captive Generation

E) Ammonia : Captive Generation and Import (some quantity may be
available from other fertiliser manufactulrers)

F) Sulphur Di Oxide, Oleum, synthesis Gas and Carbon Di Oxide : Captive

Generation

G) Benzene : Procurements from Oil Companies and import

H) Cyclohexane and cyclohexanone : Captive Generation, Import and Local
procurements.

I) Hydaroxilamine sulphate: captive Generation

J) Caustic Soda : Local Purchase

K) Furnace Oil : Procurement from Oil companies and import through Oil
companies

L) Electricity Power: Captive Generation and Procurement from State

Electricity Board

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Process Caprolactum
Caprolcatum Process

RM :
Plant :Benzene Hydroganation Intermediary
Benzene Input Out Put
(Cyclo Hexane) Cyclo Hexane
Synthasis Gas

Intermediary input

RM : Plant : Oxidation
Castic Soda RM Input Out Put Cyclo Heaxanone (Inter Mediary)
(Anone Plant)

Hydroxilamine
sunphade Plant Output1 Hyam Sulphate (Inter mediary)
RM :
Input (HYAM PLAN)T:
Carbon Dioxide Output 2
Hyam Sulphate
Sulphur dioxide
Preparation
Ammonia
Air Nitric Acid (By Product)

Amonium Sulphate Solution

Out Put 1
RM : Oximition and lactum (Co Product)
Oleum (Produced in In put Palnt
UD Plant)

Out Put2 Molton Lactom (Product)

In Put

RM :
In Put Bagged Caprolcatum Out Put Bagged Caprolactum
Bags

Non- Parallel
Start and Refer Process Process
Process Document Connec SAP Decision
end of Proce Activity
Activity tor Syste
process ss (Manual)
m

1.2 Business Drivers

RAW MATERIALS \ STORES AND SPARES

Present process : Presently the Raw material is valued for the purpose of closing
stock and consumption on the basis of moving monthly average.

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 Proposed process : As per SAP, the Raw material is valued for the purpose of closing
stock and consumption on the basis of Moving average Price (MAP) which is changing
in consequence to usage and entry of invoices. It is calculated by dividing the value of
material by the quantity in stock. Automatically recalculated based on activity.

FINISHED \ INTERMEDIARY (SEMI FINISHED)

Present process :

Presently the Intermediary (Semi Finished) products are valued at average cost up
to the period of the year or for the year. (for eg. The price as on 30th June will be
the average of the actual production costs for the months of April, May and June.)

Finished products are valued either at average cost up to the period of the year \
for the year or market price whichever is less.

Proposed process : As per SAP all Semi Finished and Finished Goods will valued
based on the actual cost for the month.

(Please refer the details in 2.1 Key Design Decision and 2.3 Material Ledger.)
1.3 Business Process Description
Product Cost Planning (CO-PC-PCP):

Cost Estimate with Quantity Structure

Purpose:
The material cost estimate with quantity structure is prepared on basis of data provided
by Production Planning module. The cost estimate is a tool for planning non order-
related costs and establishing prices for materials. It is used to calculate the cost of
goods manufactured and cost of goods sold for each product unit.

Prerequisite:
Quantity structure for the material was prepared by PP:
Bill Of Material
Routing

Cost Estimate without Quantity Structure

Purpose:
The cost estimate without quantity structure is a tool for planning costs and establishing
prices for materials without reference to quantity structure data from Production
Planning (PP and PP-PI). It is intended for materials with insufficient or no quantity
structure data produced in plants not covered by implementation of Production Planning
module.

Prerequisites:
Material master data with Costing and Accounting Views were created and planning
process for Cost centers / Activity types was proceeded. Valid Cost Estimate without
Quantity Structure should have not been created and saved.

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1.4 Business Unit Applicability
This process is applicable to the following Business units in Customer:

Table 3: Applicable Business Units

No Applicable Business Units Remarks

1 Udyogamandal Division Udyogamandal Division

2 Petro Chemical Division Petro Chemical Division

3 Cochin Division Cochin Division

4 Marketing Marketing

1.5 Requirements Summary

Table 4: Functional Requirements

No Requirements

1 Preparation of Costing Sheet for the month- Process wise / Element wise (Monthly)

2 Preparation of Costing Sheet up to the month- Process wise / Element wise (Financial
Year)

3 Preparation of Costing Sheet for the quarter - Process wise / Element wise (Quarterly)

4 Transfer of utilities \ services to other cost centres

5 Transfer of intermediaries to other cost centres

6 Service centre expense should be allocated on a monthly basis

7 Costing Sheet required for Activity wise \ Plant wise

8 Closing Stock should be valuated at actual cost up to the month end.

9 Projected cost sheet preparation based on the revised ratios \ raw material price.

10 Cost of sale up to each Depot till the sale to the consumer.

11 Allocation of income from waste \ by product to the main product.

Table 5: Reporting Requirements

No Requirements

1 Comparison of the current month actual Product cost with Previous month actual

2 Consumption ratios of various inputs for each product during a specified period.

3 Cost Accounting Records on quarterly basis.

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 4 Cost statements as per the format under the Cost Audit.

5 Annual Cost Accounting record

Table 6: Statutory Requirements

No Requirements

1 Cost Accounting Records on quarterly basis.

2 Cost statements as per the format under the Cost Audit.

3 Annual Cost Accounting record

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2 Business Process in SAP
2.1 Key Design Decisions
Product in SAP Can be valuated at Standard price or Moving average price.

In FACT, finished and Semi finished product will be valuated in standard Price, By
products at Fixed Standard price.

Requirements/ Expectations :

As and when goods are received from production order the same
should be Valuated as per the criteria decided
Quantitative and value information of all Finished product should be
available.
It should be possible to make Target vs. Actual Comparison in terms of
quantity.
Should be able to calculate Standard Price based on per unit price for
raw material decided at the time of Annual Plan.
Should be able to change standard price per period or per quarter or
half yearly.
Ammonia Sulphate solution is a CO product produced while producing
caprolactum. Costing of Caprolactum and ammonia Sulphate Solution
should be done after taking into account distribution of Ammonia Cost
on Co products, Sulphur Di oxide and Oleum only to Ammonia Sulphate
Solution and other cost only to Caprolactum.
While valuating Finished / Semi finished product Credit of by products
(including steam )coming out in the process should be given to cost of
manufacturing of parent product at pre defined rate ( Market Value ,
transfer price etc).
Valuation of Finished products / Semi finished product should be on
principal of absorption costing

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The below process flow showing how the value flow in to product costing :

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 Table 7: Key Design Decisions
No Design Decision Description
1 Product Cost Planning Product Cost Planning is used for preliminary costing of
5 a new product which is going to produce.Based on this
data we can decided for certain componenet in house
production or external procurement is advicable.

2 Cost Object Controlling Cost object controlling focuses on tracking the actual
6 direct cost costs of production and the period end
closing process.

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2.1.1 Products Identified in FACT are follows
Standard Price Fixed Standard Price
FG/SFG CO Product BY Product
Sulphuric Acid Ammonia Sulphate solution Gypsum

Sulphur Di Oxide Co2

Olieum (Concentrated
Sulphuric Acid) Nitric Acid

Phospheric Acid Soda Ash

Ammonia Colored Ammonia Phosphate

Ammonia Phosphate
(Fatcome Fose / NP) Steam

Ammonium Sulphate

Hyem

Cyclo Hexane

Anon

Caprolactum

Apart from above, By product coming out while manufacturing Sulphuric Acid, Sulphur Di
oxide and olieum is Steam.

Credit of Steam should be given to cost of production of Sulphuric Acid, Sulphur Di oxide
and olieum at predefined rate. Since steam is not a Material but Activity type, its
covered in Cost center accounting and period end closing BBP.

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2.2 TO-BE Business Process Flow

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Process
PP/MM CO Module

Create
Production Order

Issue Material Parallel Process Capture the FI

against PO material Cost in Document
from stores Cost center/Order

Parallel Process Confirmation of

At the time of
activity Price
Confirmation of
Over head
Process Order
calculation

At the time of Parallel Process

Costs are passed FI
Confirmation of Document
on to stock
Finished Goods

Technicaly
Compleet the
production Order
Do the settlement
of Production
Order

Difference of Debit
FI Document
and credit will
transfer to FI

End of the
Process

Non- Process Parallel

Start and Refer Process Continuati Process
Process Document Connec SAP Decision
end of Proce Activity on
Activity tor Syste
process ss (Manual)
m

2.3 Solution in SAP

In FACT finished / Semi Finished (Co Or By) products will be valuated at Standard
Price.

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However Standard price determination will be done using system only for
finished / semi finished/ Co products . By Product will have a standard Predefined
Fixed price and hence will not be a part of Standard Price calculation.

Material Cost :

Standard price will be calculated based on BOM and recipe for a product.

Per unit rate of RM to be used for calculating standard price is decided at

start of the year, which may be revised half yearly.

The above per unit rate will be fed in Material master of RM as Planned
price 1 with a valid starting date.

Operation Cost :

Operation cost / Overheads are computed based on Machine hours / labor Hours
and Factory hours involved in producing each unit of FG/SFG.

Standard Price per hours will be calculated based on Cost planning (Input
and Output planning) done on Manufacturing Line cost centers.

Input Plan : Cost Plan ( Please note : Input planning of cost when done at
manufacturing line cost center will involved plan cost transfer from
Support function and Maintenance cost centers , Credit of Steam cost
coming out of process etc)

Output Plan : Capacity Planning of plant

Once standard price is calculated, same is used for calculating total

process / operation cost.

Since the BOM structure is bound to change because of change % age of

procurement source of RM and SFG , its decided to have Standard Price per
period.

In SAP, Standard price calculated are presented in a pre defined structure call
Cost Component structure. This structure is used for analysis and reporting.

Below is the Cost Component structure decided for FACT.

Line 01 RM - Sulphur / Naphtha / Rock Phosphate (Consumption)
Line 02 RM- benzene / Caustic Soda (Consumption)
Line 03 RM-Others (Consumption)
Line04 SFG- Sulphuric Acid / Ammonia (Consumption)
Line 05 SFG - Phosphoric Acid (Consumption)
Line 06 SFG-Cyclo/ Anon (Consumption)
Line 07 SFG-Oleum (Consumption)
Line 08 SFG-Hyam/S02 (Consumption)
Line 09 SFG-Synthesis Gas (Consumption)
Line 10 Power
Line 11 Steam
Line 12 Lab Cost
Line 13 Machine cost
Line 14 Fact ohds

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Line 15 Co product and By product ( Cost of Production)
Valuation of CO product :

In order to derive standard Cost of Co products, rules for distribution of cost are defined in
apportionment structure (with Source structure). These rules are written to meet the requirement of
Cost distribution in some ratio, Cost assignment to certain product.
Since valuation of finished and Semi finished product is based on Absorption costing,
Fixed and variable cost are made eligible for inventory valuation.

2.3.1 SAP Process steps with transaction Codes

Table 8: SAP Process Steps with Transaction Codes

Business Process Description SAP Transacti S/W/E/M

Process Module on Code *
Step

Cost You prepare the material cost SAP CO CK11N / S

estimate with quantity
Estimate CK13N
structure, on basis of data
with provided by Production
Quantity Planning module. The cost
Structure estimate is a tool for planning
non order-related costs and
establishing prices for
materials. It is used to
calculate the cost of good
manufactured and cost of
good sold for each product
unit.
Editing The Costing Run is designed SAP CO CK40N S
to calculate the standard
Costing Run
price for products in
manufacturing affiliates. The
process enables to cost,
analyze, mark and release
more than one product at the
same time.

S Standard W Workaround E Enhancement (No modifications to SAP code) M Not in

SAP/Manual

2.3.2

2.3.3 TO-BE Business Process Flow

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2.4 System Configuration Considerations
Table 9: System Configuration

No Description
1 All the finished/ Semi Finished / Co By product and raw material will have material master with
respect to plant.

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3 Changes to Existing Organisation
3.1 Key Process Changes
Key process changes have been identified as follows:
Table 10: Key Process Changes

Process Change

OLD METHOD NEW METHOD

1 No existing Method in the system Stock will be valuated real time and COGS will be booked
as and when the goods are delivered to Customer

3.2 Description of Improvements

Table 11: Process Improvements

No Process Improvement Description

1 In legacy the Closing stock valuation and Cost of goods sold was always determined at the end of
period / Year. SAP will enable both the function to happen real time.(at standard price)

2 Variance analysis can be done based on target cost calculated using Annual Plan

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4 Process steps not covered in SAP
4.1 Functional deficits and approach to covering the functional
deficits
* FEDO AND FEW Is not Covering the Product costing

Table 12: Approach to Cover Functional Deficits

No Functional Deficit Importance Approach to covering Functional

(H/M/L)* Deficit
1

*High/Medium/Low

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5 Master Data and Master Records
5.1 Key Master Data Requirements for the process
Material Master Costing View should maintain.

If there is any co-product it should mentioned in the BOM and have to put the tick
mark in Material Master Costing View and MRP2.

Once the material master for SFG ot FG created need to run the Product cost to
derive the price of that material.

Work center Work Center name, Description, Cost Center and Activity type

5.2 Key Master Records Requirement for the process

Nil

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6 Integration/Interface Considerations
6.1 Integration Considerations

6.1.1 CO-PP Integration:

Calculate price based on the Issue of material from stores to Production, and
electricity used for the production.
Table 12:Integration Considerations

No Process Identifier Description

1 BOM / Recipe Products manufacture will have a BOM and Recipe

master data in PP module

2 MM Every Finished product should have a material master in

the system.

6.1.2 CO- MM Integration:

Table 12:Integration Considerations

No Process Identifier Description

1 Material Master In the material master Costing view,Accounting

view and Price should enter.

6.2 Interface Considerations

External interfaces identified for this process are as follows:
Table 13: Interface Considerations

External Interfaces identified with Reference if any

N/A

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7 Reporting Considerations
7.1 SAP standard Reports
The following standard reports relevant to the process are available in SAP:
Table 14: SAP Standard Reports

No Report Name Transaction Description

Code

1 Period wise cost for CK82 Here we can see the report of a material
a material. cost if u run it number of times.

2 Analyze/Compare S_P99_41000 This report can be used to see all standard

Material Cost 111 price existing in the system for Semi
Estimates Finished and Finished Goods

7.2 Custom Reports

Table 15: Custom Reports

No Report Name Transaction Description

Code

1 NA
1

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8 Development Considerations
The developments identified for this process are as follows:
Table 16: Development Considerations

No Object Description F/R/I/C/E/ FS Ref.*

W**

1 COPC Cost Accounting Records on Others/Re

1 quarterly basis. port
2 COPC Cost statements as per the Others/Re
format under the Cost Audit. port
3 COPC Annual Cost Accounting record Others/Re
port
Functional Specification Reference

** F Forms, R Reports, I Interfaces, C Conversion, E Enhacements, W

Workaround

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9 Authorisation Roles
The roles, transactions and nature of authorization for the process have been identified
as follows:

Table 17: Authorisation Rules

No Role Description Transaction Create/Change/

Code Display

1 Cost Accountant In order to run the costing CK40N/ Create/Change/D

rate CK11N isplay

2 User for changing the price in material master should be identified and should be given
appropriate system authorization. However the changes should be approved by the appropriate
authority.

3 Users for doing standard costing, marking and releasing (after making appropriate changes in
BOM as per source of procurement in AOP) should be identified.

Note: Derived roles with details of the authorization object would be

prepared separately as authorization matrix.

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10 Data Migration
Static/master and transactional data will be migrated from the legacy systems for
Integration Testing, User Acceptance Testing and Go Live.

Templates will be created for all the current data. If there are conversions required,
objects developed for the same would be identified in the Chapter 8 of this document.

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