SAPexperts _ 3 Steps to Find the Standard Cost for a Configurable Product

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3 Steps to Find the Standard Cost for

a Configurable Product

y Akhilesh Mittal, Lead Consultant, Infosys Technologies Ltd.

ovember 15, 2006

APexperts/Financials

ariant configuration functionality in SAP allows you to

ave one material master, product bill of material, routing,

nd sales pricing when customers configure a product

om several options. However, a standard SAP system

llows you to maintain only one standard cost in the

ccounting view of the material master. Use this method

o dynamically produce a standard cost when

onfigurable materials result in multiple standard costs.

Key Concept

A standard cost is a cost you use to measure production

efficiency for manufactured products. It is significant for

organizations as it helps them in valuating the finished and

semi-finished products (inventory valuation). Inventory

valuation forms a part of the current assets in the balance

sheet. You also can use standard cost for margin analysis

using the Profitability Analysis (CO- PA) module in SAP. A

product can have only one standard cost at a given time for

correct valuation of inventory and margin analysis. SAP

recommends the use of standard cost for finished and semi-

finished products. Alternatively, you can use moving average

price, but it leads to unrealistic inventory valuations and you

can’t conduct margin analysis in the absence of standard

cost.

ariant configuration functionality allows customers to select

roduct features according to their requirements. An example

f a configure-to-order (CTO) product is a laptop with options

uch as RAM, a hard disk, a processing unit, and a mouse.

etermining the standard cost for such a configurable product

material type KMAT) is a challenge. The product

onfiguration is dynamic; the customer configures the product

hen it places the sales order. In the case of a static product,ou can easily upload the standard cost for a finished good

roduct (material type FERT) to the material master. R/3

rovides the costing run functionality through transaction code

K40N, which you can use to upload the standard cost to the

material master for correct material valuation. Although my

xample refers to R/3, the functionality also works in mySAP

RP Central Component (ECC).

ince R/3 provides calculation of standard cost only for those

materials whose composition (product BOM) is known, it

annot calculate the cost for a configurable material usingosting Run functionality (transaction CK40N). However, you

an use a workaround to dynamically calculate the standard

ost for a configurable product at the time of the creation of a

ales order. This three-step approach is not documented



Figure 1

Configurable material check box in material

master basic data view

sewhere; I developed it through experience and research.

Note

A sub-optimal solution would be to create a separate

material master for each possible product configuration and

store the standard cost in the material masters. However,

this would imply that you can’t leverage the variant

configuration functionality provided by SAP for configurable

products by maintaining only one material master, onerouting, and one bill of material (BOM). With my approach

you can use the variant configuration functionality for

material maintenance and work around the restriction of one

standard cost per material.

Define Configurable Products

ou can use material type KMAT to define configurable

roducts in R/3. To do this, use transaction code MM01 and

material type KMAT to manually define the material master.ou can make material configurable by going to the material

master basic data view. Check the Material is configurable

heck box. You need to do this only once initially while

reating the material master. This is a prerequisite for using

ariant configuration functionality in an SAP system.

igure 1 shows an example of a configurable laptop, defined

sing material type KMAT, which demonstrates the problem of

tandard cost calculation.

he illustration of a configurable laptop in Table 1 shows that

he customer can choose among three types of hard disk, two

ypes of RAM, two types of processor, and two variants of

eyboard and mouse. The possible number of product

ombinations for one KMAT material here is 24 [3*2*2*2]. The

tandard cost of any one of these product combinations is the

um of the standard costs of its parts that constitute the

roduct. The R/3 material master provides the flexibility to

tore only one standard cost, but the problem here is the need

o maintain multiple standard costs for one KMAT material.

ow I’ll guide you through all the SAP configuration steps to

ost configurable products.



Table 1

Illustration of dynamic cost calculation

SAP Configuration

ou use three pieces of configuration to calculate the product

ost dynamically from its parts during the sales order creation.

nce the system has calculated the standard cost in the sales

rder, you can use the same standard cost to book inventoryost at the correct standard cost in the accounting documents.

ater on, you can use this for margin analysis. The three

eces of R/3 configuration are independent of each other and

hey work together to make the costing of configurable

roducts work in R/3:

tep 1. Set up the variant configuration relevant for standard

osting

tep 2. Modify the Sales and Distribution (SD) pricing

rocedure

tep 3. Put user exit changes in place for a third-party

rocurement scenario

Step 1. Set Up the Variant

Configuration Relevant for

Standard Costing

reate a material master for the KMAT material — in my

xample in Table 1, a laptop — by using transaction code

MM01. Create a material master for all the characteristic

alues. Characteristic values are the components of the



Figure 2

Dummy standard cost

ptop, such as 20 GB hard disk, 40 GB hard disk, and 80 GB

ard disk (Table 1). This example has nine characteristic

alues: 3+2+2+2=9.

nter 0.01 in the Standard Price field (Figure 2) in the

ccounting view of the KMAT material as the dummy standard

ost. I use a dummy standard cost in the material master

ecause standard R/3 tries to pick the standard cost of the

material from this field (MBEW- STPRS) in the material

master for valuating the inventory in the subsequentccounting documents. If you leave this field blank, R/3 shows

n error at the time of accounting document creation because

f the failure of initial R/3 checks. The process I am describing

oes not remove the SAP data validation checks as these are

one automatically by the standard SAP core code logic.

ather, it alters the logic for picking the standard cost.

se the variant configuration functionality to define the product

haracteristics. Follow this process to capture the dynamic

tandard cost for the configurable product in the sales order

hrough pricing reference characteristic:

Create a pricing reference characteristic via transactioncode CT04

Add a procedure to characteristic values via transactioncode CT04

Include the pricing reference characteristic when youdefine the class for the KMAT material via transactioncode CL01

ou determine the product configuration at the time of sales

rder creation. At a technical level, this implies the selection of



Figure 3

Pricing reference characteristic

haracteristic values that constitute the configurable product.

he system requires the characteristic values of the product

uring the sales order pricing for calculation of standard cost.

he pricing reference characteristic acts as a medium to make

he characteristic values available at the time of sales order

ricing.

reate a pricing reference characteristic via transaction code

T04. Create a reference characteristic with a characteristic

roup REF using transaction code CT04 (Figure 3). Enter EF in the Chars Group field. Enter ZPRREFCHAR in the

haracteristic field. Then enter the start date, in my example

0/05/2006, to provide the validity start date of the

haracteristic. Press Enter and click on the Yes button to

reate a new characteristic. Fill in the Basic data tab to define

he pricing reference characteristic.

onnect the pricing reference characteristic with the sales

rocedure by manually entering the communication structure

DCOM in the Table name field in the Addnl data (additional

ata) tab (Figure 4). You must do this to make the variant

onfiguration values available to the SD module through the

DCOM communication structure. Once the setup is

omplete, the system automatically transfers the productonfiguration (selected characteristic values of the product) to

ales order pricing for dynamic computation of the standard

ost.



Figure 4

Reference table in pricing reference

characteristic

dd a procedure to characteristic values via transaction code

T04. Write $self.='' in the procedure (Figure 5), replacing

ith the name of the reference characteristic and with the

ame of the characteristic value. In my example, these refer to

PRREFCHAR and ZRAM-VAR1, respectively. Do this when

ou define the characteristics using transaction code CT04.

o to the Values tab and from the menu path select

xtras>Object dependencies>Editor . Select Procedure as

he relationship type to input the illustrated code, which you

must do for all the characteristics other than the pricing

eference characteristic. This enables the reference

haracteristic to hold the values of selected characteristic

alues.

nclude the pricing reference characteristic when you define

he class for the KMAT material via transaction code CL01.

se transaction code CL01 and enter 300 in the Class type

eld to enable use of the characteristics to configure a

material. Include the pricing reference characteristic as defined

the Class definition (Figure 6).



Figure 5

Define the procedure

Figure 6

Pricing reference characteristic in class

definition

he configurable product (the laptop) and the product

haracteristics have just one link, which you can create

manually through transaction code CU41 by defining a profile

or the configurable material and then associating it with the

lass. It is essential to include the pricing reference

haracteristic in the definition of Class to link it with the

onfigurable product so you can use it during sales order

ricing.

Step 2. Modify the SD Pricing

Procedure

ollow three procedures to produce SD pricing procedure

hanges:



Figure 7

Define cost condition

Create a new pricing condition for recording thestandard cost in SD documents via transaction codeV/06

Create condition records for the new pricing conditionvia transaction code VK11 to maintain the standardcost of all the characteristic values

Modify the SD pricing procedure to add the new costcondition

reate a new pricing condition for recording the standard cost SD documents via transaction code V/06. In transaction

ode V/06 (Figure 7) set Cond.category (condition category)

o O. Condition category O enables it to interact with the

ommunication structure SDCOM and fetches the product

onfiguration characteristic values as stored in the pricing

eference characteristic.

reate condition records for the new pricing condition via

ansaction code VK11 to maintain the standard cost of all the

haracteristic values. Use transaction code VK11 to create

ondition records for all the characteristic values to store the

tandard cost associated with each part (Figure 8). You can

ccess these condition records from the sales order pricing

rocedure to populate the new cost condition (standard cost

ondition ZCOS in my example), which later on adds up in

he sales order pricing procedure to form the standard cost of

he configured product.



Figure 8

Condition records

Figure 9

Pricing procedure

Modify the SD pricing procedure to add the new cost

ondition. Use transaction code V/08 to select your pricing

rocedure. Go to Control in the left side panel and add the

equirement to the new cost condition so it is selected only for

MAT materials (Figure 9). Enter B in the SubT (Subtotal

ype) column to add the standard costs of all the

haracteristics. Use the opposite requirement logic to limit the

AP standard cost condition VPRS in the pricing procedure

Figure 10).



Figure 10

VPRS requirement

Figure 11

Illustration of a sales order

n the sales order, the reference pricing procedure passes on

he characteristic values to SD pricing through the SDCOM

tructure. The new standard cost pricing condition picks up the

tandard cost condition value for the characteristic from the

ondition table, which is maintained on the basis of the

haracteristic value VARCOND-KOMP field (Figure 11). The

ubtotal adds up the standard cost condition values and writes

to VBAP-WAVWR.

ou use the VBAP-WAVWR field to post the goods issue at

tandard cost if the KMAT material is not a sales order stock.

or sales order stock, make a modification in user exit

MV50AFZ1 (USEREXIT_SAVE_DOCUMENT_PREPARE or

SEREXIT_SAVE_DOCUMENT) to reference the standard

ost from VBAP-WAVWR instead of EBEW- STPRS, which ishe sales order stock valuation table. If the production order is

reated with reference to the sales order line item, then it

makes the stock a sales order stock. Under such a scenario,

tandard SAP references the EBEW-STPRS field for standard



ost. Therefore, you must modify the user exit so the system

an pick up the standard cost from VBAP-WAVWR and not

om EBEW-STRPS.

he system passes on the cost condition to billing through a

opy routine. Map the new pricing condition to a value field in

rofitability Analysis (CO-PA) so you can use the standard

ost in CO-PA for profitability analysis.

Step 3. Put User Exit Changes in

Place for a Third-Party

Procurement Scenario

hird-party procurement implies creation of a purchase order

PO) from the sales order. In this case the KMAT material

eeds to be sales order stock. A sales order stock implies that

he sales order itself must trigger the purchase order. The

chedule lines of the sales order line item capture the

urchase order information so that the vendor can supplyrectly to the customer against the specific sales order

material configuration.

/3 automatically triggers user exit ZXCKAU04 at the time of

oods receipt on the PO. For sales order stock, the system

utomatically picks up the standard cost from EBEW-STPRS

or creating the accounting documents. Use the VBAP-

WAVWR value through the user exit to book the inventory at

tandard cost at the time of goods receipt (movement type

01E). Use the user exit ZXCKAU04 to record this value in

he EBEW- STPRS field. Per standard SAP logic, post goodssue (PGI) against the sales order (movement type 601E)

appens at the standard cost in the EBEW- STPRS field. I

ready stored the standard cost value through the user exit in

his field; the system automatically makes the bookings at the

tandard cost at the time of PGI.

/3 automatically triggers user exits ZXEPFF02 and

XEDFU02 at the time of creation of an inter-company A/P

Doc through billing output condition RD04 from the inter-

ompany billing document. RD04 is an SAP predefined billing

utput that you need to associate with the outputetermination procedure that the inter- company billing

ocument uses. RD04 automatically generates the inter-

ompany A/P IDoc.

ou need to create inter-company A/P and A/R documents

ithin the company codes to reflect the purchase of the

roduct from the vendor plant’s company code by the

ompany code attached to the sales organization. Use these

o capture the standard cost from the EBEW- STPRS field.

his change is required in specific scenarios in case the

ompany code of the sales organization and the vendor plant

re different.

Note

In the case of a multi-company code scenario (using



different currencies), you’ll have to adjust the standard cost

value stored in the EBEW- STPRS field for the appropriate

foreign exchange rate. This is required because the VBAP-

WAVWR field stores the value in the document currency of

the company code to which you assign the sales

organization. You need to store the value in the EBEW-

STPRS field in the currency of the valuation area (company

code to which you assign the plant), and in case of a multi-

company code scenario, the two currencies might be

different. You can calculate the exchange rate using the

SAP standard function READ_EXCHANGE_RATE , which

you can view using transaction code SE37. When multiplied

by the value in VBAP-WAVWR it gives the exchange rate

adjusted value for EBEW-STPRS.

ser exit ZXF06U06 is for the processing program of the

ter- company A/P IDoc. This user exit is required only when

ou need to write additional processing logic for processing the

ter-company A/P IDoc.

n example of the use of this user exit would be to pass

eference values to an inter-company A/P document. The

ter-company A/P document doesn’t contain the link with the

ustomer sales order. If you need this link to conduct

econciliation of A/P documents with reference to the sales

rder, you can code the logic to populate the sales order

eference in the inter-company A/P document in this user exit.

or the solution discussed in this article, you don’t need to

make modifications to this user exit.

Documents

SAPexperts _ 3 Steps to Find the Standard Cost for a Configurable Product