Transfer Control Can Produce Unexpected Results in Costing
Runs
Transfer Control Can Produce Unexpected Results in Costing
Runs
by John Jordan, Director, ERPcorp
Transfer control is standard R/3 functionality that allows the
transfer of existing component cost estimates to new product cost
estimates. The author explains the costing run process and how
transfer control selects cost estimates. He also discusses the
importance of the "Always recalculate material" check box and
provides an example of how it impacts transfer control.
A six-month or yearly cost rollup is a job that is usually
understood and carried out successfully at most companies. However,
costing a new product during the year is also necessary, and this
task can cause problems. One of the difficulties is the decision of
whether to update the standard price of components.
If a new product contains all new components, a new standard
price is needed for all components. However, what if some of the
components already exist and are shared with other existing
products? Changing the existing standard price for these components
can lead to a planned variance on production orders for existing
products.
R/3 provides standard functionality called transfer control,
which allows transfer of existing component cost estimates to new
product cost estimates. You can enter transfer control in the
initial screen when a costing run is created with transaction code
CK40N, as shown in Figure 1.
Figure 1 Costing run with transfer control
Depending on the configuration of the costing variant entered
when you create the costing run, transfer control may default into
this screen. It may or may not be changeable.
How Transfer Control Defaults into Costing Runs
A costing run is used to create and process many cost estimates;
it is a way of mass processing cost estimates. When creating a
costing run, header information must first be entered, such as name
(identifier) and date of the costing run, Controlling area, Company
code, and other information, which applies to the whole costing run
(Figure 1).
The costing variant is one of the values first required when
creating a costing run. The parameters associated with the costing
variant are shown in Figure 2. The costing variant is maintained
using transaction OKKN in Customizing. The parameters include the
Valuation Variant, which determines the strategy for finding the
price of raw materials and activities, and Transfer Control, which
determines the strategy for selecting existing cost estimates. The
order of the three steps that comprise transfer control (previous,
current, and future standard cost estimates) varies depending on
whether your search is for a single plant or across plants. For
more information, see the sidebar, How Transfer Control Selects
Cost Estimates.
Figure 2 Costing variant showing default transfer control
Figure 2 shows the Control tab for costing variant configuration
(transaction OKKN), which indicates the transfer control that will
be defaulted into the header information when creating a costing
run. Figure 3 shows the Qty struct. tab of costing variant
configuration, which controls whether transfer control can be
changed when creating a costing run using the Transfr ctrl can be
changed option. The field appears white if it can be changed, and
if it cant be changed, it appears gray in the general data section
of the costing run.
Figure 3 Costing variant showing transfer control change
indicator
After the costing run header information is entered and saved, a
screen similar to that shown in Figure 4 appears with a list of six
steps that can be used to manage and monitor the costing run
process. Here is a brief description of each step:
1. Selection selects the initial materials for which cost
estimates will be created. Transfer control can be used to ignore
materials that already have a cost estimate, depending on the
status of the existing cost estimate. Any materials ignored due to
transfer control strategy will not be included in the list of
materials for which cost estimates will be created.
2. Structural explosion (Struct. explosion) explodes the bill of
materials (BOM) for each of the materials selected in the previous
step and includes these materials in the list of materials for
which cost estimates will be created. Transfer control can be used
to ignore materials that already have a cost estimate.
3. Costing creates standard cost estimates for all materials in
the list generated during the previous two steps.
4. Analysis compares the proposed standard prices generated by
the new standard cost estimates with existing standard prices.
5. Marking populates the Future standard cost estimate field of
the Costing 2 tab (commonly referred to as view) of each material
master.
6. Release moves the information from the Future standard cost
estimate to the Current standard cost estimate field of the Costing
2 view of each material master. Inventory is revalued and
accounting documents generated.
Figure 4 The six steps used to manage and monitor the costing
run process
During the Selection step of a costing run, the system checks
whether a material cost estimate already exists for a material
using transfer control criteria. If one exists, the material is not
included the selection step. By clicking on the parameter icon of
the Selection step of the costing run shown in Figure 2, the change
parameters screen shown in Figure 5 appears.
Figure 5 Use the Always recalculate material check box to ignore
transfer control
If a costing variant uses transfer control that cannot be
changed (PC01, grayed out in Figure 1), the Always recalculate
material check box in the change parameters screen (Figure 5) can
be used to ignore transfer control. Cost estimates will be created
automatically for all components of BOMs during the costing step of
the costing run. At least this is what many people assume by
reading the first paragraph of the F1 help text available on this
indicator: This indicator restricts the use of transfer control. If
you select this indicator, the transfer control is ignored in the
selection in the costing run. A cost estimate is created for all
the materials that are selected in the costing run.
But the second paragraph is difficult to understand, and most
people assume that this indicator allows transfer control to be
ignored completely. This is not the case, and in certain cases
transfer control becomes active again during the costing run, even
with the indicator selected. Unless the outcome of a large costing
run is closely monitored, the standard price of some of the
components may not be updated, and this might go unnoticed.
The second paragraph is easier to understand if two parts are
italicized: If the quantity structure is determined for all the
selected materials in the costing run, transfer control becomes
active again. For materials that were determined via BOM explosion,
the system looks for an existing cost estimate according to the
transfer strategy. This paragraph indicates that materials
determined in the costing run Struct. explosion step in Figure 4
are treated differently than materials determined in the Selection
step.
A misleading situation can occur if material type FERT (finished
goods) is entered in the costing run selection screen in Figure 5
with the Always recalculate material check box selected. All
finished goods are selected in the Selection step of the costing
run. However, transfer control now becomes active again. In the
Struct. explosion step of the costing run, materials that are
determined at lower levels of the BOMs are subject to transfer
control. Existing cost estimates that can be identified according
to the transfer strategy in Figure 6 (transaction CKC1) are in the
costing run, and new cost estimates are not created.
Figure 6 Transfer strategy
In this situation, all materials that require new cost estimates
should be entered in the costing run Selection step, with the
Always recalculate material check box selected. Several methods to
enter all required materials can be used:
1. Manually enter all BOM components and plants in the Selection
step of the costing run. This ensures all required materials are
chosen in the Selection step without transfer control activated. No
materials are to be identified in the Struct. explosion step of the
costing run. Disadvantages with this option include identifying all
materials in the BOM and the work required to manually enter the
materials in the Selection step.
2. Enter material types FERT (finished goods), HALB
(sub-assemblies), and ROH (raw materials) in the costing run
selection screen in Figure 5. This ensures that all materials in
BOMs in the plant are chosen in the Selection step. This option
works when carrying out a major costing run of all materials in a
plant. However, when costing a single BOM, this option does not
work.
3. Leave all fields in the selection screen in Figure 5 blank
except for Plant. This has a similar effect as option 1. The
difference is that materials both in and not in BOMs in the plant
are chosen. This may lead to many costing run messages, as
materials not in BOMs that do not require cost estimates are
included in the costing run.
4. Allow the user to change or delete the transfer control in
Figure 1 in the Selection step of the costing run. This is the
simplest option. However, it depends on company costing policy. For
instance, it may be company policy that no existing cost estimates
are to be recreated in between major costing runs. In this case,
transfer control may be configured as not changeable. Note that
with the transfer control field blank, there is no need to select
the Always recalculate material check box.
Lets follow an example of how the transfer control becomes
active during the Struct. explosion step of a costing run, even
though the Always recalculate material check box is selected in the
Selection step. Figure 7 shows the costing view of a semi-finished
good, indicating there is no marked future cost estimate, no
current released cost estimate, and no previously released cost
estimate with a start date within the current fiscal period (12,
2004).
Figure 7 Costing view of material master
Lets create a costing run for a finished good that contains this
semi-finished good. Figure 8 displays the costing run after the
Selection step has been executed. The finished good has been
selected and appears in the Material overview section of the
costing run. During the Struct. explosion step, materials lower in
the BOM structure that require new cost estimates are determined.
Figure 9 displays the costing run after the Struct. explosion step.
The semi-finished good was selected during the Struct. explosion
step and the finished good was selected during the Selection step.
New cost estimates are created for both of these materials during
the Costing step of the costing run.
Figure 8 Costing run Selection step executed
Figure 9 Transfer control does not locate a cost estimate
Now lets create and mark a cost estimate for the semi-finished
good. The Costing 2 view in Figure 10 shows a cost estimate marked
in period 12, 2004.
Figure 10 Costing 2 view
Remember, transfer control first searches for an existing
released cost estimate with a start date within the current fiscal
year. The Costing 2 view shown in Figure 10 indicates there is no
presently released cost estimate. If unsuccessful, transfer control
next searches for a marked cost estimate with a start date within
the current fiscal period.
Since transfer control is active during the Struct. explosion
step, it locates the marked cost estimate for the semi-finished
good. The semi-finished good that was previously selected in Figure
9 is now not selected, so it does not appear in the Material
overview list shown in Figure 11. Since the semi-finished good is
now not selected, a new cost estimate will not be created.
Figure 11 Transfer control locates a cost estimate
Finally, in large costing runs, the effect of transfer control
and the Always recalculate material check box may be difficult to
analyze. I recommended that you carry out test costing runs on a
small number of materials and BOMs to determine the existing and
required behavior.
How Transfer Control Selects Cost Estimates
Figure 1 (transaction OKKM) shows the order in which transfer
control PC01 searches for existing cost estimates within the same
plant:
1. A released cost estimate with a start date within the current
fiscal year. When a standard cost estimate is marked, it appears in
the Future standard cost estimate column of the Costing 2 view of
the material master (transaction MM02). Standard cost estimates can
be created and marked many times during a fiscal period, as long as
a cost estimate has not yet been released for that material during
the period.
2. A marked cost estimate with a start date within the current
fiscal period. When a standard cost is released, it moves from the
Future standard cost estimate to the Current standard cost estimate
column of the Costing 2 view of the material master. Any inventory
is revalued and accounting documents are generated at this time.
Standard cost estimates can only be released once in any fiscal
period for any given material.
3. A previously released cost estimate with a start date within
the current fiscal period. When a standard cost estimate is
released, the cost estimate it replaces moves to the Previous
standard cost estimate column in the Costing 2 view of the material
master.
Figure 1Transfer control within a single plant If the system
cannot find an existing cost estimate that meets the criteria, a
new cost estimate is created using the BOM and routing for
assemblies or price information from the purchasing information
records or material master for raw materials. The special
procurement key entered in the MRP 2 view of the material master of
a component can indicate that a component or subassembly is sourced
from another plant (transaction MM03). Transfer control can search
for existing cost estimates from another plant with a different
search strategy. Figure 2 shows the Cross-Plant tab for transfer
control PC01.
Figure 2 Transfer control in a different plant Separate plants
can have different people responsible for costing. A cost
accountant executing a costing run in one plant may want to create
all new cost estimates within his own plant. If any components are
sourced from another plant, however, he may want to use existing
cost estimates. This is a typical scenario requiring the use of
different search strategies for the Single-Plant and Cross-Plant
tabs. You can use transaction CKC1 (check costing variant) to check
the existing setup of transfer control for a particular costing
variant.
John Jordan is a CO consultant with more than six years of SAP
experience. He specializes in product costing, drawing on his
engineering and accounting background and qualifications. He has
worked extensively with clients on product costing reporting
requirements, training and increasing understanding of product
costing and integration with other modules, new implementations,
and auditing existing implementations. For the last four years, he
has worked as an independent consultant and director of ERPcorp.
You may reach John by email at [email protected].
