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Basics of Standard Costing – Understanding

the Cost Component Structure-Part 3
November 25, 2013 | 12,121 Views |

Hrusikesh Dalai
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FIN Controlling
FIN (Finance) | MAN Production Planning (PP) | SAP Business Process Management | SAP
ERP | accelerator | accounting | alv | available | bapi | beginner | bp

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2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

This document is in continuation of my second document

http://scn.sap.com/docs/DOC-49167 –Basics of SAP Standard Cost estimate-
understanding costing variant-Part 2 and 3rd in the series

This document explains the Cost Component Structure (CCS) and

components assigned to CCS. Explaining various settings in background as
previous part.

Cost Component Structure (CCS)

The cost component structure determines how the results of material costing
are updated. The cost component structure groups the costs for each material
according to cost component (such as material costs, internal activities,
external activities, and overhead). If the material is used in the production of
another material, the cost component split (which breaks down the costs
according to material costs, internal activities, external activities, overhead,
and so forth) remains in the system when the costs are rolled up.

In the cost component split, you also define the following for material
costing:

Which part of the costs are fixed costs

Which costs are costs of goods manufactured and what are sales and
administration costs
Which costs are relevant for stock valuation, commercial inventory
valuation and tax inventory valuation
When the cost component structure is assigned to the organizational
units, you can specify that two cost component splits are created:

Main cost component split

This is the principal cost component split, meaning that it is used in the
standard cost estimate, which can be used to update the material master. The
main cost component split can be a cost component split for cost of goods
manufactured or a primary cost component split.

Auxiliary cost component split

this can exist in addition to the main cost component split, and is not used in
the standard cost estimate. It can be used for analysis purposes, in that it can
be displayed with the cost estimate and passed on to Profitability Analysis.

Step 1 – T Code OKTZ

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 2/23
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Screenshot 1

I have created Z1 and Z2 CCS for our analysis purpose. You can use two cost
comp structure for reporting purpose and different reporting need.

Material cost estimates are created in the Product Cost Planning component.
Sales order cost estimates and order BOM cost estimates are created in
Product Cost by Sales Order component. The cost components separate the
results of a cost estimate into raw materials, material overhead, external
activities, setup costs, machine costs, labor costs, production costs, and other
costs.

Display the cost components in the cost estimate

T code ck13- view of Cost estimate Cost element and cost component like Mat,
Labor, OH etc.

Screenshot 2

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 3/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

The above screen shows the distribution of cost as per the Cost component
structure

T-code OKTZ

In Cost Center Accounting, the cost component structure determines how

the results of the activity price calculation are updated. The cost component
structure groups the costs for each activity type of the cost center according to
cost components (such as material costs and labor costs). If an internal
activity allocation is carried out, the cost component split (which breaks down
the costs according to material, labor costs, and so forth) is retained at cost
rollup.

If the cost component split is not to be retained, you can create a switching
structure for the cost component structure for Cost Center Accounting. In the
switching structure, you specify which sender cost component goes into which
receiver cost component

See below

Screenshot 3

From screenshot 2 you will notice there is a Column called cost element. We
get those from settings in Cost component structure setting by assigning cost
elements for respective cost component.

Screenshot 4

Different Settings in Cost component Structure in see below.

Control

Cost Share- which includes Variable, Fixed and variable Cost

Indicator for Roll up Cost Component

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 4/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

This indicator determines whether the costing results of a cost component are
rolled up into the next-highest costing level (cost roll up).

You can specify which cost components are rolled up into the next-highest
costing level according to the criteria specific to your organization.

Example

If the sales and administration costs and the cost of goods manufactured are
to be costed simultaneously in a costing level, you can proceed as follows:

You set this indicator for the cost components identified as the cost of goods
manufactured. These costs are rolled up into the next-highest costing level.
You do not set this indicator for the cost components identified as sales and
administration costs. These costs remain on the costing level on which they were
originally calculated.

Screenshot 5

Also the filter criteria for itemization are important for example anything which
we wanted for statistically analysis purpose we can check not relevant for
inventory valuation.Some examples below shows based on the settings how
the result will affect. Below screen you will see the cost element separated by
the Material, Labor and Overhead as we defined in CCS.

Cost estimate itemization view (T CODE-CK13n)

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 5/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

Screenshot 6

Target/Actual Comparison: Cumulative report (T CODE- KKO0), there is

additional configuration required in OKKN. You can build your own report
using report painter too.The cost components we defined in CCS will flow into
these reports based on our section in Report painter.

Screenshot 7

In this document i tried to explain in a simple manner the use of cost

component structure. This is a basic and beginners understanding of cost
component structure. In my Next series of documents i will try explaining
Costing Sheet,Activity Planning,and Summary of Standard Costing and its
integration with production Planning.

Refer next document here-

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 6/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

http://scn.sap.com/docs/DOC-49880- Basics of Standard Costing-

Understanding Overhead cost Flow.

Refer to previous Document here-

http://scn.sap.com/docs/DOC-49167 –Basics of SAP Standard Cost estimate-

understanding costing variant-Part 2

http://scn.sap.com/docs/DOC-48908– Basics of SAP Standard Cost estimate-

Understanding the flow of cost settings-Part 1

Best Regards

Hrusikesh Dalai

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51 Comments
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fransisco lozana

November 25, 2013 at 7:26 pm

Hrusikesh,

Nice document easy to follow. Good job keep it up.

I hope you will write many more documents in SCN

Thanks

Fransisco

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 7/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

Hrusikesh Dalai Post author

November 25, 2013 at 7:38 pm

Thank you for reading it Fransisco, I appreciate your feedback.

Best Regards

Hrusikesh

David Feng

November 26, 2013 at 2:08 pm

Hrusikesh,

I am loving your series, eagerly waiting for your next document.

Well done again

Thank You

David

Rajneesh Saxena

November 27, 2013 at 4:33 am

Dear Hrushi

Very good going. Keep it up and maintain the same pace. I suggest you also to
incorporate common problems which we face during whole Co process, may be at the
last document of this series.

Regards

Rajneesh Saxena

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 8/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

Hrusikesh Dalai Post author

December 2, 2013 at 3:09 pm

Rajneesh,

Thank you for your suggestion, i will try to include those in my series.

BR

Hrusikesh

Prasad Swain

November 27, 2013 at 2:24 pm

Incredible !! you are doing good job. Keep it up

Best Regards

Prasad

Hrusikesh Dalai Post author

December 2, 2013 at 3:10 pm

I appreciate your comment and thank you for the motivational words.

Best Regards

Hrusikesh

Lakshmi Sama

November 29, 2013 at 10:41 am

Hello Hrusikesh,

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 9/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

This is really a nice doc and you did a great job. Thanks for sharing your knowledge and
keep sharing

Regards,

Lakshmi S

Hrusikesh Dalai Post author

December 2, 2013 at 3:11 pm

Thank you Lashmi for your comments. I am glad you like it.

Appreciate your kind words.

BR

Hrusikesh

Venkata V

November 29, 2013 at 11:37 am

Dear Hrushikesh,

Its very helpful. Great work.

A post on Product Costing will be very useful. Awaiting your further posts.

Regards,

Sravan.

Hrusikesh Dalai Post author

December 2, 2013 at 3:13 pm

Sravan,

Thank you for kind words, A post on product costing is already there in five
part series in Controlling Space. i will try to summarize at the end of the
series.
https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 10/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

BR

Hrusikesh

Dawood Khalid

December 2, 2013 at 5:41 pm

Very well explained

Hrusikesh Dalai Post author

December 3, 2013 at 7:11 pm

Thank you Dawood

Naresh Krishnamoorthy

December 3, 2013 at 4:20 am

Good one…Thanks for your efforts.

BR,

Naresh K.

Hrusikesh Dalai Post author

December 3, 2013 at 7:11 pm

I appreciate your feedback Naresh.

Thank You

Hrusikesh

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 11/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

vasu sara

December 4, 2013 at 1:34 am

Hi Hrusikesh Dalai

great work, wishing for more postings.

Regards

Srini

Hrusikesh Dalai Post author

December 4, 2013 at 1:45 am

Thank you Srini, i appreciate your feedback.

Best regards

Hrusikesh

vasu sara

December 4, 2013 at 11:54 am

This document realy give exhautive knowledge on stardard cost estimation. I wish
Hrusikesh

to complete his next postings.

Mohsin Abbasi

December 6, 2013 at 10:57 pm

Hi Hrusikesh,

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 12/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

Such a nice Presentation……………:P

Best Regards

Mohsin Abbasi

Hrusikesh Dalai Post author

December 9, 2013 at 2:37 pm

Hi Mohsin,

I am glad you like it. Thank you for rating it.

BR

Hrusikesh

sravanreddy kalledi

December 13, 2013 at 9:38 am

Nice presentation, keep it up……….

regards

sravan k

Hrusikesh Dalai Post author

December 13, 2013 at 1:51 pm

Sravan,

Thanks for rating it. I am glad you like it.

regards

Hrusikesh

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 13/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

VINOD V

December 14, 2013 at 4:23 am

Hi Hrusikesh,

Well done. documented & explained nice way. Expecting more from you

Keep it up…..

Thanks & Regards,

VINOD.V

Hrusikesh Dalai Post author

December 16, 2013 at 4:05 pm

Vinod,

Thank You for your valuable comment and appreciation.

please refer some more documents of the series here

Refer next document here-

http://scn.sap.com/docs/DOC-49880- Basics of Standard Costing-

Understanding Overhead cost Flow.

Refer to previous Document here-

http://scn.sap.com/docs/DOC-49167 –Basics of SAP Standard Cost estimate-

understanding costing variant-Part 2

http://scn.sap.com/docs/DOC-48908– Basics of SAP Standard Cost

estimate- Understanding the flow of cost settings-Part 1

BR

Hrusikesh

Ravi Sankar

January 8, 2014 at 4:00 am

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 14/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

Hi Hrusikesh,

Good work keep it up…..

Regards,

Ravisankar

Hrusikesh Dalai Post author

January 8, 2014 at 1:55 pm

Thank You Ravisankar. I appreciate your valuable comments.

BR

Hrusikesh

Dibyendu Patra

January 9, 2014 at 5:32 am

Hmm….

Got a very clear idea about cost component structure..

Thanks Hrusikesh.

Hrusikesh Dalai Post author

January 10, 2014 at 5:41 pm

Thank You Dev, I appreciate your feedback.

Thanks

Hrusikesh

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 15/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

Sampat Kumkar

January 15, 2014 at 11:59 am

Hi Hrusikesh

Thanks for sharing Part III document, cleared now how the costs are getting updated in
CK13…

Regards

Sampat

Hrusikesh Dalai Post author

January 15, 2014 at 5:26 pm

Hello Sampat,

I am glad you like it. Thank you for the comments

BR

Hrusikesh

Pascal Bernard Ducharme

January 21, 2014 at 8:49 pm

Very clear and simple

Bravo!

PB Ducharme

Hrusikesh Dalai Post author

January 22, 2014 at 1:34 pm

Hello Mr PB Ducharme,

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 16/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

i am glad you like it and thanks for rating it. It motivates when fellow
members appreciates the documents.

Thanks

Hrusikesh

Sheryl Perry

January 22, 2014 at 12:08 am

Hrusikesh,
Today I was handed the responsibility of supporting costing and then asked to make a
change. Your series has become my “How-to Manual”. It is very succinct yet very
thorough. Having screenshots helps immensely.

Thank you very much,

Sheryl P.

Hrusikesh Dalai Post author

January 22, 2014 at 1:36 pm

Hello Sheryl,

Congratulation for your new assignment you will love your new assignment
and i am glad this document helped you anyway.

I appreciate your comment and feedback.

Thanks

Hrusikesh

Mariks .

January 24, 2014 at 10:18 am

Thanks for sharing valuable knowledge…

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 17/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

Sada Bandla

February 14, 2014 at 9:10 am

Dear Hrusikesh Dalai thank you for sharing knowledge..

Regards

Sada Bandla

Hrusikesh Dalai Post author

February 14, 2014 at 6:42 pm

Thanks you for your appreciation.

Devendra F

February 19, 2014 at 12:26 pm

hi,

Those are five star series,

Devendra

Hrusikesh Dalai Post author

April 3, 2014 at 3:54 pm

Thank you

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 18/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

Rudra Prasanna Mohapatra

August 27, 2014 at 2:31 pm

Hi Hrusikesh,

Very nice document . Thanks for sharing . Just a query on Primary Cost Component
Structure. Is it that this structure should just contain the primary cost elements?

In system, it allows to include even secondary cost elements over here? Request you to
please throw some light on the same.

Regards

Rudra

Hrusikesh Dalai Post author

August 28, 2014 at 2:16 pm

Rudra,

Yes in the config as per the business requirement you need to define that.
System will allow any cost element there.

Refer

Primary Cost Component Splits – Product Cost Planning (CO-PC-PCP) –

SAP Library

Thanks

Hrusikesh

Rudra Prasanna Mohapatra

September 2, 2014 at 12:12 pm

Hi Hrusikesh,

Thanks for answering my question regarding primary cost

component split.

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 19/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

I was expecting, that this cost component will show just the
primary costs, like material components and depreciation (as
mentioned in sap documentation.)

and this would skip the activity costs , that are the secondary
costs. But it does not do that and allows all the cost elements,
both primary and secondary.

My question is , what is the significance of the tick . Is it , that

this tick is just to remind the configurer to add just the primary
cost elements in this cost component split ?waiting for your
answer.

Regards

Rudra

Hrusikesh Dalai Post author

December 18, 2014 at 10:33 pm

Yes your understanding is correct.I think you kind

of know the answer,Significance of the tick is to
show primary cost component split is an
alternative way of showing the cost of goods
manufactured of a product.

SAP is a system it will behave the way you want it

to behave , SAP will not stop you from adding
secondary cost element to the split but question
should be why you wanted to do that? what is the
business case?

Thanks

Hrusikesh

Mukthar Ali Ahamed N

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 20/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

August 28, 2014 at 10:37 am

Good explanation…

Regards,

Mukthar

Hrusikesh Dalai Post author

December 18, 2014 at 10:34 pm

Thanks for the rating, will probably work hard to get the 5

Amarendra M

November 20, 2014 at 6:07 pm

Great Work & Explanation … Thanks..

Hrusikesh Dalai Post author

August 27, 2015 at 1:37 pm

Thanks Amarendra

zhenghao ma

December 15, 2015 at 7:20 am

Thanks Amarendra But if there is some special issue like finish goods ‘s standard cost is
variable to output valus ,how can we do it in sap, lst ‘s say

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 21/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

FICO Application Team

February 8, 2016 at 7:33 am

If i have multiple Cost component structures assigned to the Company codes which one
to be assigned to OKN0.

Michael Kozlowski

February 13, 2016 at 6:24 pm

really good work!

Best regards

Michael

Arvind Pereira

November 29, 2017 at 9:25 am

Hi Hrusikesh,

The document is quite detailed, good work.

regards

Arvind Leo Pereira

https://blogs.sap.com/2013/11/25/basics-of-standard-costing-understanding-the-cost-component-structure-part-3/ 22/23
2/2/2018 Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 | SAP Blogs

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