My client is using Material Cost Estimate with Quantity Structure (PP – production order) but not providing for waste in BOM as there is abnormal wastage in the process that cannot be quantified as % in BOM. Business would like to build up the cost of scrap in standard product cost estimate and do the variance calculation (Plan vs Actual).
Business presently is doing it manually outside the system. It is creating the material code for wastage providing certain percentage as wastage on the consumption of material in each of the process in routing.
Suggestion:
1. You need to mention the Scrap Material code in the BOM as Component
2. The Qty for this material to be specified as -ve Qty in the BOM....Maintain Price control S for this material and maintain a manual std cost for this material in MR21.. Ideally, the cost to be maintained as per the realizable value of the scrap
3. The Qty for other components may need to be increased either manually or you can specify a component scrap% for each component in the BOM
This will have the impact of
a. Component Qty being increased and hence the cost would increase
b. the estimated value of scrap realization will b reduced from the total cost estimate
c. When you do GR from Prod order, the Scrap material
will be received into stock
Question:
The nature of business is such that it is difficult to quantify the scrap in BOM and business do not want to increase the component quantity as this may vary from 2 % to 15 % depending on process & material quality. FYI, this is normal wastage of business so it would not want to provide in BOM and want to go with absolute quantity required for manufacture.
Process owner expects to calculate scrap outside the BOM based out on material consumption on certain percentage and show it separately in cost component structure as the part of its product cost and do the variance analysis.
Can I use costing sheet for this purpose and assign it to valuation variant?
Suggestion:
As you said this is normal wastage - This must be provided in the BOM.
However, if you want to calculate it manually and enter it in Cost Comp Str - Use additive cost estimate.
Allow additive cost est. in your Valuation variant - Use CK74N to enter the additive cost - Then do CK11N.
You can use a separate cost element in CK74N and map it to a separate cost comp in OKTZ.
However, costing sheet is a better option if you want to charge it as a %.... Costing sheet can be used in both Std cost estimate as well as during actual processing in month end... Additive cost estimate can only serve the purpose of Std cost estimate.
You can choose between the two based on your requirement.
