Production Variance Analysis in S/4HANA

Presented by John Jordan

Variance analysis begins much earlier than month end. It begins the previous fiscal year when sales, production, and cost center plans are created. You then create cost estimates for the following fiscal year which provide plan costs for the manufacture of products, and when compared with actual costs, allow variance analysis.

With the introduction of SAP S/4HANA there have been many improvements in SAP Controlling which we'll cover in this Webcast, including new Fiori apps which access the universal journal for improved views of variance analysis.

Q&A

Q: My question is in different variance, is there a way to stop users using material variance? The objective is that I do not want resource usage variances.

A: Resource usage variance results from substitution. You may not want to stop substitution of components since that could result in stopping production.

Q: Can we allocate some costs like the machine depreciation cost back to the production orders that have been used in this machine?

A: You can allocate with costing sheets.

Q: How to apply the actual overhead on raw material if the cost sheet is attached to a semi finished and finished product.

A: Look in the Overhead tab in the Valuation Variant and explore your options.

Q: Can we ML ACTUAL COSTING while the RM is moving average and SFG and FG are having standard cost?

A: When you're using actual costing there's no reason to use moving average price. You should set all materials to standard price control.

Q: Why do variances occur when plan and actuals are from the same data?

A: Variances occur due to production inefficiencies and explained by variance categories.

Q: What is the difference between planned cost and target cost in the order? And how does it affect the order?

A: Target costs are plan costs adjusted by the operating rate. E.g. when operating rate =50%, target costs = 50% of plan.

Q: Is costing based preferable to activate in S/4HANA if it is Conversion projects ?

A: You're free to run costing-based COPA together with Margin Analysis in S/4HANA until you're confident Margin Analysis meets your requirements.

Q: With actual costing activated, do we still need variance splits?

A: Variance splits are required to settle variance categories and for Margin Analysis.

Q: Please may we know what are the Fiori Apps for MTO based Product Costing?

A: Read this blog: https://blogs.sap.com/2019/03/20/sap-s4-hana-manufacturing-cycle-mts-mto-in-fiori-apps/

Q: When we are having manufacturing and sales happening in different company codes, then can the production variances be passed on to the sales company codes?

A: You may need to activate intercompany costing

Q: I have just started in CO, I'd be very interested to know should I get HUB, or opt for a formal training program to be able to be job ready?

A: You should take every opportunity you can, and study and research every spare moment. Work hard.

Q: What production order status cancels WIP and calculates variance?

A: Fully Delivered DLV and Technically Complete TECO.

Q: In an MTO scenario, how do we flow the Variance to COPA before settling the Sales Order?

A: During production order settlement in MTO, production variances settle to costing based COPA, depending on your requirements class configuration.

Q: Can we have variances distributed to COPA characteristics in retail industry splitting variances to shops which are maintained as profit centers?

A: The variance split maps variances to GL accounts for settlement and Margin Analysis.

Q: How do I use plan price 1 in the cost estimate of the subcontract products when a special procurement key is used?

A: Look in the Subcontracting tab in the valuation variant with transaction OKK4.

Q: Please let me know how we clarify our doubts with regards to Product Costing. To which email ID should we send the email?

A: Email: jjordan@erpcorp.com

Q: What production order status cancels WIP and calculates variance?

A: Fully delivered and Technically complete.

Q: Is Actual Costing mandatory with S/4HANA?

A: No. Material Ledger is mandatory.

Q: What cost does variance Analysis compare?

A: The actual cost and the standard cost.

Q: When does a production order receive the credit?

A: Answer: During goods receipt into inventory of the assembly at standard.

Q: When will a Variance Analysis in S/4HANA book be available?

A: January 2023