CO 202 · MODULE TOPIC
How does product costing explain manufacturing cost?
Product costing combines material, labor, machine, and overhead information so the business can value inventory, understand production differences, and assess whether a product can be sold profitably.
What this capability is for
Product cost planning estimates the expected cost. Actual collection on production or process cost objects records execution. Period-end analysis explains the difference between plan, actual, inventory valuation, and profitability.
WORKING FLOW
Follow the management question through the record
Build the standard or planned cost
Use BOM, routing or recipe, activity prices, procurement prices, overhead rules, and the approved costing variant to calculate expected cost.
Record execution cost
Material issues, confirmations, activity allocation, external services, and overhead postings collect on the production or process cost object.
Move value to inventory
Goods receipt and valuation transfer completed-product value according to the approved costing and inventory rules.
Analyze and settle differences
Calculate work in process or results analysis where applicable, analyze variance, settle, and feed the relevant profitability view.
CONTROL POINTS
What makes the result trustworthy?
Master-data coherence
BOM, routing, work center, activity type, standard values, production version, valuation class, and price controls must agree before a cost estimate is trusted.
Cost-object design
Make-to-stock, make-to-order, and engineer-to-order use different cost objects and settlement paths. Do not copy an MTS outcome into an order-specific scenario.
Period-end sequence
The order of confirmations, goods movements, WIP or results analysis, variance calculation, settlement, and reporting affects the story seen at close.
The standard cost uses purchased components, assembly hours, test hours, and approved overhead. Actual component consumption and confirmed hours collect on the production order. Goods receipt values the pump; the close explains scrap and efficiency variance before margin is reviewed.
Follow cost from source posting through allocation, close, and management reporting.