The previous document, Basics of SAP Standard Cost estimate- Understanding the flow of cost settings-Part 1, may be found at This is a straightforward and organised method of outlining the procedures involved in defining a cost variable.

The configuration of the costing variation and the components associated with it, such as the valuation variant, the quantity structure control, the transfer control, and the assignments, are explained in this paper. I had originally intended to write only two pieces for it, but it appears that there will be a need for a few more. This document aims to clarify how a conventional cost estimate’s cost flows. describing various backdrop settings from the previous section.

  • Price Variant

T CODE OKKN- Define and identify the costing variant. We are using PPC1 for analysis.


Snapshot 1

Double-click PPC1 after that to specify further options.


Snapshot 2

Let’s now examine each of these characteristics and how it was assigned.

  • Control

1. Costing type – You can define the goal of a cost estimate using the costing type.

To define a costing type, select the option to create a new one, edit an existing one, or use a T-code. OKKI

Select “Save parameter” in the tab begin with a period ( Most commonly used),


Snapshot 3

Select Standard price under the Price Update tab. We chose standard price since we intended to determine standard cost.


Screenshot 4

2. Valuation variant: T CODE OKK4

We will learn the significance of the various tabs in this setting step, which is crucial.

For Material Valuation, Internal Activity, Sub-Contracting, Overhead, and Other


Photograph 5

By designating a valuation variant to a plant, you can build plant-specific valuation variants if you want to employ various valuation methodologies or overhead rates in plants that are members of the same company code. Decide on the push-button valuation variation or plant. The valuation variants apply to all of your plants if you don’t do this.

I’ve established a valuation version in this plant, and the most crucial step is material valuation.

Here, we outline the strategy sequence for valuing our material. The one mentioned above is the one that is most frequently used, but it can be altered to meet business needs.

You may select up to five (5) techniques for each value alternative when valuing materials.

-Planned price-In accordance with the Planned price in the Material master’s Costing 2 tab (MM03 view)

If this has been maintained, the system will take this value into account first during cost run or standard costing.

-In the event that the system is unable to locate a price in priority 1, it switches to priority 2 Valuation Price in accordance with Price Control in Material Master, Costing 2 tab (MM03 view)

L Price from Purchasing Info Record: This one is utilised when purchasing products on a subcontract or from an outside source. And for this, we additionally keep a subsequence that is also organised by sequence.

Discover more TCODE OKK4 possibilities, and learn how to use each one.

Internal Movement In order to evaluate the used activity types and business processes, you define here the order in which the system searches for pricing in activity type planning, actual activity price computation, cost centre accounting, or activity-based costing. You also provide the plan or actual version that is being used.


Photograph 6

For each valuation variation, you may select up to three (3) activity prices for different activity kinds or processes.

According to the planning information in Cost centre planning and activity planning (TCODE-KP26/KP06), I have chosen one planned price for the time in the example above. (We shall see more in the following document, Part 3.)

Subcontracting In this section, you choose the order in which the system should look up prices in the record of purchase information. To establish a blended price for goods that are made with outside vendors using parts supplied by the customer, quota agreements are utilised in purchasing. You can specify whether the intended quota arrangement or the actual quota arrangement should be used to determine the quota of each individual vendor who is listed for the material to be processed.

You may select up to three (3) techniques for each valuation alternative when subcontracting.


Photograph 7

In contrast to the eight other options available, which you can choose based on your business needs, I have chosen three Net Quotation prices from the information record. In the purchasing quotation, I chose the actual quota arrangement; however, you may also choose the planning quota arrangement depending on your company’s needs.

External Processing: In this step, you choose the order in which the system looks for pricing in the record of purchasing information or during the routing operation for the value of external activities.


Photograph 8

However, for external processing, you can select up to three (3) techniques for each valuation variation. I have used Net purchase order price here. You can choose priority from 9 available SAP standard strategies based on business requirements.

Costs of Overhead

A costing sheet can be connected to the valuation variant for the defining of overhead. If you want to apply specific overhead criteria for raw materials, you may also submit a costing sheet for the allocation of overhead to raw materials.

You must have specified overhead groups (T CODE OKZ2) and made the relevant parameters for the costing sheet in the step Define costing sheet if you wish to separate overhead application based on material groupings (T CODE KZA1- I will explain that in My Next Document). For our analysis purposes, I appreciated the Costing sheet in this scenario.

In material costing, you can additionally define whether overhead is computed for subcontracted materials.

Additional Price Elements


Photograph 9

The valuation version can be linked with price elements if you want to utilise it for inventory costing.

Determine if a factor’s applicability to a costing indicator should apply to all valuation alternatives or only a select few.

The criteria are applicable to all valuation variants that do not have special entries if the valuation variant is three plus signs (+++). For the sake of our analysis, I chose this alternative.

The system applies the relevant relevancy to costing indicator and the associated components if you indicate a specific value variant. For each line, enter a relevancy to costs indicator. Add a factor for the variable expenses as well as a factor for the fixed costs.

Three-Day Control

Dates for material cost estimations are controlled by this key.

For instance, when costing with a quantity structure, you can utilise date control to specify the day for choosing the quantity structure.


Photograph 10

When manual entry is selected, you can manually alter the date throughout the cost estimate to meet your needs.

Structure 4-Qty Control

To regulate how the system chooses a bill of materials and a routing for the material to be costed, use the quantity structure control.

The quantity structure control is specified in the Customizing for Product Cost Planning process. One plant in particular or all plants may be subject to the quantity structure regulation. In the costing variant, you enter the quantity structure control. The quantity structure control ID is chosen by the system through the costing variation when the cost estimate is prepared.

You always utilise a costing option when you construct a cost estimate for a material. This version serves as the connection between the quantity structure control and the cost estimate.


Picture 11

I’ve chosen option ID 05 and BOM application PC01 (TCODE OS30 define BOM Application, A PP Functionality)


Photograph 12

These are governed by the BOM application:

The BOM usages’ order of importance (selection ID), You can use a selection ID to specify which BOM usage the system will choose first when a BOM is required to include several enterprise areas (i.e., when it includes multiple BOM usages).

The importance of a different BOM for a certain multiple BOM, You have control over which alternative BOM, taking into account the plant and the BOM usage, the system chooses as of a set date for a certain material. The programme will show you whether the system adheres to or disregards this criteria.

Whether the system only considers BOMs with certain status indicators included in their status

If the BOM status includes the indicator requested by the application, only then is an alternative BOM exploded.

In Customizing for Product Cost Planning, you may inspect the BOM application and the parameters that are connected to it.

I’ve chosen Routing 01 ( TCODE OPEB can be used to define automatic selection, A PP functionality)


Pictures 13

The system chooses a routing based on the routing selection ID. There are various possible priorities. To each of these priorities, you apply selection criteria (task list type, task list usage, and task list status).

The routing with the highest selection priority that matches the selection criteria is chosen. However, if a different route cannot be found, the algorithm keeps looking using the next selection priority’s selection criteria.

The system additionally verifies if the BOM and routing are still valid as of the quantity structure date when determining the BOM and routing (refer date Control screenshot 10). whether the lot size in the routing and BOM corresponds to the lot size in the pricing.

Transfer Control (#4)

You set the parameters for the partial costing in this stage. When costing information already exists, you utilise partial costing to stop the system from generating a new cost estimate for a material. Instead, the new cost estimate merely incorporates the current price data. This raises efficiency.


Photograph 14

If cost estimates for specific materials are present in the BOM’s individual levels, they are not recosted under the single-plant transfer method. Instead, in compliance with the transfer control, the current costing data is added to the cost estimate.

Select the transfer control if you always wish to recost. no transfer

Cross-Plant Transfer: The unique procurement types are used to evaluate material costs:

Move from another plant, withdrawal in a different plant production at another facility

Strategies for Cross-Plant and Single-Plant Transfer Up to three single-plant transfer techniques and three cross-plant transfer strategies may be defined. The system looks for costing data in the order that is determined by the strategy sequence. Even after finishing the strategy sequence, if the system is unable to choose a cost estimate, it explodes the material’s BOM and generates a new cost estimate.

  • Quantity Struct.

Pass on Lot Size – This setting affects whether the system uses the lot size of the highest material in the BOM and the input quantities of the components to calculate the costing lot size.

1) Pay attention to lot size.

If this indicator is not chosen, the materials farther along in the structure will be costed in the costing view of the material master record using the lot size. The costing outcomes of the semifinished materials are translated to the lot size of the finished material to determine the material costs for the completed product after the materials in the next-highest costing level are costed.

2) Only disclose lot size upon specific request

You can specify that a material is planned as an individual requirement in the MRP view of the material master record. When such a material is combined with another material, the lot size of the highest material is used for costing.

3) Never mention lot size

Here, the costing lot size of the highest material is used to determine the costs for all the materials in a multi-level BOM. The main application of this function is in sales order costing.


Photograph 15

Neglect Product Cost Estimates Without Quantity Structure-

Assesses the ability of a cost estimate with quantity structure to access data that was generated by a cost estimate without quantity structure.

If you do not wish to use a cost estimate without a quantity structure, then you should set this indicator.

When this indication is selected, the system won’t take into account data from a cost estimate without a quantity structure when choosing the BOM or costing. As an alternative, the system will make an effort to determine the costs of manufacturing the material using a current BOM or operation.

You can define whether the material should be costed with or without a quantity structure using the With quantity structure indicator in the costing view of the material master record. The system will disregard the entry in the material master record if the Ignore cost estimate w/o qty structure indicator in the costing variation is selected.

  • Addicting Price

When expenses cannot be determined by the system, you manually add costs to a material cost estimate using additive costing. Freight fees, insurance premiums, stock transfer fees, incomplete or modified BOMs, and routings are a few examples of such expenses.


Photograph 16

The system calculates the BOM for the material when you cost it, and it chooses a price for the valuation of the material’s constituent parts using the valuation variant. When you select the valuation variant’s Incl. additive costs indicator, the system searches for any previously calculated additive cost estimates for the given material. The manually entered costs are added to the system’s calculated costs. Each cost component’s expenses from both the additive and automated cost estimates are combined.

  • Update


Indicator 17

A cost estimate’s ability to be updated is indicated by the indicator “Update Allowed.”


You must set this indicator because the cost estimate needs to be preserved in order to use the costing data in other ways.

Examples of additional uses for the costing data

  1. Update the material master’s price fields:

The results of the standard cost estimate are used as the standard price.

The results of the inventory cost estimate are used as the tax or commercial law price.

As particular planned prices 1, 2, and 3: the outcome of every cost projection

  1. Utilizing the costing outputs in Cost Object Controlling for: Calculating Variance

WIP estimation

Results evaluation

  • Assignments-I previously discussed the costing version in my first part, but in my next part I’ll go into more detail regarding the cost component structure.


Photograph 18

Structure of cost components defines the costs that are included in the cost component split. You can specify specific expenses by using the cost component structure.

Profitability Analysis receives any remaining apparent costs from the cost estimate.

  • MISC.-Error Management Parameters

Controls how messages are gathered within a programme (information, warning, and error messages).


Snapshot 19

Online Communications

Each message is sent out separately from the status bar. In the cost estimate, the log function is not in use.

Logged and stored messages, inactive mail,

The messages are compiled in a log that is readable and storable. They can’t send the messages.

Mail is operational, messages are registered and kept, The messages are compiled in a log that is readable and storable. The notifications can be delivered to the person in charge of fixing the mistake. Messages logged, no way to save, inactive mail The communications are gathered in a log that can be read online but is not kept.


You must save the log in order to be able to use a costing variant for the costing run.

In this lengthy document, I’ve attempted to cover every facet of the Costing Variant. In my next part, we’ll examine a few additional configurations and an explanation of it. If it gets too long, I’ll try to put together a separate document. I’ll try to try to wrap up this document series in my next instalment.

This document was written with the intention of reaching out to newcomers, amateurs, and people who were interested in learning about and comprehending the process of standard costing. When additional information or expert recommendations are needed, I will update the document.

Please see the following document: Basics of Standard Costing – Understanding the Cost Component Structure-Part 3 (

Refer to the preceding document here: Basics of SAP Standard Cost estimate- Understanding the flow of cost settings-Part 1 (