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Introduction:

 

In product costing, WIP represents the production costs of incomplete assemblies at period end.

Depending on the production process there are two types of WIP Valuations

 

  • Target WIP: at target valuates based on a cost estimate. (Product cost collector in repetitive manufacturing)

  • Actual WIP: at actual is valuated based on actual debits and credits to a manufacturing order or product cost collector. (Process and production order in Make to stock scenarios)


 

 

During month end activities, to reflect company assets at period end, the system moves WIP costs temporarily to WIP balance sheet and profit and loss accounts depending on the status of the production or process order.


 

In this blog we are going to learn how to configure WIP calculation and posting in SAP, we will show how to define the following points:

  • Result analysis key.

  • Define cost element for WIP.

  • Result analysis version.

  • WIP Valuation methods.

  • WIP line IDs.

  • WIP assignment.

  • WIP Update.

  • WIP posting rules.


 

WIP Configuration : 

So now let’s check how can we configure WIP in product costing:

 

  • Result analysis key


 

Result analysis key is mandatory in the process order master for which we want to create WIP.

Result analysis key can be defaulted for each order type and plant and then added for each order master data once the order is created.

 


RA Key


 

 

You can create you own result analysis key or use the ones delivered by SAP.

 

  • Define cost element for WIP


 

We need to create a cost element for WIP calculation.

This account will be used as a technical account to calculate WIP.

WIP calculation is based on the costs of category K. (More information’s will be provided in chap 6: WIP Update).

 

WIP CE in Controlling area and company code :

All WIP cost elements should be created with cost element category 31 (Order/ Project results analysis)

 

We need to create also other WIP cost elements for each line ID with cost category K. (To show WIP by line ID during the calculation).

 

 

  • Result analysis version


 

The results analysis version allows us to define different methods for WIP calculation.

 

Like for production variance only result analysis version 0 can be settled to COPA.

If we are using different valuation methods, we can create a result analysis version for each method.

 

  • Legal valuation



  • Group valuation



  • Profit Center valuation


 


RA Version


 

In our case we are using legal and group valuation, so we created two different RA versions.


RA Versions


 

You should select: Transfer to post the WIP in FI.

Select technical RA cost element created in the previous step.

 

  • WIP Valuation methods.


 

WIP is normally calculated for orders with the following status:

  • Partially released

  • Released


 

The system cancels WIP postings during period-end processing following the delivery of associated assemblies or of finished products to inventory.

The WIP is canceled also if the status of the process order is TECO (Technically closed).

 


Valuation method


 

 

  • WIP line IDs.


 


WIP Line IDs


 

 

Line IDs will be used to group costs according to the Financial Accounting requirements.

The system calculates the work in process for the period and distributes the calculated value to the line IDs in accordance with the cost element groups assigned to the line IDs with cost category K.

 

  • WIP assignment.


 

In this step we should assign source G/L Accounts for work in process capitalization.


WIP assignments


For each cost element used in T030 for the following entries:

  • GBB-VBR (Internal good issue, for material consumptions in the production order)

  • GBB-VBO (Stock provided to vendor in subcontracting)

  • GBB-AUF (Good receipt for orders, for stock delivery of the semi finished or finished goods)

  • GBB-VNG (Scrapping/ Destruction, for component and assembly scraping)


 

NB: You can select only the valuation types for materials used in the production process.

 

And secondary cost element for the activities used in production

For each entry or masked entry (Interval) we should assign the related line ID.

We can choose of the cost posted is required, optional or cannot be capitalized.

We can also only capitalize/ Or not capitalize   a percentage of the cost posted on the process order/ Production order based on the business requirement.

 


 

 

  • WIP Update.


 

For each line ID created before we need to specify the cost category

 


WIP Update


 

K: Costs we want to include in the WIP calculation.

S: Settled costs.

N: Costs not to be included.  (Cost we don’t want to include in WIP calculation)

For category K we need to select the WIP and reserve account.

WIP Reserve account is used for negative WIP.

 

  • WIP posting rules.


 

Once all the basic configuration is done, we can setup the posting rules for WIP settlement

 


Posting rules


 

 

We should put the P&L and Balance sheet account to be used for WIP Posting.

WIPR (Work in Process with Requirement to Capitalize) and RUCR (Reserves for Unrealized Costs (Group with Req. to Cap.) RA categories should be maintained.

If you have several RA versions (For example for legal and group valuation) you should maintain them also.

 




Please share with us your feedback, suggestions, questions  and thoughts regarding this topic in comments.

For more information and to get updated with all new SAP S/4 Hana insights I encourage you to follow the SAP S/4HANA Finance : https://blogs.sap.com/tags/67837800100800006927/

 

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