Concept of actual cost calculations in Refurbishment Order

[tajinder_singh]

A refurbishment order (IW81) differs from other order types in many ways:

1) The order is mostly created with respect to a material/spare (which may or may not be an equipment).

2) Split valuation is activated for the material.

3) Settlement is done to the material itself against which we are creating refurbishment order.

4) Provision of issuing as well as receiving the material wrt the order no. is there. Normal maintenance order only has provision for issuing the material wrt order no.

There is also a slight difference in how the actual cost is calculated in a refurbishment order. Below is the step by step procedure on how the cost is populated in a refubishment order.

a) Once you plan the order wrt material required and manhours required and release the order, you will get planned costs populated in the order.

b) After you issue the material to be refurbished and components required to refurbish the material along with confirming the operation, you will get actual costs populated in the system.

c) Now, when you receive the material against refurbishment order using IW8W, the actual cost again gets modifed. Below is the logic for this cost calcuation.

The current actual material cost is minus 436.01. The logic is that when we received the refurbished material using transaction IW8W, the cost in the material master for refurbished material (say valuation type C2) was 468.83.

The system calculates the actual material cost as 32.82 - 468.83 = -436.01

And the actual total cost of refurbishment is 100 - 436.01 = -336.01

It is this negative cost which would be settled to the material when we execute the settlement KO88.

[jogeswararao_kavala]

Subjects like these are very useful to many. If Costing is your strong area, please come with many such concepts.

Thanks for sharing

KJogeswaraRao

[tajinder_singh]

Thanks a lot Jogeswara! I will try to put some more documents around this area.

Since you are a champion in this forum, I feel glad to receive your appreciation.

Thank You!

Tajinder

[keerthan_1987]

Hi Tajinder ,

                   Very nice document , I have one doubt here , You have mentioned "actual material cost as 32.82 - 468.83 = -436.01" , so since refurbishment cost will be settled to material itself , where will the labour cost be reflected .will it be reflected in moving price after settlement ?

[tajinder_singh]

Hi Keerthan,

Labour cost plus material cost both get added and settles to the material. That's how settlement works for refurbishment order.

Hope you got your answer.

Thanks,

Tajinder

[keerthan_1987]

Yes, Thank you.

[anand_rao3]

Thanks Tanjider for sharing such a useful document! :smile:

I've a doubt here. Whether planned cost under Goods Receipt does not reflect when we create and release the order?

Anand

[tajinder_singh]

Hi Anand,

In refurbishment order, we plan for the issue of materials and not receipt of materials. Hence there won't be any planned cost reflected under 'Goods Receipt' when we create and release the order. The cost of issued materials however will get reflected under appropriate 'Value Category' for example Material cost.

Thanks,

Tajinder

[Former Member]

thanks for sharing. very useful.

[tajinder_singh]

Hi Mukesh,

I am glad to know that you found this useful. Thanks for your appreciation!

Regards,

Tajinder

[gaurav_solanki2]

HI,

This document is very use full. But I have some doubts.

1. when did you maintain the defective material price.


2. From where the material cost 32.82 is picked. while the moving price is different.

[manoj_kalluri]

Hi

What will be the Moving Average Price after the settlement ?

Will it be (6094.8+336.01)/(13+1) or (6094.8+132.82)/(13+1)

 

Regards

Manoj

[attaullah_khan]

I have a query that, is there any Mechanism for which system calculate only the cost of Component and its Labor Utilization rather than taking the Material Actual Cost ??

[tajinder_singh]

Hi Gaurav,

1. Defective material price will be maintained during the initial creation of defective material in the material master


2. Material cost 32.82 is the cost of core (defective material) + any material issued to perform the refurbishment

Hope this answers.

Thanks,

Tajinder

[tajinder_singh]

Hi Manoj,

It will be (6094.83-336.01)/(13+1)

Thanks,

Tajinder

[tajinder_singh]

Hi Attaullah,

In standard SAP, system will only take into account the actual cost of the material during settlement.

Thanks,

Tajinder