SAP Product Costing Interview Questions And Answers prepared from Codingcompiler experts. These interview Questions were asked in various interviews conducted by top multinational companies across the globe. We hope that these interview questions on SAP Product Costing will help you in cracking your next job interview. All the best and happy learning.
In this article, you’ll learn
SAP Product Costing Interview Questions
SAP Product Costing Interview Questions And Answers
Advanced SAP Product Costing Interview Questions And Answers
The Best SAP Product Costing Interview Questions And Answers
SAP Product Costing Interview Questions
- How Does Sap Go About Costing A Product Having Multiple Bill Of Materials Within It?
- What is ‘Activity-Based Costing’?
- What is ‘Cost Object’?
- What Are The Important Terminologies In Product Costing?
- What Do You Mean By Primary Cost Component Split?
- What is ‘Cost Element’?
- Is It Possible To Configure 2 Cost Component Structures For The Same Product In Order To Have 2 Different Views?
- What Are The Configuration Settings Maintained In The Costing Variant?
- Why do You Need ‘Cost Element Accounting’?
- Explain Cost Center Accounting?
SAP Product Costing Interview Questions And Answers
Q. How Does Sap Go About Costing A Product Having Multiple Bill Of Materials Within It?
Answer :
SAP first costs the lowest level product, arrives at the cost and then goes and cost the next highest level and finally arrives at the cost of the final product.
Q. What is ‘Activity-Based Costing’?
Ans. ‘Activity-Based Costing,’ popularly known as ABC, helps you to view overhead costs from the point of business processes. The result is you will be able to optimize costs for the entire business process. As a single business process, activity-based costing will cut across several cost centres and will give you an enhanced view of the costs incurred.
Q. What is ‘Cost Object’?
Ans. ‘Cost Object,’ also known as a CO Account Assignment Object, in SAP denotes a unit to which you can assign objects. It is something like a repository in which you collect costs, and, if necessary, move the costs from one object to another. All the components of CO have their own cost objects such as cost centres, internal orders, etc.
The cost objects decide the nature of postings as to whether they are real postings or statistical postings. All the objects that are identified as statistical postings are not considered cost objects (for example, profit centres).
Q. What Are The Important Terminologies In Product Costing?
Answer :
- Results Analysis Key – This key determines how the Work in Progress is calculated
- Cost Components – The break up of the costs which get reflected in the product costing eg. Material Cost, Labour Cost, Overhead etc
- Costing Sheets – This is used to calculate the overhead in Controlling
- Costing Variant – For All manufactured products the price control recommended is Standard Price. To come up with this standard price for the finished good material this material has to be costed. This is done using Costing Variant. Further questions down below will explain this concept better.
Q. What Do You Mean By Primary Cost Component Split?
Answer : Primary cost split is defined when you create a cost component structure. When you switch on this setting, the primary cost from the cost center are picked up and assigned to the various cost components.
Q. What is ‘Cost Element’?
Ans.
- ‘Cost Elements’ represent the origin of costs. There are two types of cost elements:
- Primary Cost Elements
- Secondary Cost Elements
Q. Is It Possible To Configure 2 Cost Component Structures For The Same Product In Order To Have 2 Different Views?
Answer :
Yes it is possible. We create another cost component structure and assign it to the main cost component structure. This cost component structure is called Auxiliary cost component structure which provides another view of the cost component structure.
Q. What Are The Configuration Settings Maintained In The Costing Variant?
Answer :
Costing variant forms the link between the application and Customizing, since all cost estimates are carried out and saved with reference to a costing variant. The costing variant contains all the control parameters for costing.
The configuration parameters are maintained for costing type, valuation variants, date control, and quantity structure control. In costing type we specify which field in the material master should be updated.
In valuation variant we specify the following
- the sequence or order the system should go about accessing prices for the material master (planned price, standard price, moving average price etc).
- b) It also contains which price should be considered for activity price calculation and .
- How the system should select BOM and routing.
Q. Why do You Need ‘Cost Element Accounting’?
Ans. Cost Element Accounting’ (CO-OM-CEL) helps you to classify costs/revenues posted to CO. It also provides you the ability to reconcile the costs between FI and CO. CO-OM-CEL provides the structure for assignment of CO data in the form of cost/revenue carriers called cost elements or revenue elements.
Q. Explain Cost Center Accounting?
Ans. ‘Cost Center Accounting’ deals with the difficult task of managing ‘overheads’ within your organization. Since overhead costs are something that you cannot directly associate with a product or service, which can be difficult to control, cost centre accounting provides you with the necessary tools to achieve this.
Advanced SAP Product Costing Interview Questions And Answers
Q. Let’s Say For A Product There Exists Three Production Versions. Explain The Process How You Would Go About Creating A Mixed Cost Estimate?
Answer :
The process of creating a Mixed cost estimate would be as follows:-
- Create procurement alternatives for each of the production version.
- Define Mixing ratios for the procurement alternatives
- Select the configured quantity structure type and execute a material cost estimate based on the costing version.
Q. What do you mean by the Primary cost component split?
Ans. – The primary cost split occurs when you create a cost component structure. When we switch on this setting, the system picks up the primary cost from the cost center and assigns it to the various cost components.
Q. How does the system pick a primary cost from the cost center into the cost component structure?
Ans. – This is possible when we do a planned activity price calculation from SAP. The SAP system assigns the primary cost component structure to plan version-0 in the Controlling.
Q. Is it possible to configure two cost component structures for the same product in order to have two different views?
Ans. – Yes, it is possible. We can create another cost component structure and assign it to the main cost component structure. This cost component structure is called the Auxiliary cost component structure. It provides another view of the cost component structure.
Q. What is the basic difference in the WIP calculation between Product Cost by Order and Product Cost by Period?
Ans. – Generally in product cost by order, we calculate the WIP at the actual costs. While in the product cost by period (repetitive Manufacturing), we calculate the WIP at target costs. This is the main difference.
Q. What precautions you should take while switching on the material ledger for a plant?
Ans. – Once we activate the material ledger for a plant, we cannot switch it off. Therefore we should be very careful before activating the material ledger for a plant.
Q. What is ‘Profitability Analysis’ (CO-PA)?
Ans. ‘Profitability Analysis’ (CO-PA) helps you determine how profitable (denoted by the ‘contribution margin’) your market segments are. The analysis is on the external side of the market. You will be able to define what segments, such as customer, product, geography, sales organization, etc., of the market are required for analyzing ‘operating results/profits.’ With multi-dimensional ‘drill-down’ capability, you have all the flexibility you need for reporting.
Q. How is ‘Profit Center Accounting’ (EC-PCA) Different from CO-PA?
Ans. Unlike CO-PA where the focus is on external market segments’ profitability, ‘Profit Center Accounting’ (EC-PCA) focuses on profitability of internal areas (profit centers) of the enterprise. Profit center accounting is used to draw internal balance sheets and profit & loss statements. You may use EC-PCA in place of business area accounting.
Both CO-PA and EC-PCA serve different purposes and are not mutually exclusive. You may need them both in your organization.
The Best SAP Product Costing Interview Questions And Answers
Q. What is the ‘Secondary Cost Element’?
Ans. ‘Secondary Cost Elements’ represent the consumption of production factors provided internally by the enterprise itself and are present only in the CO. They are actually like cost carriers and are used in allocations and settlements in CO. While creating these elements, you need to mention the cost element category, which can be any of the following:
Category 21, used in internal settlements
Category 42, used in assessments
Category 43, used in internal activity allocation
Q. What problems you may face while activating a material ledger?
Ans. – When we activate a material ledger, it is imperative that we perform the actual costing run every month. This is to say, we should do the actual costing run immediately after the new month rollover.
This is also important because, after the actual costing run, we cannot post any MM entry to the previous period.
Q. There Are Result Analysis Categories In Wip (work In Process). What Do You Mean By The Result Analysis Category Reserves For Unrealized Costs?
Answer :
If you are calculating the work in process at actual costs, the system will create reserves for unrealized costs if the credit for the production order based on goods receipts is greater than the debit of the order with actual costs incurred. The Result analysis category RUCR (Reserves for unrealized cost) would need to be maintained. Normally this is not maintained in most of the companies.
Q. How do you Automatically Create ‘Cost Elements’?
Ans. You will be able to create ‘cost elements’ automatically by specifying the cost element, the cost element interval, and the cost element category for the cost elements. All these are achieved by creating default settings. The creation of cost elements is done in the background.
The primary cost elements can be created only when you have the corresponding GL accounts in the chart of accounts of the Company Code. Even though the GL account names are used as the names of the primary cost elements thus created by the system, you have the option of changing these names in CO. All the secondary cost elements are created in CO; the name of these cost elements comes from the cost element category.
Q. Explain ‘Cost Center Accounting.’
Ans. ‘Cost Center Accounting’ deals with the difficult task of managing ‘overheads’ within your organization. Since overhead costs are something that you cannot directly associate with a product or service, which can be difficult to control, cost center accounting provides you with the necessary tools to achieve this.
Q. What is ‘Activity-Based Costing’?
Ans. ‘Activity-Based Costing,’ popularly known as ABC, helps you to view overhead costs from the point of business processes. The result is you will be able to optimize costs for the entire business process. As a single business process, activity-based costing will cut across several cost centers and will give you an enhanced view of the costs incurred.
Q. What are the important Terminologies in Product Costing?: Results Analysis Key?
Ans. This key determines how the Work in Progress is calculated
- Cost Components
- The break up of the costs which get reflected in the product costing eg. Material Cost, Labour Cost, Overhead etc
- Costing Sheets
- This is used to calculate the overhead in Controlling
- Costing Variant
For All manufactured products the price control recommended is Standard Price. To come up with this standard price for the finished good material this material has to be costed. This is done using Costing Variant. Further questions down below will explain this concept better.
Q. There Are Result Analysis Categories In Wip (work In Process). What Do You Mean By The Result Analysis Category Reserves For Unrealized Costs?
Answer :
If you are calculating the work in process at actual costs, the system will create reserves for unrealized costs if the credit for the production order based on goods receipts is greater than the debit of the order with actual costs incurred. The Result analysis category RUCR (Reserves for unrealized cost) would need to be maintained. Normally this is not maintained in most of the companies.
Q. Which Is The Result Analysis Category Which Is Normally Maintained For The Wip (work In Process) Calculation?
Answer : The Result analysis category WIPR – Work in process with requirement to capitalize costs is normally maintained for WIP calculation.
Q. Is It Possible To Use Standard Sap Co-product Functionality In Repetitive Manufacturing?
Answer : No. It is not possible to use the Standard Co-product functionality in repetitive manufacturing.
Q. Why Is Preliminary Cost Estimate Required?
Answer :
The preliminary cost estimate is required for the following:-
- Confirm the actual activity quantities.
- Evaluate work in process
- Calculate production variances in variance calculation
- Evaluate the unplanned scrap in variance calculation
Q. How Are Scrap Costs Shows In The Standard Cost Estimate?
Answer: Scrap costs are assigned to the relevant cost component and can be shown separately for material in the costed multilevel BOM.
Q. How Are Scrap Variances Calculated?
Answer :
Scrap variance are calculated by valuating the scrap quantities with the amount of the actual costs less the planned scrap costs.
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