Production order standard price material variance settlement

✅ Production Order – Standard Price Material Variance Settlement in SAP

Modules: SAP PP (Production Planning) + CO (Controlling) + FI (Financial Accounting)
Use Case: Settle variances from a production order when the finished material is valued using Standard Price (S). This allows tracking and posting of actual vs planned cost differences.

🎯 Objective

To settle production order variances (e.g., material, labor, overhead) to cost objects such as cost centers, COPA, or profitability segments, ensuring accurate financial reporting and variance analysis.

🛠️ Step-by-Step Process for Standard Price Material Variance Settlement

✅ 1. Material Master Setup

TcodeStepMM03Ensure the valuation price control is S (Standard Price)MR21Set or update the standard price if neededCK11N / CK40NUse cost estimates to determine standard price

✔️ Standard Price = fixed inventory valuation basis
✔️ Variance = difference between actual cost and standard cost

✅ 2. Create Production Order

Tcode: CO01

  • Use the finished material with standard price
  • Quantity: e.g., 100 units
  • BOM and Routing/Recipe must exist

✅ 3. Execute the Production Order Process

ActivityTcodeNotesIssue componentsMIGO (261 movement)Actual material consumptionConfirm operationsCO11NPosts labor/activity costGoods receiptMIGO (101 movement)Posts goods into stock at standard price

✔️ At GR, variance = actual cost – (standard price × qty)
✔️ Variance is temporarily stored on the production order

✅ 4. Review Actual Costs and Variance

Tcode: CO03 → Costs

  • View:
    • Planned cost
    • Actual cost
    • Variance

✔️ Variances are categorized as:

  • Input Price Variance
  • Quantity Variance
  • Overhead Variance
  • Scrap Variance

✅ 5. Create/Check Settlement Rule

Tcode: KO02 / CO02 → Settlement Rule

  • Receiver: e.g., Cost Center / COPA / WBS
  • Type: CTR / PSG / WBS
  • Settlement type: FUL or PER

✅ 6. Execute Settlement of Variance

Tcode: CO88 – Single Order
or
Tcode: KO8G – Mass Settlement

  • Enter: Order, Period, Fiscal Year
  • Run in Test mode, then in Update mode

✔️ FI and CO documents are generated
✔️ Variance is removed from the order and posted to receiver

✅ 7. Review Accounting Postings

Tcode: FB03, KSB5, CJI3, COPA

  • Shows variance postings:
    • Debit: receiver (e.g., cost center)
    • Credit: production order (settlement)

🧾 Accounting Flow Example

StepDebitCreditMaterial IssueProduction OrderInventoryLabor ConfirmationProduction OrderCost CenterGoods ReceiptInventory (at standard)Production OrderVariance Settlement (CO88)Cost Center / COPAProduction Order

📂 Key Tables

TableDescriptionAUFKOrder MasterCOEPCO line itemsCOSPCost totalsSETLESettlement logsMBEWMaterial valuation (standard price)

✅ Conclusion

For standard price materials, the production order collects actual costs, and the difference from the standard cost is treated as variance, which is settled to appropriate cost objects using CO88. This allows for accurate cost control, profitability analysis, and FI-CO reconciliation.