Cost of sales versus Profit Center Accounting Example One product, sales price 180, standard cost 100. The current period, one product is made and sold,

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Presentation transcript:

Cost of sales versus Profit Center Accounting Example One product, sales price 180, standard cost 100. The current period, one product is made and sold, one is still in WIP. Primary costs are posted to cost centers, cost centers charge to production orders. The following postings are made: 1Revenue posting from SD. 2Cogs posting from SD. 3Settlement of production order variance to FI/CO-PA. 4Month end assessment of cost center variances. 5Month end assessment of M,A and T cost.

Financial reporting: COPA/FI-SL MarketingAdminTechnology Prod Cctr A Prod Cctr B Revenue(1) COGS(2) Prod.order variance(3) Prod.cctr variance(4) M(5) A(5) T(5) Profit xxxxxx balance: Pr C 50 Act 44 Pr C 60 Act 62 Var 6 Var 2 Prod order 1Prod order 2 RM 50 Pr A 22 Pr B 31 Stock 100 Pr B 31 WIP 103 Var (A) 100 (A) 3 (M) 4 (M) 10 (M) 20 (M) 30 (M) 13 Pr C = Primary Costs Act = Activity allocation RM= Raw Mat. consumption Pr A,B = allocated from production cost center A,B (A)= automatic direct posting (M)= month end posting

Alternative P&L reporting Standard FI income statement Revenue180 COGS100 MAT costs (split by prime elements) 60 Production costs (same)210 Profit = 13 Factory output206 Production order variance Income statement in CO-PCA Revenue180 Primary production costs (split by prime element)210 MAT costs (same) 60 Changes in WIP/Finished goods inventory 103 -/- Profit 13