FICO Product Costing Part 5: Order-Based Controlling, Variances and Settlement
Control production orders: plan, target and actual costs; work in process for open orders; variance calculation by category (input price, quantity, resource-usage, lot size, output); and settlement of variances to finance and margin analysis at period-end.
Explanation
📌 KEY POINTS
✅ Order costs: plan (at creation), target (standard × delivered quantity), actual (postings).
✅ WIP is calculated for orders not fully delivered; it is cancelled once completed.
✅ Variances (actual − target) are split into categories: input price, input quantity, resource usage, lot size, output price/quantity.
✅ Settlement moves WIP and variances to FI and margin analysis.
⚠️ Settling orders before WIP and variance calculation posts incomplete results.
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▶ WHERE WE ARE
Part 4 covered architecture. Now order controlling.
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▶ 1. COST TYPES
- Plan, target, actual.\n\n━━━━━━━━━━━━━━━━━━━━\n▶ 2. WIP\n• Open orders → WIP to balance sheet.
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▶ 3. VARIANCES
- Categories and their causes.
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▶ 4. SETTLEMENT
- Variances to price difference accounts / margin analysis.
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▶ 5. PERIOD-END SEQUENCE
- Overheads → WIP → variances → settlement.
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▶ STEP BY STEP
- Review an order's plan/target/actual.
- Run WIP and variances.
- Settle and check postings.
✅ CHECKPOINT: order balance zero after settlement for delivered orders.
Code example
===== PERIOD-END SEQUENCE =====KGI2/CO43 overhead | KKAX/KKAO WIP | KKS2/KKS1 variances | KO88/CO88 settlement ===== EXAMPLE =====Target (standard 124 × 100 bikes) = 12,400 | actual 13,100 → variance 700Split: input price 300, quantity 250, resource-usage 150 → settled to price differences/margin analysisReal project scenario
During monthly close at a process manufacturer, large WIP stayed on completed orders because they were never technically completed. Setting orders to TECO after final delivery turned WIP into variances and cleaned the balance sheet.
Common mistakes
- Wrong sequence.
- Orders not TECO.
- Ignoring variance categories.
- Settling before calculation.
- No variance review.
Best practices
- Fixed sequence.
- TECO completed orders.
- Analyse categories.
- Settle last.
- Monthly variance review.
Interview angle
Questions: "Plan vs target vs actual?", "What is WIP?", "Explain variance categories."
Strong answer: cost types, WIP, variance categories, settlement, sequence.
Practice this lesson
Quick check
1. What is the correct period-end sequence for production orders?
2. Completed production orders keep showing WIP at month-end. What is the fix?
3. How is target cost of a production order calculated?
Interview questions
1. A production issue is reported in Product Costing. What would you check first, and how would you troubleshoot it systematically?
Answer it in your own words first, then compare.
2. Month-end production order results are unreliable: WIP on finished orders and unexplained variances. How do you fix order controlling?
Answer it in your own words first, then compare.
Reference-verified: the steps are checked against official SAP documentation and tutorials, and object and field names in the sample code are checked for consistency. The code has not been compiled or run on an SAP system by ERPClimb. Syntax marked release-dependent varies by SAP release, so check it in your own system.