SAP Product Costing – a primer

SAP Product Costing – a primer

Product Costing in SAP is a mature process that has been implemented and being used by several of SAP customers. The significant limitation with Product Costing was that it was biased significantly towards Standard Cost. Over years, Product Costing spawned a new feature in SAP to handle this limitation – Material Ledger. Product Costing along with Material Ledger allow customers to cost their material at standard cost during the month; and revalue products and all the transactions during the month at moving average – this revaluation is done at the end of the month.

The below presentation is a primer on Product Costing in SAP. It presents the basic tenets of Product Costing and the fundamental concepts on which the features are built. I have not cluttered it with Material Ledger. Material Ledger concepts are presented in a different blog and a different presentation.

Over the next few blogs, I will explain with examples and demonstrations how specific complex business scenarios can be handled in SAP Product Costing.

If you have any questions/ comments/ suggestions, please use the form below to let me know.


Presentation on Slideshare


Rajesh is an Associate member of Chartered Institute of Management Accountants (CIMA) London and a Fellow member of the Institute of Chartered Accountants of India. He has over 20 years experience in designing and implementing business and technology solutions in the areas of Finance and Management Accounting. His business process knowledge combined with his IT expertise enables him to provide his customers with best-in-class advice on business process / IT implementations.

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  1. dear rajesh sir this slide is really a very helpfull to me could you send me this on my mail id in pdf form.

  2. Hi Rajesh,
    found this material to be quiet useful. Can you send a link to the blog if published else a PDF document if possible.
    This can help me to understand product costing better.

  3. Hi Rajesh,
    found this material to be quiet useful. Can you send a link to the blog if published else a PDF document if possible.
    This can help me to understand product costing better.

  4. Hi Rajesh,

    Excellent overview presentation. A link or pdf copy would be most appreciated.


  5. Can you explain in detail, what is assessment, distribution.
    what is difference between indirect activity allocation and direct activity allocation in simple terms.
    Explanation on this would be most appreciated.


  6. Hi Rajesh

    Very informative and knowledge intensive , would apprecate you sending a pdf version to my email


  7. Hi,
    I.m very new in this and i found this to be very useful. will you be able to assist me with configuration manual of the Transfer Pricing?

    would really appreciate it.


  8. Hi Rajesh,

    This presentation is very helpful. You explained it in a simple way in few words with big meaning.

    Want to see more from you.


  9. Hi Rajesh,

    I found the slides very useful. Kindly send the presentation to my email address. I’d also like to discuss more on this topic to be implemented in my company, a coal mining group.

    Thank you in advance.


  10. Hi Rajesh
    Your presentation is very helpful.
    I am new to SAP and we are in the Blue print phase. We have one semi finished goods agreed at standard price (in house material A). Same Material A is also purchased. The objective is to get it at moving average price.

    We ended up in the discussion to keep the in house material at standard price say Material A. Material B (the purchased material – same feature of Material A) at moving average. However we transfer both the material at the beginning of the month based on plan to a Material C (Price control-Moving average). Then use Material C in the all other inputs. Thus the Material C will be at MAV. Material A and B will be 0 every month beginning.

    Will this work? Or do we have any other methodology?
    Best regards

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