top of page

Product costing - the art and science of assigning true costs to a diverse product range

Product costing - the art and science of assigning true costs to a diverse product range


The company in question is one of India’s largest consumer electronics companies, producing a wide range of consumer durables, including speakers, IT accessories, mobile accessories, personal care appliances, and medical products. It has sold over a billion products and services across 20,000+ pin codes in India.


To develop a detailed and comprehensive product costing substructure mechanism that embeds into the overall product cost management (PCM) [1] structure. Thus, the PCM framework will form part of the comprehensive management information system (MIS), facilitating a decision support system for the management to make well-informed decisions.

Re-configure the product costing framework into the SAP-ERP system (SAP-CO-PC) to enable its alignment with MIS and SAP systems.


Product costing is assigning costs to products based on the principle of cause-and-effect. Given below is a framework for deriving costs for each cost element:

​Cost element

SAP tcodes

Data Source and Validation Rules

Raw material

  • CK13N 

  • MCRP 

  • KE5Z

  • Material cost is generally derived from the Bill of materials (BOMs) [Refer to Footnote 2] using CK13N tcode

  • Quantitative reconciliation of standard vs actual material consumption*

  • -Physical verification of closing material stock helps in further validating BOM. (Expected material closing stock vs Actual material closing stock)

* Actual Material Consumption = Material Opening Stock + Quantity Purchased – Material Closing Stock

Standard Material Consumption = Product BOM recipe X FG quantity produced (using MCRP tcode)