The Product Cost Controling (CO-PC) application component of SAP generally divided into 4 components (for learning purposes only) namely:

1. Product Cost Planning (CO-PC-PCP)
2. Cost Object Controlling (CO-PC-OBJ)
3. Actual Costing/Material Ledger (CO-PC-ACT)
4. Product Cost Controlling Information System (CO-PC-IS)

♦♦♦ Product Cost Planning (CO-PC-PCP) – this is an area of Product Cost Controlling which you can use to:

• analyze the total costs of your product such as; manufactured materials, services, or other nontangible items.
• plan material costs without reference to an orders.
• set prices for materials and other cost accounting cost objects.

♦♦♦ Cost Object Controlling (CO-PC-OBJ) – this is also an area of Product Cost Controlling. This can be used to assign the costs incurred in the production activities of a manufacturing company. It provides solutions for these management accounting decisions:

• Whether to make or buy decision – normally management decides whether to buy a product if lesser costs is incurred in buying compared with internally producing the items.
• Determining product prices or price floors – If actual costs are assigned accurately to individual products, then management can set a certain percentage to arrive the selling prices of the items.
• Cost Variance Analysis – Most companies using SAP system normally used standard costing. A standard price and quantity is set to produce their product. In variance calculation, the standard price is compared against the actual costs incurred in the production.
• Inventory value determination

Cost Object Controlling in SAP system is divided as follows:

• Product Cost by Period
• Product Cost by Order
• Product Cost by Sales Order
• Costs for Intangible Goods and Services

♦♦♦ Actual Costing/Material Ledger (CO-PC-ACT) - This application component under Product Cost Controlling accomplishes 2 basic objectives:

1. Be able to carry material prices in multiple currencies/valuations – normally inventory values are carried out in the system only in one currency which is the company code currency. With the presence of material ledger, inventory values can be carried out by the system up to three currencies/valuations;  and,
2. Able to carry out actual costs of materials externally procured or internally produce – instead of standard costing, the inventories (raw materials, semi-finished, finished) are valuated at actual costs.

♦♦♦ Product Cost Controllng Information System (CO-PC-IS) – this component of Product Cost Controlling provide an extensive and powerful range of reports for the above 3 areas, as follows:

• Product Cost Planning
• Cost Object Controlling
• Actual Costing/Material Ledger