The difference between order-related and product-related COC is mainly in the level of cost object that is used to collect and analyze the costs of production. In order-related COC, each production order is a cost object that carries its own plan, target, and actual costs. In product-related COC, a product cost collector is a cost object that aggregates the costs of multiple production orders for the same product or product variant. The advantages and disadvantages of each approach depend on the production scenario and the reporting requirements. Some of the factors to consider are:

In product-related COC, all costs are debited and credited to a product cost collector. This means that the production orders linked to the product cost collector do not have any cost segments and do not show any variances. The product cost collector is used for variance calculation and settlement. This simplifies the cost accounting process and reduces the number of cost objects to be managed. However, this also means that the cost details of individual production orders are not available for analysis. Product-related COC is suitable for mass production of standard products with low variance and high volume12.

Order-related COC is beneficial in a flexible production environment where each production order has different characteristics, such as lot size, routing, material components, or quality specifications. Order-related COC allows for a detailed analysis of the cost and performance of each production order and enables a more accurate allocation of overhead costs. However, order-related COC also requires more effort and resources to maintain and process the cost segments and variances of each production order. Order-related COC is suitable for make-to-order or engineer-to-order scenarios where each production order is unique and customized12.

Product-related COC is used in manufacturing for co-products, which are products that are produced simultaneously from the same production process and have a relatively high sales value. Co-products share the joint costs of the production process based on a predefined apportionment structure. Product-related COC allows for a consistent and transparent allocation of the joint costs to the co-products and avoids the problem of negative variances that may occur in order-related COC. Product-related COC is suitable for process industries where co-products are common, such as chemical, pharmaceutical, or food industries34.

References:

1: SAP Help Portal: Production Orders in Cost Object Controlling

2: SAP S/4HANA Production Planning and Manufacturing Certification Guide, Chapter 6: Product Cost by Order

3: SAP Help Portal: Product Cost by Period

4: SAP S/4HANA Production Planning and Manufacturing Certification Guide, Chapter 7: Product Cost by Period