# Production standard cost in SAP Business One: how it works and where it stops > Source: https://netray.co/erp-help/production-standard-cost-in-sap-business-one-variances-process-manufacturing > Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems. > Section: ERP Help ## Short answer In SAP Business One, standard costing is a valuation method set on the item. Production receipts of a standard-cost item are valued at its standard price, components are issued at their cost, and the difference is posted as a variance when the production order is closed. There is no full multi-level cost rollup in the base product, and process manufacturing is limited. ## Kind how-to ## System sap ## Erp SAP Business One ## Module Production / Costing ## Query production standard cost in sap business one ## Alternate Queries - sap business one process manufacturing - sap b1 standard costing production order - sap business one production variance account ## Applies To SAP Business One 10.0. Behavior depends on valuation method and G/L account determination settings. ## Steps ### Set up and run standard costing for production **Items:** - Set the valuation method on each item (Item Master > Inventory Data tab): Standard for finished and semi-finished items you want to control. - Enter the standard price for each such item. Decide how you calculate it: from BOM component cost plus labor and overhead outside the system, or with a DI-based script. - Configure G/L account determination: inventory, production variance and related accounts (Administration > Setup > Financials > G/L Account Determination). - Create and release production orders as usual. Issue components and post the receipt from production. - Review the order cost: planned versus actual component cost and quantity. - Close the order. The system posts the variance between actual cost and the standard value of the receipt to the variance account. - Review variances by period and update standard prices through a controlled periodic process, with finance approval. ## Sections ### What happens at each step **Body:** Issue for production values components at their current inventory cost under their own valuation method. The receipt for a standard-cost finished item is valued at its standard price. When you close the order, the total actual cost accumulated on the order is compared to the value received, and the difference goes to the production variance account as defined in account determination. If you close with partial receipts, the variance relates to the quantity actually received. Because variances are posted at close, closing orders on time matters. An order left open for months carries work in process and distorts periods. Many companies close orders as part of a monthly checklist. ### Standard cost rollup and overhead **Body:** The base product does not calculate a multi-level rollup that includes routing time and overhead absorption as a full cost accounting system does. Teams commonly compute the roll up in a spreadsheet or in a query that explodes the BOM bottom-up, adds labor and overhead rates by item, and loads the result into the item standard price through the DI API or the Service Layer. Keep an audit record of each standard price change, with the date and approver, because changing standard price revalues inventory and affects the books. Consider the timing relative to period end. ### Process manufacturing limits **Body:** Process industries need co-products and by-products, formulas with percentage based quantities, potency or yield adjustments, batch genealogy and often catch-weight handling. Business One production supports BOMs with scrap and phantom items, but not these as native functions, so companies in process industries typically use a partner manufacturing add-on built for Business One, or a different ERP. Before you decide, write the five or six process features you cannot live without, and test the add-on on those. The cost accounting model of the add-on matters as much as the screens. ## Pitfalls - Mixing valuation methods between components and finished goods without understanding the effect on variances. - Changing standard price mid-period with open production orders. - Not mapping the variance account in account determination. - Leaving orders open so variances never post. - Assuming the add-on's cost model matches your finance team's method. ## Ai Angle Finance and operations ask where variance comes from: quantity, price or yield, and which items. A read-only assistant over the order, inventory and journal tables, like ERPray, can break variances down by item and period and show the queries. It does not change standard prices, which remains a controlled finance step. ## Faq ### How does standard costing work for production in SAP Business One? **Answer:** Finished items with Standard valuation are received at their standard price. Components are issued at their cost. When the order is closed, the difference between actual accumulated cost and the standard value received is posted as a production variance. ### Does SAP Business One roll up standard costs automatically? **Answer:** Not as a full multi-level cost rollup including routing and overhead. Companies usually compute it in a query or spreadsheet and update the standard price through a controlled process using the DI API or the Service Layer. ### Where do production variances post? **Answer:** To the production variance account configured in G/L account determination, at the time the order is closed. Check that the account is set before you close orders. ### Is SAP Business One suitable for process manufacturing? **Answer:** Only with a partner add-on for most real cases. Base functionality covers BOMs and orders but not co-products, formulas, potency or advanced batch control. ## Search terms production standard cost in sap business one, sap business one process manufacturing, sap b1 standard cost production order, sap b1 production variance, sap business one cost rollup, sap b1 valuation method standard, sap business one close production order, sap b1 g/l account determination production --- Talk to an engineer: https://netray.co/contact?intent=erp_ai | Machine catalog: https://netray.co/agent/catalog.json