A 36% margin became 6% at month-end, and nothing was posted wrong

I built a small manufacturing company end-to-end inside an SAP S/4HANA sandbox — one plant, one product, one month — specifically to watch what the month-end close does to a margin that looks healthy at billing time. Every number below comes from an actual document in that system.

At billing, the month looked good

Three days later, after the close, the same month landed at 1,200 = 6%.

Nothing was posted incorrectly. Three gates took the 30 points, in this order.

Gate 1 — Cost center revaluation (KSS1 / KSII)

The planned price for the labour activity type was derived the usual way: planned cost divided by planned activity quantity. Production orders consumed hours at that planned rate all month.

Then the actuals arrived. Depreciation posted 9,000 against a plan of 3,000. Activity quantity did not move. So the actual activity rate came out at roughly three times the planned rate, and every hour any order had already consumed became retroactively more expensive.

This is the part that surprises people: the damage was decided weeks earlier, in a transaction nobody files under "costing decisions" — planning the activity price.

Gate 2 — Order variance (KKS1 / CO88)

With the revalued rate applied (CON2), the production orders no longer settled clean. The difference split across variance categories and settled to variance accounts — not into inventory.

That distinction matters. If it went to inventory, it would sit on the balance sheet until the goods were sold. It doesn't. It is parked, waiting for the next step.

Gate 3 — Actual costing (CKMLCP)

This is the step people forget, and it is where the margin actually dies.

The actual costing run rolls the variance into the material's periodic unit price, and then moves the portion belonging to what was already sold into COGS. Before this run, the P&L still looked fine. After it, the 6,000 that had been sitting in variance found its way onto the income statement.

What I took from it

• A margin at billing time is a standard margin. It is a statement about the cost estimate, not about the month.
• The three gates are a pipeline: revalue the rate, recompute the order, move the difference to the sold goods. Skip the third and the books look better than they are.
• A 3x error on planned depreciation is a 3x error on every labour hour the plant books, and it is invisible for four weeks.

If you own product costing: how do you catch a drifting activity rate before the close, rather than explaining it afterwards? I would genuinely like to hear the practical answers.

This is from a dumpling factory I built from scratch in S/4HANA to document a full month end-to-end. There is a free 16-page sample of the write-up if you want to see the format.