How a 36% Product Margin Collapsed to 6% at Month-End Without Any Posting Errors

A developer simulated a full manufacturing month-end close inside an SAP S/4HANA sandbox to demonstrate how a healthy-looking margin can deteriorate sharply by period end. Revenue of 20,000 against a standard COGS of 12,800 initially showed a 36% margin, which fell to just 6% after closing entries — with no incorrect postings. The root cause was a planned depreciation figure of 3,000 that came in three times higher at 9,000 in actuals, tripling the effective labour activity rate and retroactively inflating production order costs. Variance from revalued orders settled to variance accounts rather than inventory, and the subsequent actual costing run shifted 6,000 of that variance directly into cost of goods sold, hitting the income statement. The experiment highlights how activity rate planning errors made weeks before month-end can silently erode margins, remaining invisible until the final costing run is executed.