Let’s review 27 tips so you can see just how useful all 110 tips are.
Let's first explore the 11 tips for Cost Center Accounting.
You’ll find many unique and useful ideas for working with the standard hierarchy, planning, price calculation, and target cost and variance analysis. These ideas are only published in detail in the book and in this blog. You'll find more details in the book.
You can easily maintain both standard and alternate cost center hierarchies for flexible reporting.
Figure 1 Cost Center Standard Hierarchy
The cost center standard hierarchy usually represents your company’s structure and you use most often in your reporting. This is because the standard hierarchy, guaranteed to contain all the cost centers in a controlling area, is easily maintainable. An example cost center standard hierarchy is shown in Figure 1. While alternative hierarchies offer more flexible reporting, you can only maintain them with a transaction with less functionality.
If you use an alternate hierarchy more than the standard hierarchy, you can swap them by maintaining the Controlling Area as shown in Figure 2.
Figure 2 Maintain Controlling Area
Copying the alternate hierarchy as a node directly under the standard hierarchy and then deleting other existing nodes would be the simplest solution—if possible.
You can quickly assign a default account by maintaining cost element master data as shown in Figure 3.
Figure 3 Default Account Assignment
You need to assign a cost object, such as a cost center or order when posting to Controlling (CO). Usually, you assign a default object so that you don’t have to enter every expense posting manually.
You can make default cost center assignments per plant with automatic account assignment.
Automatic account assignment lets you enter a default cost center per primary cost element for each plant. Automatic assignment occurs during postings in external accounting modules (such as Financial Accounting, Materials Management, and Sales and Distribution) if you don’t enter an automatic account assignment object (such as a cost center or order) during a cost accounting relevant posting.
We'll look at how to set a default account assignment as shown in Figure 4.
Figure 4 Automatic Account Assignment Configuration
Continue reading: 100 Things You Should Know About Controlling with SAP
You display only the activities you work with by filtering the price-planning screen with activity type groups when entering plan activity prices.
Activity type groups allow you to limit activity types displayed when planning activity prices with Transaction KP26. You enter an individual activity type, range, or group in the initial selection screen when planning activity prices.
Figure 5 Create Activity Type Group
You copy cost center plans from year to year and version to version with a standard transaction.
When you create next year’s cost center plan, you may want to copy the current year’s plan to next year and make the necessary adjustments. You can do this and copy and change actual data to plan data with standard transactions as shown in Figure 6. We look at the details of these standard transactions. You copy cost center plan data with Transaction KP97 which displays the screen shown in Figure 6.
Figure 6 Cost Center Copy Plan to Plan
Select Template Cost Center to copy from a cost center on a 1:1 basis. If you'd like to copy from one cost center to multiple cost centers, select Choose Template and click the template cost center.
The selection screen settings in Figure 6 will copy all cost center plan data from Version 0 Fiscal Year 2010 to Version 1 Fiscal Year 2011. You can modify the plan data in Version 1 for Fiscal Year 2011 and when finalized, you can copy from Version 1 Fiscal Year 2011 to Version 0 Fiscal Year 2001.
You can allocate cost center costs across activities using two different methods.
During plan cost splitting, the system splits the activity-independent costs of a cost center among the activity types of that cost center. Plan costs are split automatically during plan price calculation. First, let’s look at activity-dependent and activity-independent costs as shown in Figure 7, and then we’ll move on to see how the costs are split.
Figure 7 Cost Element Planning Selection
The system automatically calculates prices for activity types based on actual costs and actual activities.
You allocate cost center under/over absorption to products with revaluation at actual prices. This process calculates the incremental planned activity price needed to allocate all cost center debits. Orders are then revalued with incremental debits as shown in Figure 8, and the cost center receives the credits. Actual price calculation and revaluation let you post cost center variances to manufacturing orders.
Figure 8 Revaluation Settings in Version Configuration
Following revaluation, the cost center’s actual balance is zero.
You analyze cost center under/over absorption with the standard actual/plan cost center report S_ALR_87013611, and for most companies, this provides sufficient information for managing overhead costs.
More advanced functionality is available to analyze cost center balance, with target cost and variance analysis.
Target costs are continuously calculated and are reported in real-time. You view the cost center actual/target report with Transaction S_ALR_87013625 as shown in Figure 9.
Figure 9 Actual/Target Cost Center Report
Actual and target costs increase with resource consumption while plan costs remain constant. Plan costs are based on activity consumption resulting in a credit of -20,000. Actual activity consumption is greater than plan resulting in an actual credit of -28,000.
The target debit is more realistic than the plan debit because it’s increased by rising variable costs due to increased activity consumption. There’s only a 1,000 variance between actual and target in the Under/Overabsorption row in Figure 9 compared with a 5,000 variance between total actual and plan costs.
You use variance calculation to allocate cost center over/under absorption into variance categories.
The difference between actual and target data causes variances. If you want to analyze the causes of cost center variances in detail, you can use automatic variance calculation. You may need to carry out a variance analysis if the target cost analysis doesn’t provide enough information on the source of the variance or the responsible person. We examine the two steps involved in variance analysis.
A report highlighting input variance is shown in Figure 10.
Figure 10 Input Variance Analysis—Cost Center Debits
Input variance is based on Cost center actual debit – Target debit
In this example, the formula is 23,000 – 24,000 = (1,000)
You create selection variants for flexible collective reporting and processing when working with master data selection.
Master data groups, such as cost center groups, are useful for collective processing and reporting, but selection variants offer a more flexible option.
In this tip, we’ll show you how to create selection variants and use them. You can create selection variants for cost elements, cost centers, activity types, statistical key figures, business processes, orders, or WBS elements. You enter the selection criteria once and save it in a selection variant.
Create a cost center selection variant with Transaction KM1V as shown in Figure 11.
Figure 11 Display Cost Centers Collectively
There are several integrated planning indicators for internal orders on separate screens.
Little-known integrated planning checkboxes related to internal orders are in both configuration and order master data. In this tip, we'll see where they’re located and how they interact.
There are two integrated planning checkboxes in the version definition, which you maintain via Transaction OKEQ shown in Figure 12.
Figure 12 Controlling Settings for Each Fiscal Year
Internal order planning allows you to enter plan costs, compare actual, and carry out variance analysis. Orders for a short duration are not usually planned.
Cost planning is carried out on internal orders of a long duration. You can plan at an overall, annual, or detailed cost element level.
You maintain a planning profile with Transaction OKOS as shown in Figure 13.
Figure 13 Internal Order Planning Profile
The Past and Future Time Frame fields define how many years in the past and future you can enter planning data. The Total and Annual Values checkboxes control whether you can plan with total and annual data.
The Primary Cost Element group defines the primary cost elements you can plan against.
You assign the planning profile to an order type with Transaction KOAP.
You use internal order budgeting to control actual expenditures by activating availability control.
An internal order budget represents approved funds. A budget is maintained at either an overall or annual level. You can activate availability control, issuing warnings or error messages based on tolerances. Let’s look at how to create an internal order budget and how to activate availability control.
You maintain a budget profile with Transaction OKOB as shown in Figure 14.
Figure 14 Internal order Budget Profile
Activation Type 1 indicates the automatic activation of availability control during budget allocation. If the Overall checkbox is selected, availability control checks against the overall budget. If the Overall checkbox is not selected, availability control checks against the annual budget. Availability control works with controlling area currency unless you select the Object Currency checkbox.
You can automatically or manually transfer plan data from other components to Profit Center Accounting.
Overhead costs for each profit center are typically planned in underlying cost centers. We look at the plan integration features for automatically transferring costs to the profit center.
You allow profit center online transfer and integrated planning with Transaction OKEQ, as shown in Figure 15.
Figure 15 General Version Definition - Online Transfer Checkbox
Select the Online transfer checkbox to allow cost center plan line items to transfer automatically to profit centers.
You also need to allow integrated planning for each Fiscal Year Version. To do this double-click General Version Definition in Figure 15, select a Version, double-click Controlling Area Settings, select a version and then double-click Settings for Each Fiscal Year to display the screen in Figure 15.1.
Figure 15.1 General Version Definition Integrated Planning Checkbox
Select the Integrated Planning checkbox to allow online transfer of cost center plan data automatically to profit centers per Fiscal Year. Line item documents keep a record of every planning change. Manually setting or deleting the Integrated Planning checkbox is possible only as long as no plan data exists.
You analyze the assignment of profit centers to master data and objects with the profit center Assignment Monitor.
The Assignment Monitor assists you check which objects aren’t assigned to a profit center to minimize postings to the dummy profit center. We follow a material master example. The profit center in the material master is copied to all financial documents generated by inventory movements.
You run the assignment monitor with Transaction 1KE4 to display the screen in Figure 16. Click on Assignment monitor in the menu bar to display a list of objects which contain profit centers. To display a list of unassigned Materials select Assignment monitor • Material • Nonassigned from the menu bar.
Figure 16 Assignment Monitor
Type in material type and execute to display the screen shown in Figure 16-1.
Figure 16-1 Unassigned Material Numbers
You can drill-down directly to each material master. There are two reasons why a material master may not be assigned to a profit center:
To make the profit center field mandatory first determine which field selection group the profit center field is assigned to with Transaction OMSR.
Many companies must choose whether to use standard or moving average price control for inventory valuation. While you have complete flexibility in setting this up, there are some best-practice guidelines.
You can change the price control indicator with Transaction MM02 as shown in Figure 17.
Figure 17 Costing 2 View Valuation Data
SAP recommends standard price control for all semi-finished and finished products since problems with moving average price can occur if you consume more assemblies than you produce during a period. There may be insufficient stock coverage to absorb differences when settling production orders at period-end, leading to an unrealistic moving average price. Read more details of stock coverage and moving average price in SAP Note 81682 and our SAP Material Ledger blog.
SAP also recommends you use moving average price for purchased materials. Inventory is revalued for every goods and invoice receipt with a price different to the moving average price. While this provides the advantage of real-time inventory valuation, it has the disadvantage of not providing purchase price difference PPV postings for analysis.
Finding historical values for moving average price is often asked when you have moving average price control for inventory valuation. You can view historical price at a summary level and calculate it at a detailed level.
Stock and valuation fields relating to the previous or earlier periods are stored in the history table MBEWH, separate from table MBEW. History tables contain only one entry for each period. An entry in a history table is only created if stock or valuation-relevant data changes occur in the current period.
You can display the data in table MBEWH with Transaction SE16N as shown in Figure 18.
Figure 18 Material Valuation History Table
The history table entries displayed for periods 1 and 3 indicate:
You can verify the above bullet points by displaying a list of goods movements with Transaction MB51.
Material prices are changed automatically with one of these three methods:
Occasionally, you may need to change material prices manually, for example, if a goods receipt is carried out with an incorrect purchase order price for a moving average price material. You cannot change the price directly in the material master. However, there’s a separate transaction available for this purpose.
You manually change material prices with Transaction MR21 as shown in Figure 19.
Figure 19 Price Change Overview Screen
You can either enter the Company Code or Plant. The Reference number can contain the document number of the customer or vendor or some other number. The Header Text field contains explanations or notes which apply to the document as a whole, i.e. all line items.
Type in the materials and Press Enter to display the screen shown in Figure 19-1.
Figure 19-1 Price Change Line Items
The screen automatically populates the material Price control, Current valuation and other price related fields. You can enter New prices for Materials 100-100 and 100-110 in Figure 19-1 since they use moving average (V) Price control. You cannot change the New price for Material P-100 since it uses standard (S) Price control and there is an existing current cost estimate. It would be inconsistent to have the material master standard price different to the current standard cost estimate. To change the standard price in this case you first need to delete the current standard cost estimate with Transaction CKR1.
The statistical price in the last two columns refers to a price that has no influence on the material valuation. For materials with price control S the statistical price is the moving average price. For materials with price control V the statistical price is the standard price.
When you first display the screen there are twenty blank lines allowing you to copy and paste entries directly from Excel. This means you can easily change the price of hundreds of materials with this transaction if needed.
When you click the save icon after entering materials and prices in you will generate a price change document recording details of the price change. If you revalue existing inventory with this transaction you will also generate accounting documents with document type PR recording the resulting postings to inventory accounts.
If the material ledger is active, a price change for a material with price determination 3 (single- and multilevel material price determination) is only possible if there have been no goods movements relevant to valuation and no incoming invoices for the material in the period.
There’s often some confusion regarding the price unit and costing lot size fields in the material master costing views, which can lead to less-than-ideal settings. Price unit is a factor that improves price accuracy because prices have a set number of decimal places. The unit price is easy to calculate if you make the price unit a factor of ten. Costing lot size should be set as close to typical purchase and production quantities to reduce lot size and purchase price variance PPV.
You maintain the price unit with Transaction MM02, as shown in Figure 20.
Figure 20 Price Unit Field - Costing 2 View
In this example you calculate the unit standard price of 135.98 EUR by dividing the Standard price by the Price Unit. To keep this calculation simple it’s good practice to make the Price Unit 1, 10, 100, 1,000 or 10,000. The maximum price unit you can enter is 99,999. You can adjust the price unit at any time and the system will automatically adjust the price accordingly.
The price unit cannot be smaller than the costing lot size. If you change the price unit to a value larger than the costing lot size the system will automatically adjust the costing lot size to the same as the price unit. This is a requirement because a cost estimate is calculated based on the costing lot size. There would be rounding issues if you marked and released a cost estimate.
Now that we’ve discussed price unit let’s look at costing lot size. You maintain the costing lot size by navigating to the material master Costing 1 view. The screen shown in Figure 20.1 is displayed.
Figure 20.1 Costing Lot Size Field - Costing 1 View
The Costing Lot Size determines the material quantity on which cost estimate calculations are based. This is a mandatory field because a cost estimate must base cost calculations on a quantity. When a standard cost estimate is created, it uses the costing lot size value in the Costing 1 view by default. You have an opportunity to manually change the costing lot size defaulted from the Costing 1 view when creating a single cost estimate with Transaction CK11N. You don’t get this opportunity when creating cost estimates collectively with costing run Transaction CK40N.
The costing lot size should be set as close as possible to typical purchase and production quantities to reduce purchase price and lot size variance. Unfavorable variances may result if a production order is created for a quantity less than the costing lot size. Setup time is needed to prepare equipment and machinery for production of assemblies, and is generally the same, regardless of quantity produced. Setup time spread over a smaller production quantity increases the unit cost. This also applies to externally procured items, because vendors usually quote higher unit prices for smaller quantities, resulting in purchase price variances.
The price unit allows you to increase price accuracy since prices have a set number of decimal places. The unit price is easy to calculate if you make the price unit a factor of ten. Costing lot size should be set as close as possible to typical purchase and production quantities to reduce lot size and purchase price variance.
A cost estimate uses the costing lot size to determine the quantity to base cost calculations on. This affects production variances since in many cases there are fixed costs such as setup and teardown time which do not change with different production lot sizes. This type of variance is known as output lot size variance.
This also applies to externally procured items, since vendors usually quote higher unit prices for smaller purchased quantities. You enter vendor quotations in purchasing info record condition scales and the cost estimate determines the scale quantity and associated purchase price based on the costing lot size.
You can reduce production variances by using the costing lot size based on the quantity typically manufactured or purchased. Unfavorable production variances will occur if a production order is created for a quantity less than the costing lot size. Fixed production costs spread across a smaller production quantity increase the unit cost.
A cost estimate determines the costing lot size from the corresponding field in the material master Costing 1 view. You can change this material master field with Transaction MM02.
Type in the material number, press Enter, select Costing 1 view, type in the plant and press Enter to display the screen shown in Figure 21.
Figure 21 Material Master Costing Lot Size Field in Costing 2 View
In this example the Costing Lot Size is 100. You have an opportunity to manually override the costing lot size defaulted from the Costing 1 view when creating a single cost estimate with Transaction CK11N as shown in Figure 21-1.
Figure 21-1: Costing Lot Size Field When Creating Single Cost Estimate
You can create a single cost estimate based on any Costing Lot Size you enter in the initial screen as shown in Figure 21-1. If you do not make an entry in this field the cost estimate takes the Costing Lot Size from the Costing 2 view. This functionality is useful when carrying out scenario planning for individual products. You don’t get the opportunity to enter the Costing Lot Size when creating cost estimates collectively with costing run Transaction CK40N.
The costing lot size cannot be smaller than the price unit. Because costing is based on the costing lot size, this combination could result in rounding problems when determining a new price. You receive an error message if you attempt to enter this combination in the material master.
Costing lot size accuracy can greatly influence lot size output variance. An increasing trend of unfavorable lot size variance can be explained by smaller quantities being manufactured than planned.
When implementing the search strategy to determine material prices for a cost estimate you have the option of using purchasing data. There are many purchasing info record prices available. Let's examine each in detail.
You maintain material valuation search strategies with Transaction OKK4. Double click a valuation variant to display the screen shown in Figure 22.
Figure 22 Purchasing Info Record Valuation Possible Entries
If you've selected Price from Purchasing Info Record in the search strategy above this section of the valuation variant screen, Purchasing Info Record Sub-Strategies will be available. Click any of the three Sub-Strategy Sequence fields to display the Possible Entries list in Figure 22.
The purchasing info record quotation is the official quotation submitted by a vendor to supply a material. No discount or conditions are taken into account.
The system searches for the last purchase order or scheduling agreement which has been defined in the purchasing info record. Select Environment • Last document from the purchasing info record menu bar to display the document.
The gross price is the total vendor price without considering vendor discounts or surcharges, or adding on any other costs such as delivery charges. An example would be the purchase price without taking into account any discounts for purchasing large quantities or adding on any custom charges.
The net price is the total vendor price after taking into account all vendor discounts and surcharges. You subtract quantity discounts, in addition to any other discounts, to calculate the net price.
The effective price is the price calculated after taking all pricing conditions into account. You first subtract vendor discounts and rebates to calculate the net price then you add on other costs such as freight charges and customs and duty.
This effective price is calculated from all of the conditions which are also contained in the assigned calculation schema with the exception of fixed amount conditions, (data element KRECH = B). All tax conditions (data element KOAID = D) are included in the price.
You can assign the purchasing condition type to an origin group. As of release 4.6A, you can maintain this table via the Delivery Costs button (partly obscured) in Figure 1. In previous releases you can access the table with Transaction OKYO.
Purchasing info record scales let you store vendor quotes for different quantities.
Purchasing info record scales represent vendor quotes that contain reduced prices for purchasing large quantities. Scales assist you with the following:
You can display a purchasing info record with Transaction ME1M or by going to:
Logistics • Materials Management • Purchasing • Master Data • Info Record • List Displays • By Material
Type in the material, purchasing organization, and plant in the selection screen and click Execute. Double-click a purchasing info record, click the Conditions button, and double-click a condition type to display the screen shown in Figure 1.
Figure 1 Purchasing Info Record Scale
This scale indicates that the purchase price for a quantity between 1 and 199 is 4.00 EUR, which is discounted to 1.00 for a quantity of 200 or more.
Let’s create two cost estimates with costing lot sizes of 10 and 200. You can create a cost estimate with Transaction CK11N or via the following menu path:
Accounting • Controlling • Product Cost Controlling • Product Cost Planning
• Material Costing • Material Cost Estimate with Quantity Structure
In the selection screen, type in material, plant, and costing variant and press
(Enter) twice to display the screen shown in Figure 2.
Figure 2 Cost Estimate Based on Costing Lot Size of 10—Unit Price 4 EUR
Costing lot size 10 defaults from the material master Costing 1 view. Because
the costing lot size is less than 200, the cost estimate accesses the first line of the purchasing info record scale in Figure 2.
To create a cost estimate with a different costing lot size, run Transaction CK11N. The selection screen shown in Figure 3 is displayed.
Figure 3 Create Cost Estimate Selection Screen
The Cost Lot Size field defaults as blank and the cost estimate accesses the costing lot size from the material master Costing 1 view. If you manually type in a costing lot size in the selection screen shown in Figure 3, the cost estimate uses this value.
For example, enter 200 as the costing lot size and press (Enter) twice to display the screen shown in Figure 3.
Figure 4 Cost Estimate Based on Costing Lot Size of 200—Unit Price 1 EUR
The cost estimate accesses the second line of the purchasing info record scale in Figure 4.
When you need cost estimates to retrieve purchase prices per plant, you can set up plant-specific purchasing info records.
It’s common practice to automatically create purchasing info records when a purchasing document is created. With some simple settings, you can specify automatically created purchasing info records as plant-specific. If you do not, a cost estimate may instead choose the lowest cost nonspecific plant info record.
You can display scheduling agreements, which are long-standing purchasing documents, with Transaction ME2M or via the following menu path:
Logistics • Materials Management • Purchasing • Purchase Order • List
Displays • By Material
Enter the material, plant, scope of list, document type LP, and press Execute to
display a list of agreements. Double-click a line to display the screen in Figure 1.
Figure 1 Purchasing Scheduling Agreement
You need option B to default to this field to ensure that plant-specific purchasing info records are created automatically. To display if the related purchasing info record is plant-specific, select Environment • Info Record from the menu bar and click the Purch. Org. Data 1 button to display the screen in Figure 2.
Figure 2 Plant-Specific Purchasing Info Record
A plant entry means the info record is plant-specific, and a valuation variant will only search within the plant if all purchasing info records are plant-specific.
There are two steps needed to make sure purchasing documents automatically create plant specific purchasing info records. The first is to configure default values for buyers with Transaction OMFI or via the following IMG menu path:
Materials Management • Purchasing • Environment Data • Define Default
Values for Buyers
Double-click the text Settings for Default Values and either change an existing
default values setup or create your own. The screen in Figure 3 is displayed.
Figure 3 Default Values for Buyers—Purchasing Info Record Update
Make sure B is entered for Purchase Order and save your entry. The next step is to assign this default value to buyers. You can do this either as a collective update with Transaction SU10 or by assigning the default values to your own profile
(select System • User Profile • Own Data from the menu bar from any screen).
Click the Parameters tab and enter the default values profile you just created for Parameter ID EVO.
Figure 4 Parameter ID for Default Values for Purchasing
While you can set a specific info record update for each scheduling agreement,
selecting the purchase order update info record checkbox in the Material Data
tab causes the following:
* If two info records exist, the info record with a plant is updated.
* If just one info record exists, with or without a plant, it is updated.
* If no info record exists, and B is specified as a buyer default, an info record with a plant is created. Otherwise, an info record without a plant is created.
SAP Note 569885 contains more details about the purchase order info record update checkbox (EKPO-SPINF).
A cost estimate obtains data on how a material is sourced based on your
procurement type setting.
Cost estimates use the procurement type field setting to determine how materials are procured. The cost estimate searches for either in-house production information (bill of material, routing, or production version) or purchasing information (purchasing info record). The special procurement type can be used to override the procurement type, if required. Material requirements planning (MRP) guarantees material availability by monitoring stocks and requirements and by generating planned orders for procurement and production. A cost estimate needs data on how the material is procured as the first step in determining material cost. Let’s see how to display procurement types, and then take a look at how cost estimates utilize this information.
The procurement type field is located in the material master MRP 2 view, which you can access with Transaction MM02 or via the following menu path:
Logistics • Materials Management • Material Master • Material • Change •
Navigate to the MRP 2 tab to display the screen shown in Figure 1.
Figure 1 Procurement Type Field in MRP 2 View
To display a list of possible entries for Procurement type, right-click in the field
and select Possible Entries. A list of possible procurement types is displayed as
shown in Figure 1. Let’s discuss each in detail:
* In-house production (E): This entry means the cost estimate will search for
production information, such as BOM and a routing. A BOM is a structured
hierarchy of components necessary to build an assembly. A routing is a list of tasks containing the standard activity times required to build an assembly.
* External procurement (F): This entry means the cost estimate will search for purchasing information, usually from a purchasing info record containing vendor quotes for the material.
* Both procurement types (X): This entry means a planned (proposed) order generated by MRP can be converted into either a production order or purchase requisition. A cost estimate will be based on a BOM and routing if they’re available; that is, the procurement type will behave as an in-house production. You can make the cost estimate treat the material as though it’s externally procured with an entry in the special procurement type field, as discussed next.
The Special procurement field found immediately below the Procurement type field shown in Figure 1 more closely defines the procurement type. For example, it can indicate if the item was produced in another plant and transferred to the plant you are looking at. A cost estimate normally follows the MRP special procurement type when determining costs. However, an entry in the special procurement type for the costing field in the Costing 1 view, as shown in Figure 2, will be used by costing instead of the MRP setting.
Figure 2 Special Procurement Type for the Costing Field
The special procurement type can be used to override the procurement type. For example, if you enter a special procurement type that contains an external procurement type (F) in configuration Transaction OMD9, the material will behave as if it’s externally procured, regardless of the procurement type setting.
Costing sheets offer you flexibility in allocating overhead across individual products or product groups.
There are three methods for distributing overhead costs to cost of goods sold. In increasing level of flexibility and complexity, they are:
* Activity rate: You can either increase the planned activity price to include overhead or you can create separate overhead activity types. Manufacturing orders are debited and the production cost center is credited.
* Costing sheets: Costing sheets offer more flexibility in allocating overhead across individual products or product groups based on cost elements and origin groups.
* Templates: In addition to cost elements, templates give you more options to base your overhead costs on.
Because costing sheets offer sufficient flexibility to allocate overhead costs in most cases, let’s discuss how these work in more detail.
You can view the configuration of the costing sheet settings with Transaction KZS2 or via the following IMG menu path:
Controlling • Product Cost Controlling • Product Cost Planning • Basic
Settings for material Costing • Overhead • Define Costing Sheets
The screen shown in Figure 1 is displayed.
Figure 1 Costing Sheet Overview
Available costing sheets are listed on the right of this overview screen. Select the first costing sheet, A00000, and double-click Costing sheet rows on the left to display the screen shown in Figure 2.
Figure 2 Costing Sheet Rows Overview
You can view the details of the three costing sheet components by:
* Calculation Base: Select any row with an entry in the Base column and double- click Base at the left to display a screen that lets you enter cost elements and origin groups.
* Overhead Rate: Select any row with an entry in the Overhead rate column and double-click Overhead rate at the left.
* Credit Key: Select any row with an entry in the Credit column and double-click
Credit at the left to display a screen that lets you enter the cost center.
Costing sheets debits manufacturing orders and credits cost centers.
Templates provide you with a flexible alternative to costing sheets for distributing overhead costs.
While you typically allocate overhead costs during activity type confirmations or with costing sheets, templates offer an alternative with more flexibility. Although setting up templates is more complex, they’re set out logically.
Activity type confirmations and costing sheets determine overhead allocation based on either cost elements or activity quantity. While this works fine in most situations, templates allow you to allocate overhead based on most table fields available in the system, and also on formulas. Let’s follow a simple example of how a beverage manufacturer can allocate plan overhead based on volume.
There are three basic steps involved in setting up templates for plan allocation. Environments determine the columns available in the template. You can define an environment with Transaction CTU6 or via the following IMG menu path:
Controlling • Product Cost Controlling • Product Cost Planning • Basic Settings for Material Costing • Templates
Expand the Environment 001 hierarchy to display the screen in Figure 1.
Figure 1 Maintain Environment and Function Hierarchies
There are many environments already available in the standard system. You can maintain templates with Transaction CPT1 or via the following IMG menu path:
Controlling • Product Cost Controlling • Product Cost Planning • Basic
Settings for Material Costing • Templates • Maintain Templates
Enter the name and environment, and press Enter to display the screen in
Figure 2 Maintain Template Sender Fields
Click the down arrow in the first Type row and choose Cost Center/Activity Type. Then click the down arrow in the Object field to choose the actual sender cost center and activity type, 1000 / 1000 in this example.
Next, double-click the Plan quantity field, double-click the MaterialVolume function below, and click the Plan quantity button. Click the down arrow in the Plan activation field and choose ACTIVE to display the screen in Figure 3.
Figure 3 Maintain Template Plan Quantity and Activation
Save your entries in this screen. The next step is to assign the template you just created with Transaction KTPF or via the following IMG menu path:
Controlling • Product Cost Controlling • Product Cost Planning • Basic
Settings for Material Costing • Templates • Assign Templates
Assign the template to a costing sheet (CostSh) and overhead key (OH key) as
displayed in Figure 4.
Figure 4 Assign Template to Costing Sheet and Overhead Key
The template is selected through a costing sheet and an overhead key. The costing sheet determines the conditions for calculating overhead rates, and is selected through the valuation variant. The overhead key is selected through the overhead group specified in the material master Costing 1 view. You can assign overhead keys to overhead groups with Transaction OKZ2.
You use Material Ledger to collect transaction data for materials and to calculate actual prices.
The Material Ledger has two main functions:
* To carry inventory in multiple currencies and valuations
* Actual costing
Let’s discuss Actual Costing in more detail.
Actual costing generates a material ledger document for all goods movements within a period at the standard price (preliminary valuation). At the end of the period, an actual price is calculated for each material based on the actual costs of the period. This actual price is called the periodic unit price (PUP) and can be used for the following at period end:
*Revaluate inventory: The material stock account is debited with the proportional price differences, and the price differences account is credited with the same amount. You can use the actual price as the standard price for the next period.
* Do not revaluate inventory: Price differences are posted to an accrual account. The amount that would have been posted to the material stock account is posted to another price difference account.
You can decide whether to revalue inventory according to which financial accounts are posted to during automatic account determination with configuration Transaction OBYC. If you want to calculate a periodic unit price for your materials based on the actual costs incurred in a period, you need to activate actual costing in addition to activating the material ledger.
You activate actual costing via the following IMG menu path:
Controlling • Product Cost Controlling • Actual Costing / Material Ledger • Actual Costing • Activate Actual Costing
The screen shown in Figure 1 is displayed.
Figure 1 Activate Actual Costing
In this step, you activate actual costing for materials and activity consumption
updates in the quantity structure. Here’s an explanation of each of the fields:
* Act. costing (Activate Actual Costing): If you want to work with multilevel
price determination in the Actual Costing component, you must select this
checkbox so that the actual quantity structure is updated.
* ActAct (Update of Activity Consumption in the Quantity Structure): Actual costing determines what portion of the variance is to be debited to the next-highest level using material consumption. The actual bill of material (BOM) rolls variances up over multiple production levels all the way to the finished product.
Left-click then right-click the field and select Possible Entries to display the list on the right in Figure 1. The possible entries are explained as follows:
0 No activity update: Update is not active.
* 1 Activity update not relevant to price determination: Update is active
but not relevant to price determination. Consumption is updated in the quantity structure but not taken into account upon price determination.
* 2 Activity update relevant to price determination: Variances between
the activity prices/process prices posted during the period and the actual price at the end of the period are adjusted subsequently. In addition, you must set multilevel price determination (option 3) in the material master Accounting 1 view. In this case, you must use standard prices for all materials that you want to use in actual costing.
After you activate actual costing, you’ll need to carry out an actual costing run each period-end with Transaction CKMLCP. The functionality of the actual costing run screen is similar to the standard cost estimate costing run screen. First, assign plants to the actual costing run, and then follow the rows.
44 Display Automatic Account Assignment Entries
45 Assign Material Type to an Account Category Reference
46 Stop Valuation Grouping Code Message
47 Configure Purchasing Account Assignment Categories
48 Post Purchase Price Variance to Purchasing
49 Set Up Default Values for Product Cost Collectors
50 Understanding Process versus Production Orders
51 Set Up Valuated Sales Order Stock
52 Implementing Valuated Sales Order Stock
53 Calculate Total, Production, and Planning Variance
54 Configure Work in Process and Product Cost Collectors
55 Set Up Results Analysis
56 Fix Settlement Issues with Settlement and Processing Types
57 Understand Assembly Scrap Basics
58 Plan and Work With Component and Assembly Scrap
59 Understanding Operation Scrap Basics
60 Set the Purchase Order Deletion Flag
61 Set the Production Order Deletion Flag
62 Reduce Period-End Processing Time with the Product Cost Collector Deletion Flag
63 Allow Movement Types in a Test System
64 Set Up the Main Subcontracting Process Steps
65 Run Different Inventory Aging Reports
66 Value Inventory at the Lowest Price
67 Change Valuation Class with Inventory
68 Control Movement Type Account Determination
69 Change Local Currency Types in a Test System
70 Remove the Tax Warning Message
71 Multiple Valuations with the Material Ledger
72 Actual Costing with the Material Ledger
73 Period-End Closing with the Material Ledger
74 Convert Material Master Data during Startup
75 Convert Purchase Order History Data during Startup
76 Perform Reconciliation during Production Startup
77 Preparing for Production Startup
78 Perform Post Conversion Activities
79 Activate the Actual Cost Component Split
80 Deactivating the Material Ledger
81 Assessing Purchase Price Variance to Manufacturing Orders
82 Understanding Data Storage Tables
83 Using Account- versus Costing-Based CO-PA
84 Map Condition Types to Value Fields
85 Define Statistical Condition Types for Profitability Analysis
86 Map Manual Account Adjustments
87 Adjust Condition Values with Interface Sign Logic
88 Perform Valuation by Cost Estimates
89 Settle Production Variances to CO-PA
90 Create Summarization Levels for Better Reporting
91 Display Mapped Postings with the Customizing Monitor
92 Set Up Valuation Costing Keys
93 Modify Additional Fields for Sales Order Reporting
94 Delete Controlling Areas
95 Open and Close Accounting Periods
96 Lock Planned and Actual Transactions
97 Closing Materials Management Periods
98 Add Object Services to Sales Orders
99 Using Implementation Guide Shortcuts
100 Finding Answers to Frequently Asked Questions
An activity type identifies activities provided by a cost center to manufacturing orders. The secondary cost element associated with an activity type identifies the activity costs on cost center and detailed reports
While there can only be one cost center standard hierarchy, you can create as many alternative hierarchies as you like. You create an alternative hierarchy by creating cost center groups
Automatic account assignment allows you to enter a default cost center per cost element within a plant with Transaction OKB9.
A condition type is a key that identifies a condition. The condition type indicates, for example, whether the system applies a price, a discount, a surcharge, or some other pricing, such as freight costs and sales taxes.
A cost center is a function within an organization that does not directly add to profit but still costs money to operate, such as the accounting, HR, or IT departments. The main use of a cost center is to track actual expenses for comparison to the budget.
A cost estimate calculates the plan cost to manufacture a product or purchase a component. It determines material costs by multiplying BOM quantities by the standard price, labor costs by multiplying operation standard quantities by plan activity price, and overhead values by costing sheet configuration.
An SAP Cost object such as a cost center or internal order describes where the cost occurs. A cost element or account describes what the cost is.
The costing lot size in the Costing 1 view determines the quantity cost estimate calculations are based on. The costing lot size should be set as close as possible to actual purchase and production quantities to reduce lot size variance.
A goods issue is the movement (removal) of goods or materials from inventory to manufacturing or to a customer. When goods are issued, it reduces the number of stock in the warehouse.
It is a goods movement that is used to post goods received from external vendors or from in-plant production. All goods receipts result in an increase of stock in the warehouse.
An internal order monitors costs and revenue of an organization for short- to medium-term jobs. You can carry out planning at a cost element and detailed level, and you can carry out budgeting at an overall level with availability control.
A material master contains all of the information required to manage a material. Information is stored in views, and each view corresponds to a department or area of business responsibility. Views conveniently group information together for users in different departments, for example, sales and purchasing.
An origin group separately identifies materials assigned to the same cost element, allowing them to be assigned to separate cost components. The origin group can also determine the calculation base for overhead in costing sheets.
The Price control field in the Costing 2 view determines whether inventory is valuated at standard or moving average price.
The price unit is the number of units to which the price refers. You can increase the accuracy of the price by increasing the price unit. To determine the unit price, divide the price by the price unit.
Process orders are used for the production of materials or provide services in a certain quantity and on a certain date. They allow resource planning, process order management control, and account assignment and order settlement rules to be specified.
Production variance is a type of variance calculation based on the difference between net actual costs debited to the order and target costs based on the preliminary cost estimate and quantity delivered to inventory. You calculate production variance with target cost version 1.
A profit center receives postings made in parallel to cost centers and other master data such as orders. Profit Center Accounting (PCA) is a separate ledger that enables reporting from a profit center point of view. You normally create profit centers based on areas in a company that generate revenue and have a responsible manager assigned.
If PCA is active, you will receive a warning message if you do not specify a profit center, and all unassigned postings are made to a dummy profit center. You activate profit center accounting with configuration Transaction OKKP, which maintains the controlling area.
A purchasing info record stores all of the information relevant to the procurement of a material from a vendor. It contains the Purchase Price field, which the standard cost estimate searches for when determining the purchase price.
A scheduling agreement is a longer-term purchase arrangement with a vendor covering the supply of materials according to predetermined conditions. These apply for a predefined period and a total purchase quantity.
A standard hierarchy represents your company structure. A standard hierarchy is guaranteed to contain all cost centers or profit centers because a mandatory field in cost and profit center master data is a standard hierarchy node.
The standard price in the Costing 2 view determines the inventory valuation price if price control is set at standard (S). The standard price is updated when a standard cost estimate is released. You normally value manufactured goods at the standard price.
You can apply surcharges to material prices and activity prices in order to take into account increases or decreases in item prices over time when calculating the lifecycle costs for a project.
Target costs are plan costs adjusted by the delivered quantity. For example, if the quantity delivered to inventory is 50% of the plan quantity, target costs are calculated as 50% of the plan costs.
Cost center balance, otherwise known as under/over absorption, represents the difference between cost center debits and credits during a period or range of periods. Cost center under/over absorption occurs due to differences between plan and actual debits and plan and actual credits.
The valuation variant is a costing variant component that allows different search strategies for materials, activity types, subcontracting, and external processing. For example, the search strategy for purchased and raw materials typically searches first for a price from the purchasing info record.
Variance analysis involves comparing actual with target costs and dividing the balance into variance categories.
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