TomKingThis is the first of a series of 7 blogs on SAP activity types.

My company began its journey with SAP in 2007. I was a charter member of the FICO team because of my work with product costing in our legacy world. I quickly discovered the way SAP handles product costing and Controlling is different. The concepts were familiar, but the structures and processes were not. One of the first items I encountered was the activity type. Ah, a familiar concept I thought! 

We had implemented a form of activity-based costing in the legacy world, and this must be SAP’s version of a cost driver. However, when I looked at SAP activity-based costing, I found business processes and templates, not activity types. I discovered that activity types were not the cost drivers that I was used to, but instead a device for allocating costs from cost centers to other cost objects.  There was some similarity to our legacy cost drivers, but the methods for assigning costs through activities and assigning activities to the other cost objects were different for me! I clearly had to find out more about SAP activity types and how costs moved from cost center to cost object.

I learned more as I prepared for each go live. As anyone who has been involved in the time crunch of an implementation knows, you rarely have time to think and do what your consultants tell you – fire first, ask questions later! Since our first go live in 2008, I've have had time to reflect on what we did and make adjustments to how we understand and use activity types. I learned this through trial and error and with the help of John Evanoff of Hitachi Consulting who encouraged me to write an article on indirect activity allocation for SAP Experts, various publications and

Not all activity types are created equal. The way you define an activity type determines how you plan and post costs. Depending on that definition, two different activity types behave differently. 

You define activity types with transaction KL01. An activity type is assigned a unit of measure which reflects the purpose of the activity. For example, you can use KWH for an activity type for electricity consumption and HR for an activity type for machine hours.

You assign an activity type secondary cost element type 43 (internal activity allocation). You post the activity type cost which is identified with the assigned cost element, crediting the sender cost center and debiting the receiver cost object.
You also assign an activity type category and Price indicator which determine how you perform planning. The category defines the method you use for planning. 
The price indicator defines how you calculate the planned activity price.
You assign a category to an activity type to determine how posting is performed,
and assign a price indicator to determine if the actual value is calculated based on actual cost element postings.

Now that we've defined activity types, we'll look at the behaviour of each actual allocation activity category in follow-on blogs. Since these blogs are about activity type posting, we'll assume all planning is manual. As you'll see, each posting category behaves behaves differently and we'll explore each of the 5 categories in detail. My hope is this information will confirm what you already know, and that you'll find something new that will help you in the future. Next, we'll discuss the posting behavior of category 1 activity types. Let’s dig in!