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Activity Postings 6: Category 4 Activity Types and Posting

TomKingCategory 4 activity types are unique in that they do not allow any sort of allocation at all.  They are manually posted like category 1 and category 3 activity types, but that is the extent of it.  The activity stays in the cost center.  You might be saying to yourself, “Why have an activity type that cannot allocate costs between cost objects?  Isn’t that the main purpose of the activity type?”

That is mostly correct.  However, if you have been reading the previous blog posts, you can see that another purpose for the activity type is to generate targets for variable costs.  If you plan fixed costs, you don’t necessarily need to have an activity type associated with them because your target cost will always equal the planned costs.  What if you have a set of cost centers where costs are variable, but you don’t need to allocate those costs to another cost object?  Variable costs must be associated with an activity, but up until now we have only looked at activity types that allocate the costs to other cost objects.  Category 4 activity types allow you to post the activity to generate targets for your variable costs without allocation so that you are better able to manage variances in those cost centers.  In my on-going analogy, this is more like what I remember growing up as ice milk.  It looks like vanilla ice cream, but it definitely doesn’t taste the same!


CATEG4 is the category 4 actvity type.  Notice that because the actual activity type category does not allow allocations, the system requires that you not be able to allocate in planning either.  Therefore, the planning activity category must also be set to 4 as well.  If you allow for allocations in your planning, but don’t allow actual activity allocations, your cost plan will be out of sync.

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There are no receivers possible, so it is only necessary to understand how the activity postings are made and what the impact those postings have.


First, let’s look at the cost center plan.  I have used a plan that mimics what was used for the category 1 activity type example.  Category 4 activity types behave similiarly to category 1 actvity types, except no allocation is allowed.  I have planned 10,000 units of activity to cost center SND4 using transaction KP26.
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The primary cost plan is similar to what was planned for the CATEG1 activity type.  The primary cost plan is loaded in KP06.  Note that it should be possible to allocate costs to this activity type, but I will not show that here.

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The activity price is then calculated with KSPI.

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Let’s look at what cost center SND4 looks like in the Target/Actual/Variances report prior to posting activity.
TKingBP6 5As expected, there are no target costs for anything that was planned as a variable cost.  Activity is posted using transaction KB51N, which does not allow the assignment of an allocation cost object.

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During period 4 (April), 500 units of CATEG4 was posted in SND4.  There are no credit postings for the cost element 943904, which is the cost element assigned to CATEG4.  This is because there can be no allocations to other cost objects.  However, we do see that targets have now appeared for the variable costs assigned to CATEG4.  This provides us with the means of determining variances when the actual costs have been posted.
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That’s it for category 4 activity types.  They are useful for handling variable costs that aren’t allocated to other cost objects.  This makes it possible to manage variances for truly variable costs in these types of cost centers. 

In my next and final blog post concerning activity type categories, I will return to indirect activity allocation.  This time, however, it will not involve the creation of a cycle to generate the activity postings.

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Comments 2

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Guest - Ashik on Saturday, 14 October 2017 22:36

I am confused here regarding target cost postings after KB21N for activity type category -1.

in KP26, the total quantity is 10000. In KP06, the total price (fixed + variable) is 10,50,000 /- . So, per unit cost is 10,50,000/10,000 = 105 /-
So for 100 quanity price = 105 * 100 = 10,500 /-
Now, after KB21N the posting in SND1 are 10,500 /- in Actual cost (which is correct)
but, under Target cost a value of 2,500 /- and 5,000 /- is posted as per the cost elements provided in KP06. As per the explanation, this
Target Cost is varaible target cost for 100 quantity. How this was calculated and how it got posted on ??

I am confused here regarding target cost postings after KB21N for activity type category -1. in KP26, the total quantity is 10000. In KP06, the total price (fixed + variable) is 10,50,000 /- . So, per unit cost is 10,50,000/10,000 = 105 /- So for 100 quanity price = 105 * 100 = 10,500 /- Now, after KB21N the posting in SND1 are 10,500 /- in Actual cost (which is correct) but, under Target cost a value of 2,500 /- and 5,000 /- is posted as per the cost elements provided in KP06. As per the explanation, this Target Cost is varaible target cost for 100 quantity. How this was calculated and how it got posted on ??
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Friday, 13 December 2019