We come to the end of our tour of activity type posting with category 5 (Target=actual allocation). This one is the low-fat frozen yogurt of activity types. It tastes great, but you don’t have to work as hard to keep a trim figure. This works similarly to the category 2 activity type, but does not require an indirect activity allocation cycle in order to post the activity.
Instead, all that is required is that you run transaction KNMA in order to make the postings.
“How can this be?”, you might ask. KNMA looks at the amount of receiver activity that is posted and then determines from the planned allocation how much of the allocated activity should be posted. It’s as simple as that. I am going to show you two different examples of how this works. First, let’s look at activity that is planned using a fixed allocation quantity.
In our category 2 examples, the planned activity allocation was planned as variable. That means that the quantity of activity to post was based on some receiver factor associated with an actual posting. For fixed allocations, the total planned quantity of activity should be posted regardless of how much of the receiver is posted. Let’s see how this works. The receiver activity MACHHR is planned in three cost centers (RCV5A, RCV5B, and RCV5C), and the price of the activity type in each of those cost centers is made up of both costs that are directly assigned in the manufacturing cost center as well as indirect support costs that must be allocated from other support cost centers. The indirect support costs are allocated in planning from cost center SND5A, activity type CATEG5. The planned MACHHR activity and the CATEG5 activity allocated for the three cost centers are as follows:
• RCV5A: MACHHR – 8,000 HR and 50,000 units of CATEG5 allocated – fixed
• RCV5B: MACHHR – 16,000 HR and 30,000 units of CATEG5 allocated – fixed
• RCV5C: MACHHR – 24,000 HR and 40,000 units of CATEG5 allocated – fixed
KP06 layout 1-102 is used for the manual activity allocation plan. In this case, we see that the allocation is planned as fixed rather than variable.
This is done for all three of the receiving cost centers, and a total of 120,000 units of CATEG5 have been allocated from cost center SND5A.
Let’s look at the plan for cost center SND5A. Note that because we intend to do a fixed allocation, we have decided to plan the costs as fixed rather than variable. This does not appear to be a requirement, but because the actual allocation will end up being the same as the planned activity, it makes sense for the costs to be fixed as well.
When running KSPI to generate the costs, the activity price will be 100% fixed.
During period 4 (April), 500 hours of MACHHR was posted in RCV5A, 700 in RCV5B, and 1,200 in RCV5C. Prior to running KNMA, the Cost Center Target/Actual/Variance report shows this for the four cost centers: SND5A,
The targets for the allocations for each of the receiver cost centers are not based on the amount of the MACHHR activity posted, but instead are based on the amount of planned MACHHR activity. This is because the allocation is fixed instead of variable.
Next, we will run KNMA to post the CATEG5 activity in SND5A.
As a part of running KNMA, the operating rate is calculated. The operating rate determines how much activity will be posted in the sending cost center. Because this is a completely fixed allocation, the operating rate should be 100%, meaning that all the planned activity will be posted.
In case you are wondering about the operating rate for MACHHR in the three receiving cost centers, that is not calculated during the KNMA run, but instead is determined from the actual activity posting divided by the planned amount. This is because MACCHR is a category 1 activity type.
The resulting Cost Center Actual/Target/Variance report now shows the result of the CATEG5 activity postings and allocation. First, SND5A shows that the full amount of activity was allocated out.
It did not matter how much of the receiving activity was posted because this was a fixed allocation. The receiver cost centers show the result of the allocation. First RCV5A.
And that is all there is to posting category 5 activities. This is the simplest type of automated posting and can be a very powerful tool.
I have one more example to go over, and then we will be done with the activity type tour. If you remember from the blog posts of the category 2 activity types, I indicated we would be revisiting one of the examples. I included an example where the MACHHR activity posting was the receiver tracing factor, and we calculated the weighting factors for the sender activity using the planned allocation quantities. Well, guess what! We could have done the exact same thing using category 5 activity types with a variable planned allocation and saved ourselves the trouble of creating an indirect activity allocation cycle. Let’s see how this works. The sender cost center is SND5B, and the three receiver cost centers are RCV5D, RCV5E, and RCV5F. I used the exact same plan as for the fixed allocation example, except the planned allocations are now variable.
The planned MACHHR activity and the CATEG5 activity allocated for the three cost centers are as follows:
• RCV5D: MACHHR – 8,000 HR and 50,000 units of CATEG5 allocated – variable
• RCV5E: MACHHR – 16,000 HR and 30,000 units of CATEG5 allocated – variable
• RCV5F: MACHHR – 24,000 HR and 40,000 units of CATEG5 allocated – variable
Using RCV5D as the example, note that the allocation is planned as variable instead of fixed.
This is done for all three of the receiving cost centers, and a total of 120,000 units of CATEG5 have been allocated from cost center SND5B.
Let’s look at the plan for cost center SND5B. Now the costs are planned in the variable column.
When running KSPI to generate the costs, the activity price will be 100% variable.
During period 4 (April), 500 hours of MACHHR was posted in RCV5D, 700 in RCV5E, and 1,200 in RCV5F. Prior to running KNMA, the Cost Center Target/Actual/Variance report shows this for the four cost centers: SND5B,
The targets for the allocations for each of the receiver cost centers are entirely based on the posting of the receiver activity MACCHR. If you refer back to the category 2 activity type example in the previous blog post, you will see the same results.
Next, we will run KNMA to post the CATEG5 activity in SND5B. If we look at the results of the calculation we see that the operating rate for SND5B/CATEG5 is not 100% like we saw before, but instead is 64.37%. This is based on the actual quantity of MACHHR that was posted in all the receiver cost centers. This percentage times the planned quantity for the period determines the total quantity being posted.
The Cost Center Actual/Target/Variance report shows the following results. Compare this to the previous fixed allocation example to see the difference. Then compare them to the category 2 activity type example which used receiver activity as the tracing factor.
First, let’s look at SND5B and see what was posted for CATEG5.
Note that the actual activity posted reflects the activity operating rate that was displayed for KNMA. The receiving cost centers will show the results of the variable allocation. First, look at RCV5D,
and then, RCV5E
Since this last use of Target=Actual indirect activity allocation is so simple, you may wonder why I showed you a similar example using category 2 activity types. The reason is because that is what my company has been using for doing our activity allocations! In our first implementation back in 2008, we originally only used KNMA for doing our activity allocations because we were planning fixed allocations. When we wanted to move to doing variable allocations, we were shown KSC1 and KSC5 and, of course, we were able to make that work. What we didn’t know (and I am including our consultants in the “we”) was that KNMA also worked with variable allocations. I’m sure there is a lesson in there somewhere, but I’ll let you determine what that is.
That ends our journey through activity type postings. My intent was to help clarify some of the mystery concerning activity types. Hopefully, you have found some useful information that will help you find the best ways to use activity types in your implementations, and maybe you can even find a way to automate some of the manual work currently being done.