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SAP Results Analysis allows you to valuate ongoing, unfinished activities, such as production orders, internal orders or projects at month-end. The underlying assumption for each of these activities is that they will add value when they are finished – a production order will yield a finished product, while a customer project will eventually be billed to the customer.
Now if you look at the mere profit and loss of such an activity before the added value has been achieved (that is, before the goods receipt has been posted for the production order or before the customer project has been billed), you will only see costs and therefore, a loss. If you happen to look at month-end, it would seem that the activity has an unfavorable effect on your company’s results.
With SAP Results Analysis, you can provide a more realistic view of your ongoing activities by capitalizing the value added so far in the balance sheet. Simply, you reverse the costs posted to your activities during the month and convert them into stock. If we maintain the assumption that the activity will lead to added value, then we can show this value in the inventory of your balance sheet as equivalent to the costs incurred.
Results Analysis comes with a number of different methods to determine the value of the inventory to be capitalized at month-end. The simplest of these is the Work in Process (WIP) calculation, which is primarily used for production orders. In this scenario, you consider the capitalized inventory to be equal to the total cost of a production order minus any credits from goods receipt of finished products. For a customer project, the WIP is the difference between the total cost and the (partial) billings. In this scenario, there are a variety of options available to valuate the WIP. For example, you can consider the ratio between the planned and actual costs, compared to the planned and actual revenue for a more realistic result. You could also ignore all billings and show all costs as WIP until the project is finished.
An important variation of Results Analysis is the Percentage of Completion (POC) method. This method is primarily used in large customer projects and is used to capitalize revenue instead of costs. With the POC method, you assume that the costs incurred to a project will eventually lead to an amount of revenue equal to the costs, plus your planned margin. For example, if you have realized 25% of your planned costs, you will capitalize 25% of your planned revenue in the balance sheet and P&L.
SAP Results Analysis provides a flexible toolset to determine a realistic picture of your ongoing activities at month-end closing. It can be used for production orders, internal orders, service / maintenance orders, and projects.
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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
An allocation structure allocates the costs incurred for a sender by cost element or cost element group, and it is used for settlement and assessment. An assignment maps a source cost element group to a settlement general ledger account.
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.
Availability control enables you to control costs actively by issuing warnings and error messages when costs are incurred.
A bill of material (BOM) is a structured hierarchy of components necessary to build an assembly. BOMs together with purchasing info records allow cost estimates to calculate material costs of assemblies.
You use the controlling area currency for cost accounting. You specify the controlling area currency when defining the controlling area in customizing for Controlling . You can assign more than one company code with different currencies to a controlling area.
A cost center is master data that identifies where the cost occurred. A responsible person assigned to the cost center analyzes and explains cost center variances at period end.
A cost component identifies costs of similar types, such as material, labor, and overhead costs by grouping together cost elements in the cost component structure.
Cost component groups allow you to display cost components in standard reports. In the simplest implementation, you create a cost component group for each cost component and assign each group to a corresponding cost component. You assign cost component groups as columns in cost estimate list reports and costed multilevel BOMs.
The cost component split is the combination of cost components that makes up the total cost of a material. For example, if you need to view three cost components (material, labor, and overhead) for your reporting requirements, the combination of these three cost components represents the cost component split.
You define which cost components make up a cost component split by assigning them to a cost component structure. Within the cost component structure, you assign cost elements and origin groups to cost components.
Each cost component is assigned to a cost component view. When you display a cost estimate, you can choose a cost component view, which filters the cost components displayed in the cost estimate.
Cost elements are included as part of a general ledger account. Primary cost elements identify external costs, while secondary cost elements identify costs allocated within controlling, such as activity allocations from cost centers to manufacturing orders.
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 by costing sheet configuration.
A costed multilevel BOM is a hierarchical overview of the values of all items of a costed material according to the material’s costed quantity structure (BOM and routing). You display a costed multilevel BOM on the left side of a cost estimate screen. You can also view a costed multilevel BOM separately with Transaction CK86_99.
Costing BOMs are assigned a BOM usage of costing and are usually copied from BOMs with a usage of production. You can make adjustments to costing BOMs if you require them to be different from production BOMs. With system-supplied settings, standard cost estimates search for costing BOMs before production BOMs.
The costing lot size should be set as close as possible to actual purchase or production quantities to reduce lot size variance. Unfavorable variances may result if you create a production order for a quantity that is less than the costing lot size. You need setup time to prepare equipment and machinery for production of assemblies, and that preparation is generally the same regardless of the quantity produced. Setup time spread over a smaller production quantity increases the unit cost. This also applies to externally procured items because vendors typically quote higher unit prices for smaller quantities.
A costing run is a collective processing of cost estimates, which you maintain with Transaction CK40N.
A costing sheet summarizes the rules for allocating overhead from cost centers for cost estimates, product cost collectors, and manufacturing orders. The components of a costing sheet include the calculation base (group of cost elements), overhead rate (percentage rate applied to base), and credit key (cost center receiving credit).
The costing type determines if the cost estimate can update the standard price.
The costing variant contains information on how a cost estimate calculates the standard price. For example, it determines if either the purchasing info record price is used for purchased materials, or an estimated price is manually entered in the Planned price 1 field of the Costing 2 view.
The currency type identifies the role of the currency such as local or global.
Demand management involves planning requirement quantities and dates for assemblies, as well as defining the strategy for planning and producing/procuring a finished product.
Dependent requirements are caused by higher-level dependent and independent requirements when running MRP. Independent requirements, created by sales orders or manually planned independent requirement entries in demand management, determine lower-level dependent material requirements.
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Martin Munzel is an internationally recognized speaker, author, and SAP consultant specializing in SAP Controlling functionality. He has more than 18 years of experience working with SAP, both as an external and in-house consultant. Martin has extensive experience implementing SAP FI/CO solutions in Europe, Asia, and North America in the manufacturing and wholesale industries as well as in the public sector. He regularly speaks at international SAP conferences and delivers training for consultants and SAP users. Martin is the Co-founder and Managing Director of Espresso Tutorials, a publishing company focused on short and concise SAP textbooks. He is the author of New SAP Controlling Planning Interface, First Steps in SAP, as well as a number of best-selling German titles. Contact Martin at martin.munzel@espresso-tutorials.com or on LinkedIn.
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