Tip for settling manufacturing variances to cost based CO-PA

When using costing based Profitability Analysis (CO-PA), manufacturers want as much detail as possible in contribution margin reports.

When settling manufacturing orders, utilize the PA Transfer Structure to assign the settlement variance categories to  CO-PA value fields. The PA Transfer Structure assigns the variance category and the cost elements of origin to a specific value field.

By leveraging cost element groups, we can provide more details on the origin of the variance. For example, to post labor quantity variance and material quantity variance to separate value fields: create two rows in the structure. Create a row for the cost element group identifying material costs origin and another for the cost element group identifying labor costs origin; assigning the input quantity variance category QTYV to both. In this way, we can post variances from consumption of materials to a different value field than variances from consumption of labor.

You then assign the PA Transfer Structure to the settlement profile of the order type, and select the checkbox for settlement to CO-PA. When you calculate variances and post settlement, reports in costing based CO-PA now display the variance amounts separately.

Glossary

Cost Element

A cost element is master data that identifies what the cost is. Primary cost elements correspond to financial accounting general ledger accounts, and identify external costs.

Secondary cost elements identify costs allocated within Controlling, such as activity allocations from cost centers to manufacturing orders.

Order Type

The order type categorizes orders according to their purpose and allows you to allocate different number ranges and settlement profiles.

PA Transfer Structure

A PA transfer structure allows you to assign costs and revenues from other modules to value and quantity fields in Profitability Analysis.

Profitability Analysis

Profitability Analysis enables you to evaluate market segments, which can be classified according to products, customers, orders (or any combination of these), or strategic business units, such as sales organizations or business areas, with respect to your company's profit or contribution margin.

Settlement Profile

A settlement profile contains the parameters necessary to create a settlement rule for manufacturing orders and product cost collectors and is contained in the order type.

Value Field

In costing-based Profitability Analysis, value fields store the base quantities and amounts for reporting. Value fields can either be highly summarized (representing a summary of cost element balances, for example) or highly detailed (representing just one part of a single cost element balance).

Variance Category

During variance calculation, the order balance is divided into categories on the input and output sides. Variance categories provide reasons for the cause of the variance, which you can use when deciding corrective action.