CO - Cost Centers

4/10/2017

CO - Cost C enter s

Cost Centers In this section I cover Cost Center Accounting (CO-CCA), I will cover how to setup the cost center master data, cost center planning, cost center budgeting , actual postings processes such as assessments, distributions and cost center variances. CO-CCA is used to classify and segregate costs in accounting and reporting by departments or functional areas and by types. Functional areas can be defined by production processes or major equipment to capture process cost information in manufacturing or by departments to segregate costs by the person responsible in other area's, for example costs types could be production, distribution, sales and administration. First we must activate CO-CCA in SAP using transaction code OKKP, this is activated within the controlling area, you are first asked to specify the starting year and then you change the cost centers drop down list component active - this is the default settings and indicates that CO-CCA is not active component not active - the CO-CCA subcomponent is activated without restriction component active for validations - the CO-CCA subcomponent is not active, you can use the cost objects but the CO component will not be updated, this is useful only to check and validate postings component active for existence checks - he CO-CCA subcomponent is not active and is only used to validate, in this case the system will check only if the cost center master data exists or not.

Master Data

Master Data defines how you can use your Co-CCA subcomponent, the master data and how you choose to organize the structures will also affect the way that management information will be available in reporting on these areas. Normally business management will discuss and create a structure that fits the companies organization, plus what they would want to see from a reporting aspect. The Co-CCA master data structures are divided into four important areas Cost Center Activity types Statistical key figures Resources We will start with cost centers master data, however we will take a look at the cost center categories which define the the type of activity performed by the cost center such as production, administration, etc. SAP already supply a standard set but you can add to them if you wish. Cost center categories also define default values for the cost center, you can define a default functional area and also activate or deactivate the following default values, you can set this values when you define the cost center or change them later Lock primary postings Lock secondary postings Lock revenue postings and revenue planning Lock commitment planning Lock primary cost planning Lock secondary cost planning Lock consumption quantities Using transaction code OKA2, you create or change the default settings, I have added a few and I may come back to change some once the DCC DCC is is up and running.

Next we must define a standard hierarchy for the controlling area, it is basically a cost center group with all the cost centers in a controlling area assigned on it. The standard hierarchy consists of two structural elements End nodes where you assign the cost centers Summarization nodes, which are not cost centers but summarize the cost centers in the nodes attached to them. You cannot assign the same cost center to two different nodes and each cost center can be assigned to only one node at a time. An example of a standard can be seen in the diagram below, you can also set a period of validity for the cost center

http://ken- lo lor i.i.com /d /datadisk/www.datadisk.co.uk.100314/htm l_ l_docs/sap/co/cost_center s. s.htm

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You can use transactions OKEON to create a standard hierarchy, I have created one for the DCC company, I have kept it very simple, you can also view the whole cost center, business area, functional area configuration for my DCC company. Basically you are trying to group related types together based on the nature of their function for example decision making, monitoring, administration, etc. In the screen below you can create the cost center group and the cost center themselves.

You can also use the below transactions to manage cost center groups and cost centers

Cost Center

KS01 ‐ create KS02 ‐ change KS03 ‐ display KS13 ‐ display all cost centers

Cost Centers Groups

KSH1 ‐ create KSH2 ‐ change KSH3 ‐ display

You can then use a common controlling report S_ALR_87013611 , I don't have any data in DCC at then moment but below is an example from the IDES system, you see the cost center groups to the right and the cost elements on the left-hand side, here to can clearly see what area costs are, this is an excellent report for managers as they can see the mostly costly areas and perhaps streamline them to reduce costs.

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We mentioned time-based fields in our cost element section, cost center also permits some fields that are time-based, remember that time-based fields do create large amounts of data, you can use transaction code OKEG, it is the same as before you can either turn on or turn off, they work the same way as the cost element time based fields work.

Next we will look at activity types, which classify a specific activity performed by one or more cost centers, I will be creating the below and using the secondary cost elements I created in the cost elements section, I will probably extend this as I start to use the DCC company, but this will get us started.

You can use the below transaction codes

Activity Types

KL01 ‐ Create KL02 ‐ Change KL03 ‐ Display KL04 ‐ Delete KL13 ‐ Display all types

There are a number of fields that need to be completed, also the allocation cost element should be type 43, which is what we created in the cost element section, Name and Description - self explaining Activity Unit - the measurement in which the activity will be measured in, for example hours, minutes, liters, cubic feet CCtr categories - defines what cost centers can be used with this activity type, this help you restrict specific activity types, * means all cost center categories ATyp category - is used in both planning and actual transactions, (see below for more information) Allocation cost elem - you use a cost element of type 43, which we have already created in the cost element section Price Indicator - select how the system will calculate the planned and actual activity price (see below) Actual qty set - sets the actual activity quantity must be posted manually Average price - indicates whether the activity prices for the cost center and activity type combination remain constant for the entire fiscal year, this field is also year time dependent and can be changed each year if desired Plan quantity set - indicates that the planned activity cannot be changed by the planning reconciliation PreDistriFixedCosts - allows this activity type to be used in fixed cost predistribution. ATyp category 1: Manual Entry, Manual Allocation

Activities in this category are used for manual planning and allocation, the planning amount of the activity to be performed by the sender cost center is made using the planning function of the activity type. The planning will consist of an activity quantity and price (allocation of measurable activities; actual quantity times planned price)

2: Indirect Determination, Indirect All ocation

This category is used when the calculation of the quantities is impossible or extremely tedious, the calculation of planned and actual amounts is made through the indirect activity allocation using a relationship defined between the sender and the receiver.

3: Manual Ent ry, Indirect Al location

You can use the category when you manually plan the sender cost center through a special function without informing any receiver cost object. The system based on the relationship established between the sender and receiver will calculate the amount of activities to be allocated to each receiver. After allocation of indirect activities, the activities will be fully reconciled

4: Manual Entry, No Al location

Select this category if you are doing manual planning to the sender cost center and you want the cost to remain there. You can use this category for internal cost center activities.

5: Target = A ctual Allocation (Actual only)

This is a special kind of indirect allocation that determines the actual values from the needs of planned activities through operating index. This category can only be used for actual allocation Price Indicator

the system calculates the price automatically based on the planned activity and the planned costs 1: Plan Price, Automatically based on Activit y

2: Plan Price, Automatically based on Capacity

Fixed Price = Fixed planned costs / planned activity Variable Price = Variable planned costs / planned activity Total price = fixed price / variable price

the fixed portion of the activity will be calculated based on the cost center capacity, this method will often result in over‐ or under‐ absorption in the cost center because the cost center can receive more or less activity than its capacity


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CO - Cost Centers Fixed Price = Fixed planned costs / capacity Variable Price = Variable planned costs / capacity Total price = fixed price / variable price

3: Determined Manually

you set the price of the activity type manually

5: Actual price, Automatically based on Activity

you want the system to calculate the actual price based on the actual activity and actual costs.

6: Actual Price, Automatically based on Capacity

similar to above but the system will use the capacity to calculate the activity rate

7: Manually determined for actual Al location

you set the activity price manually

Below is an example of one of the activity types for internal transport (left hand screenshot), the definition in the version maintenance (transaction code OKEQ) for the price calculation method will impact how SAP calculates the price.

lastly regarding activity types you can group them which can be very useful for reporting and customizing, they work the same way as cost elements and cost center grouping, below is an example of grouping the activity types, I may move and add to these later once I get using the DCC company.

Activity Type Groups

KLH1 ‐ create KLH2 ‐ change KLH3 ‐ display

Next we move on to statistical key figures which ar e numerical measures that assist in the allocation of costs between cost centers, internal orders and profit centers. You can use statistic figures for periodic cost allocation (distributions and assessments), they can also be defined for a particular type of activity performed by a cost center (for example the number of employees in a cost center or the amount of power in Kilowatt hours used in a cost center), they can be used in reporting for both planned and actual. There are two categories for statistical key figures 01: Fixed Values - means that its values remain constant over the periods, the quantity is measured once and applies to all periods 02: Total Values - corresponds to values accumulated over the period, these need to periodically need updating.

You can use the below transaction codes to create, change or display

Statistical Key Figures

KK01 ‐ create KK02 ‐ change KK03 ‐ display

Statistical Key Figures groups

KBH1 ‐ create KBH2 ‐ change KBH3 ‐ display

SAP has some statistical key figures already defined and I will use these for the time being, I will come back here once my experience grows and create some that are DCC specific and I also will group these at a later date.


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Lastly we cover resources which are goods and services purchased for the execution of a particular business activity, in CO-OM (overhead cost controlling) you can use resources for planning purposes only. You can plan resources during the cost centers/activity type planning. By associating more than one resource to a cost element you can reduce the chart of accounts without losing details relevant to cost analysis. There are three types that are available Type R - exists only in CO-OM and their prices are stored directly in the price tables Type M - refers to a material and their price is stored in the material master, in MM the resources together with the item category describe what the item represents as an estimate of costs (material, activity type, purchasing info records or overhead) Type B - refers to a base planning object and considers the price of the base planning object to value the resource consumption. Planning

Cost center planning is part of the company budget and generally will be incorporated into the overall planning process. Planning can be done for primary costs, secondary costs, activity type quantities consumed and statistical key figures. Planning is usually done for the fiscal year. Using cost center groups and cost element groups you can streamline the planning procedure. First we will look at exchange rate types, you can define an optional exchange rate type for cost center planning, this then should be updated in the version using the version maintenance. The exchange rate type stores exchange rates for different purposes for example planning, buying rate, selling rate and average rate. SAP already supplies a standard exchange rate type "P", we will copy this to P1 for the DCC company using transaction code OB07 (left-hand screenshot), then we will define the exchange rates to be stored in this type using transaction code OB08 (right-hand screenshot), we ill enter the currency rate for USD into EURO's

Now we can update our version using transaction code OKEQ, as you can see we are now using P1 which we created above, also I have removed the value date, the system will use the exchange rate for the first day of the period for each planning month. If there are two rates in period the system for example on on 01.01.2014 (1st Jan) and one on 05.01.2014 (5th Jan) the system will use the rate on the 01.01.2014.

Now we can test the above, fir st we will use transaction KP06 to create the planning we will enter a $10,000 per month for a total of $120,000, using cost center FINANCIAL, the DCC company uses USD as the currency


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Running the report S_ALR_87013611 we see the below results our $10,000 over the 12 periods (left-hand screenshot), however perhaps we wish to see this in EURO's, we can use transaction code RPC0 to select our exchange rate type P1 we created a moment ago (middle screenshot), when we rerun the report we get the results in EURO's (right-hand screenshot) and if you notice that the values are different based on the exchange rate we entered

Manual planning covers the following areas Statistical key figures planning Activity type planning Primary cost planning Secondary cost planning Budget Planning Detailed planning You can either use standard planning profiles that come with the SAP system our create your own (using a copy of a SAP supplied one), planning is done via predefined screens containing only the fields that should be updated by the planner and associated to planner profiles, these screen are known as planning layouts. There are three kinds of planning layouts Planning layouts for cost element planning Planning layouts for cost element planning Planning layouts for statistical key figure planning An advantage of the planning layouts is that you can change the currency, the standard layout uses the controlling area currency as a planning currency. Using transaction code KP65, we can create our own planning layout that will use the object currency, we basically copy the existing planning layout 1-101

In the editor screen we change the column plan fixed cost from plan fixed costs in CO area currency to plan fixed costs in object currency, this will allow us to view the correct currency for that specific object instead of the controlling area currency. You need to repeat the same process with the plan variable cost


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When you go save you may see this error, you need to make sure that both plan fixed costs and plan variable costs have been updated, also you need to remove both dist columns and recreate them, from the main menu select edit -> columns -> append add. fields do this for both columns, then save.

Now we create our own planner profile, again we will copy and exist planner profile sapall to zsapall and use the above planner layout, using transaction code KP34

Highlight the new planner profile drill down until the layouts for controlling, then replace the 1-101 with our new planner Z1-101, the overwrite flag controls whether users can change the proposed values for the distribution key when planning and the integrated excel flag means that SAP will open Microsoft Excel to perform the planning.

After you have saved the above we can use transaction code KP04 so that we can set the planner profile

Now when you use transaction code KP06 you will be using the layout we created above and the currency will be determined by the object currency and not the controlling area currency. This example now give you the knowledge to create your own custom layouts. There are a number of tools that SAP supply to help in the planning process which I will briefly discuss below, such as copying planning, deleting planning, revaluating and transferring planning from other components. The copy function allows you to copy planning data from another version, referencing either planning or actual postings, you can define the specific periods, fiscal years, versions and cost centers. You can also limit to a data type of planning and a currency type. You can use the below transaction codes http://ken- lor i.com /datadisk/www.datadisk.co.uk.100314/htm l_docs/sap/co/cost_center s.htm

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KP97 - Copy planning for cost centers KP98 - Copy actual to plan for cost centers KP90 - Delete cost element planned costs KP91 - Delete cost centers planned costs

Another tools is revaluation by which you revalue the planning values using a defined percentage, it is possible to create the revaluation by period and with the cost element restricted, this is only valid for cost center planning. Using transaction code KPU1

Now we run the revaluation using transaction code KSPU, first I will perform a test run then the actual run

Then we will rerun the report S_ALR_87013611 and we can see that the values have indeed increased by 10%

You can import planning data from other components such as depreciation data from Asset Accounting (AA), human resources costs from HCM, statistical key figures from LIS and production activity from Production Planning (PP). For example to enable a import from PP you need to do the following 1. Create the cost center planning cost center/activity type for which PP can create the necessary activity. This can be done using transaction code KP26 or by copying another planning or from actual values. 2. Create the production planning using Sales and Operation Planning (SOP), Materials Resource Planning (MRP) or Long-Term Planning (LTP) 3. Run the plan reconciliation using KPSI You need to customize the reconciliation planning using transaction code OMIK , as i mentioned you need to have setup some configuration on the specific transfer activity that you wish to transfer. Once I get DCC up and running and will data entered into the system I will revisit this. The advantage to using this allows you to create planning scenarios to allocate different planning versions in Controlling (CO) simplifying the planning process. You should work with the various production teams as they will determine if the planning should be based on SOP, MRP or LTP.

Allocations are used to send a cost or group of costs from one cost object to another, for example you can split the energy costs from the overhead cost center to the production cost centers. There are four type of periodic allocations available, however you need to define cycles fir st, the cycle contains the allocation definition such as senders and receivers as well as other rules for the allocation. You need to define which cost elements are to be allocated and the activity type quantities and the criteria that would be used to establish the allocation either directly or indirectly.


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The four periodic allocations are Periodic reposting Distribution Assessment Indirect activity allocation You have to create at least one cycle for each kind of allocation, you cannot use a cycle for distribution, also separate cycles must be defined for planned and actual values. In planning a cycle must be created for each version for distribution, assessments and periodic reposting the following values are assessed Total planned or actual Fixed planned or actual Fixed rate or activity type For indirect activity allocation, the following values are assessed Total planned or actual Fixed planned or actual inversely determined quantity Cycle processing can be hierarchical or iterative as per the diagram below

Hierarchical method ‐ this method is used when there is no recursive link between the cost centers or the cost center will receive no cost from one of its receptors directly or indirectly, this method can also be used when the sender cost object is part of the receiver and must have a part of the cost allocated Iterative method ‐ is used in repetitive processing, as in the example diagram cost center A must have its costs allocated to cost centers A, B and C and part of the cost from cost center C must return to cost center A to be allocated again.

Periodic repostings reduces the number of postings made in FI and the planning time as well, for example you can post all planned electricity costs to one cost center or internal order and then run the periodic repostings to settle these costs to other cost object following a predefined customized rule. This is similar to distribution process (which we will see in a moment), in periodic posting you cannot see the credit posting in the total reports, also you cannot use an internal order as a sender cost object where as in periodic posting you can. Using transaction code KSW7 to create (KSW8 - change, KSW9 to display) a periodic reporting cycle, you fill in the cycle name and a start date

then we customize the cycle header start date - define the end date of the cycle as we have already defined the start date text - the cycle description indicators - iterative field will define the cycle to iterative field groups - define what will be allocated consumption, object currency and transaction currency, the allocation will always be made in the controlling area currency plus the currency selected in this section present selection criteria - define the cycle version that you are going to use to perform the cycle.

Once we have created the cycle header we can attach the segments using the attach segment button, you can attach multiple segments, just keep adding, the segment header tab is filled in as follows segment name - description of the specific segment lock indicator - when processing cycles locked segments will be ignored sender rule - specify how the system will distribute the values between the sender and the receiver posted amounts - consider the values posted in the planning fixed amounts - consider fixed values on the sender values tab fixed rates - on the senders values tab, the fixed prices defined for the sender are multiplied by the receiving tracing factors and the results allocated to the receivers share in % - percentage of the sender costs that will be allocated act vals or plan vals - define the reference type value used for the sender, you can only choose one. receiver rule - define how the values are going to be allocated in the receiver


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variable portions - the system will use values already recorded in the database to determine the amount for each receiver. also see var.portion type below fixed amounts - considers fixed values determined in the sender values tab to determine the values that each receiver will receive, the sender will be credited by the sum of those values fixed percentages - considers the fixed percentages determined by the sender values tab by applying the percentage in the sender values, in this case if the sum of the percentages set is less 100% a residual balance will remain on the sender. fixed portions - same as above but rather than percentage a value is set. The system will add up all the protions and divided by the portion of each receiver to find the percentage assigned to the receiver, the entire balance of the cost center is allocated unless you set a percentage less than 100% for the sender. var.portion type - determine which object cost will be used as reference for the allocation plan costs - considers the planning values for the version and cost element selected on the receivers tracing factor tab, the system will add up the total planned costs for the costs in the receivers and divided the total of each receiver by the grand total to determine the percentage that each receiver will receive. The sender values will be defined by the combination entered in the sender/receivers tab. actual costs - same as above but the system will consider the actual costs as reference for the allocation plan/actual consumption - same as above but except they consider the consumption quantity and not the cost values plan/actual statistic key figures - same as above but the system will use the planning or actual statistical key figures defined on the receiver tracing factor tab plan/actual activity - as as statistical key figures but uses the planning or actual activity type to create the receiver percentage. statistical plan cost - same as above but only considers statistical planning values for internal orders or cost centers. A cost center receives statistical values when real planning is posted to an internal order assigned to this cost center and the order receives the real planning. An internal order gets a statistical planning value when the internal order master data is defined as a statistic. he cost center assigned to this internal order will receiver the real planning. scale Neg. Tracing factors - define how the system will manage negative values in the allocations no scaling - the system uses negative tracing factor in the calculations standard scaling - scaling depends on the sum of the receiver tracing factors absolute value - the tracing factor negative sign is reversed, all tracing factors will be positive negative tracing factors to zero - the negative tracing factors will be set to zero, nothing will be allocated to this receiver smallest negative tracing factor to zero - the largest negative tracing factor is set to zero, the other tracing factors are increased accordingly, the previous receiver with zero tracing factors will now receive a positive tracing factor smallest negative tracing factor to zero but zero = zero - the largest negative tracing factor in terms of amount is set to zero, the other tracing factors are increased accordingly, the previous receiver with zero tracing factor will remain with a zero as a tracing factor

In the senders/receivers tab we detail both the senders and receivers and the cost elements, as you can can below you can setup single values, ranges or groups. You can also check the segment to make sure you have not made any mistakes using the check button, any errors will be highlighted.

Another allocation is distributions which are similar to periodic reporting, they use cycles to define the allocation but in distributions only cost centers or ActivityBased Costing (CO-ABC) processes can be considered senders, it is also possible to see the credit values on the total records. The differences between distribution and periodic reposting are below Distribution

Periodic Reposting

sender can be cost center or CO‐ABC process

senders can be a cost center, Co‐ABC process, internal order or another cost object

total values are saved, so its possible to see the credit on the sender side

total values are not saved, making it impossible to see the credit on the sender side

it does not allocate activity‐dependent costs

it can allocate activity‐dependent costs

To customize distribution you can use transaction code KSV7 (KSV8 change and KSV9 display), the screens are the same as the periodic reposting. An assessment uses cycles to transfer primary and secondary costs from the sender to the receiver, the sender and receiver can be a cost center, ABC process, an internal order or cost objects. The difference between assessments and distribution and periodic processing is that assessments summarizes all of the costs in the sender and uses a secondary cost element with a category of 42 (Assessment) to create both the credit in the sender and the debit in the receiver. Periodic reposting and distributions both use the same (primary) cost element rather than allocating costs in the secondary cost elements. http://ken- lor i.com /datadisk/www.datadisk.co.uk.100314/htm l_docs/sap/co/cost_center s.htm

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Additionally in assessments, allocation structures can be used to allow for the creation of group of accounts that will be settling to a secondary cost element category 42 (assessment), using the IMG we can define the allocation structures

From the initial screen select New Entries, I have created Z1 for the DCC company, then highlight Z1 and select assignments which is used to define groups of sender cost elements, you can create as many groups as you wish,

When yo create the groups you will notice that the overlay icon is yellow which means that no cost elements have yet been assigned, once you have assigned cost elements it will turn green as per the labor assignment below, if you get a red icon it means that cost elements have overlapped which must be corrected.

The labor assignment has a cost element 614020 assigned, you can also use groups of cost elements if you have configured this.

In the assessment cost folder you add the appropriate cost element, this can only be a category 42 (assessment), Use transaction KA06 if you need to create a secondary cost element of category 42.

Once you have configured the allocation structure you can view it in another view, highlight the allocation structure you want to view then select extras -> overviewlist (see left-hand screenshot), the hierarchical structure will be displayed (right-hand screenshot)


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You can use transaction code KSU7 to create assessments (KSU8 change, KSU9 display) again this is the same as the above cycle creations, so i won't go into detail here. Indirect activity allocations can be used for activity type categories 02 (indirect determination, indirect allocation) and type category 03 (manual entry, indirect allocation) Category type 02 refers to a situation where the costs cannot be defined at the sender and instead the system needs information from the receivers to allocate the costs. For example using a maintenance order and based on the hours of production in each production cost center a relationship between the production hours and the maintenance hours can be established and through indirect activity allocation the maintenance cost center is defined as the sender and the production cost center is defined as the receiver using the production hours as the reference for the allocation. Category type 03 is used when the sender quantity is entered manually in the sender and the system uses the rule defined in the cycle to distribute the activity type quantities to the receivers. Again the cycle definition is the same as we have used before except that you transaction code KSC7 to create (KSC8 change, KSC9 display). Before I move on to splitting lets see an example for above, I will use periodic reposting to demonstrate, I won't post but explain how to use the periodic cycle, first a quick look at the periodic reposting cycle, I will only use 50% of the original value, again i am demonstrating the various possible ways, then in the sender/receivers tab I enter the sender and receivers and the cost element

In the receiver tracing factor tab I can then allocate the portion/percentage of costs to the receivers, again this in only demonstrating what can be done and not much business though has gone on to this, once I have the DCC company up and running I will revisit to make it more meaningful

Now using transaction code KSWB we can execute the periodic reposting plan (in test mode), select the cycle we just viewed above


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If all goes to plan you will see the number of senders (one in our case which is FINANCIAL) and receivers (two in our case OTHER and HR), you may get an error to run an report called RK811XST (transaction code SE38) to create the basic sets for the allocation processor, just run as requested.

Using the sender and receiver buttons we can see the values, we can see that the senders value are 50% and then the 50% is split between OTHER and HR cost centers. Sender (FINANCIAL)

Receivers (OTHER and HR)

You can also view previous cycle runs using KSWC, as I did not post then nothing can be seen in the below, I suggest you have a play around and create different cycles to see what different outcomes you can create.

Below is a summary table for all the transaction codes for the above PLAN Create

Change

Display

Delete

Execute

Overview

Periodic Reposting

KSW7

KSW8

KSW9

KSWA

KSWB

KSWC

Distribution

KSV7

KSV8

KSV9

KSVA

KSVB

KSVC

Assessment

KSU7

KSU8

KSU9

KSUA

KSUB

KSUC

indirect activity

KSC7

KSC8

KSC9

KSCA

KSCB

KSCB

KSW4

KSW5

KSW6

ACTUAL Periodic Reposting

KSW1

KSW2

KSW3

Distribution

KSV1

KSV2

KSV3

KSV4

KSV5

KSV6

Assessment

KSU1

KSU2

KSU3

KSU4

KSU5

KSU6

indirect activity

KSC1

KSC2

KSC3

KSC4

KSC5

KSC6

At the end of the planning process or for actual posting at the end of the period you can recalculate the activity price (actual and plan) using the planned values and activity quantities planned to create a new price. http://ken- lor i.com /datadisk/www.datadisk.co.uk.100314/htm l_docs/sap/co/cost_center s.htm

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Before activity price calculation can be done then you need to run the plan or actual cost splitting, this will split the planning or actual costs on the cost elements between activity types planned in the cost center,then you can divide the values for each activity type in a cost center by the quantity of this activity, creating the activity price. You can customize the cost splitting using transaction code OKES, select the new entries button and create the splitting structure

We then create the splitting rules, select the splitting structure and double-click on splitting rules, then select the new entries button and add the below rules (lefthand screenshot), to assign the rule to the version simply double-click on the rule and add the version field and value (right-hand screenshot) SAP already comes with some predefined rules, the Wt column to the far right allows when splitting the costs between activity types with different units of measure, the system will then use the equivalence number of defined in the planning transaction to convert both activity type units to a common unit of measure.

Next we create the assignments for the splitting structure, go back to the splitting structure and then double-click on assignments (left-hand screenshot) , then using the new entries button add the assignments as below, again I will return here once I have the DCC company fully running and will probably add additional assignments. We add the rule to the assignment which is the one we used for the version above. Then we need to assign a combination of cost element and activity type, simply select an assignment and then select selection for assignment , the right-hand screenshot should be displayed, add the cost element and the activity type that I created in the cost elements section or you have created groups then use these.

So lets see an example of cost splitting, to how to use it, the planned values from four cost elements can be split based on two activity types to calculate two activity rates, you can see how the system will calculate the portion of the planned costs from each cost element to use in the planned activity rate calculation. The calculation amounts shown for each activity type will then be divided by the planned activity quantity to determine the planned activity rates Cost Element

Planned Costs

414300 ‐ Electric Power

$25,000

414202 ‐ Maintenance/Repairs

$12,000

421101 ‐ Salaries and fee

$17,000

422450 ‐ Depreciation/Amortization

$7,000

Activity Type

Quantity Planned

PH ‐ Production Hours

300 100

Deprec ‐ Depreciation Cost Element

Depreciation

Depreciation Splitting

PH

PH Splitting

414300

100/400

25,000 * 0.25 = $6,250

300/400

25,000 * 0.75 = $18,750

414202

100/400

12,000 * 0.25 = $3,000

300/400

12,000 * 0.75 = $9,000

421101

100/400

17,000 * 0.25 = $4,250

300/400

17,000 * 0.75 = $12,750

422450

100/400

7,000 * 0.25 = $1,750

300/400

7,000 * 0.75 = $5,250

After creating the splitting structure the final piece is to assign the structure to the cost centers that will send or receive the activity types. We will use transaction code OKEW, you can restrict by using the specific cost centers, cost center groups, all cost cost centers and customize for one or all CO versions.


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Simply select the cost center that you wish to assign to the splitting structure, highlight the splitting structure and then select the assign button (right-hand screenshot), once they have been assigned you should see something looking like in the right-hand screenshot.

Budget Management

Instead of using primary and secondary cost planning the budget can be set by cost center rather than cost elements, first we must create budget profile which will contain the following Budgeting time frame Decimal places Scaling factor Distribution keys Fiscal year or period values We start by using transaction code OKF1 to create the budget profile, make sure you understand the past, future and start time frames Past - specifies how far in the past you can plan/budget for, the start year is the reference point, so for example if the year is 2014 and we have 1 in this field you including the years up to 2013 Future - specifies how far into the future you can plan/budget for again the start year is the reference point, so for example if the year is 2014 and we have 3 in this filed you can include up to 2017 Start - determines the start year for planning and budgeting using the current fiscal year as a reference, so for example if the year is 2014 and we have a 1 in this field then the start year for past and future will be 2015

You can then use transaction code KPZ2 to create your budget for the cost center (left-hand screenshot), you can then user report S_ALR_87013648 to view your budget (right-hand screenshot)

You may run into problem when using transaction code KPZ2 and receive the informational message at the bottom of the screen

To get more details select extras -> error log from the main menu (left-hand screenshot), here you can see the details of the error, in this case we have miss match of dates between the budget profile and the cost center http://ken- lor i.com /datadisk/www.datadisk.co.uk.100314/htm l_docs/sap/co/cost_center s.htm

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You can get the the profiles years by simply, selecting on the drop down list, you will see all the budget profiles also detailing their timeframe's, now compare this to what you have for the cost center as long as the time is not less than what is created in the budget profile then you should be ok, as you can see in the case below the budget profile is expecting years 2014-2018 but we have only 2014-2017 in the cost center, so you need to change either one of them to get this to work.

Commitments and Funds Commitments

Commitments are payments that are not entered into the accounts but can lead to actual costs at a future date, it has its origin in the purchase requisition and purchase order. If you enter a CO object in the purchase requisition it will show as a commitment on CO reports. If you use the purchase requisition to create the purchase order the system will transfer the commitments to the purchase order automatically and when you goods receipt and invoice this purchase order the system transfers the commitment to actual values. You need to activate commitments in the controlling area using transaction code OKKP

Additionally the cost center master data must not be locked as we can see below in the FINANCIAL cost center.

Actual Postings

Actual postings means transferring cost amounts to CO from other components such as FI, PP, HCM and also from transactions performed within the CO components such as assessments, distributions and others. You can define automatic accounting assignment for controlling posting, which means that by default you can set cost centers, profit centers or orders to be used when posting occurs in a specific cost element and company code, using transaction code OKB9, first I want to cover the 8th column acct assignment detail this determines what folders you can use on the left-hand side other you will get a message at the bottom of the screen stating change the rule for that detailed account assignment first the three options are below 1 (valuation area) allows you to use the business area folder 2 (business area) allows you to use the business area folder 3 (profit center) allows you to use the profit center folder

Select one of the three above allows you to create one or more break down using the business area or the profit center folders (right-hand screenshot), this example cost element 416400 will use cost center SERVICES and valuation 1000 as the default assignment, this will be useful if you need to ensure that all postings to an account are reflected in a certain cost center. You could for instance allocate all electric power utility costs to one cost center then us distribution to allocate them to other cost centers based on electric power consumption during the period-end processing.


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Period-End Closing

Period-end closing allows you to make changes to controlling so that the data is ready for the users, you can create manual postings to reclassify amounts posted in CO and run accrual calculations, allocations and activity prices. What we are talking about here is actual values, basically you follow the steps below which we have already discussed above for planning Periodic repostings Distribution Assessments Activity allocation Accrual calculation You can use the below table for the transaction codes but instead you will use the actual transaction codes, the only difference with the planning and the actual is that you don't use the version however you will need to go through the process of creating the cycles, etc. PLAN Create

Change

Display

Delete

Execute

Overview

Periodic Reposting

KSW7

KSW8

KSW9

KSWA

KSWB

KSWC

Distribution

KSV7

KSV8

KSV9

KSVA

KSVB

KSVC

Assessment

KSU7

KSU8

KSU9

KSUA

KSUB

KSUC

indirect activity

KSC7

KSC8

KSC9

KSCA

KSCB

KSCB KSW6

ACTUAL Periodic Reposting

KSW1

KSW2

KSW3

KSW4

KSW5

Distribution

KSV1

KSV2

KSV3

KSV4

KSV5

KSV6

Assessment

KSU1

KSU2

KSU3

KSU4

KSU5

KSU6

indirect activity

KSC1

KSC2

KSC3

KSC4

KSC5

KSC6

Variances

Variance will happen then you get differences between planning and actual costs (over-absorption/under-absorption), which helps you to measure the efficiency and productivity of a company or production line. There are two kinds of variances input variances and output variances

Input Variances

Input price variance ‐ this is caused by a change in price of the material component or the price of the activity type, for example planned hours were priced at $10 but actually they were priced at $12, the same amount of hours were used. Input quantity variance ‐ this is caused if the plan quantity differs from the actual quantity consumed, for example additional hours were used but the price of the hours remained the same. Resource usage variance ‐ no actual or target costs exist for a cost center, for example the planning and actual cost elements are different, the system cannot assign the difference to the input price or input quantity variances so it classifies it as a resource usage variance Remaining input variance ‐ you choose not to calculate the input quantity, input price or resource‐usage variance and the system cannot assign to any of the above variances

Output Variances

Output price variance ‐ when a activity price (such as cost per labor hour) was entered manually output price variance = (planned price ‐ actual price) X accrual activity Output quantity variance ‐ when a quantity was posted manually for the activity type output quantity variance = (actual quantity ‐ manually entered actual quantity) X accrual price Fixed cost variance ‐ the difference between fixed costs and planned costs

You can use transaction code OKA8 to calculate and post the input price variances for primary postings, basically the below will post 100% of the input variance to the cost element 465000 for all periods.

After defining the cost element for primary variances you define which kind of variance the system will calculate for the controlling area and the version, you can use transaction OKVF, simply tick or untick which ones you require, you can use the minor difference field to determine a threshold, any variances under this threshold will be assigned to the relevant categories (such as input variance output, input quantity output, etc)


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Lastly you can assign the variance variant to the version and controlling area using transaction OKV5

The process to calculate the variances are as follows 1. Calculate target costs 2. Perform cost splitting 3. Calculate variances Information System

Now we have setup all the costing configuration we finally get to see the results, there are a large number of reports relating to costing and I will only cover a few here

As I don't have any data in my DCC company yet I will use the IDES system data, we have already seen report S_ALR_87013611

Other report is to view the activity types using transaction code KSBT, there are a number of filters that you can to reduce the size of the report


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I suggest that you have a look at the reports and see if there is one that the management would like, you can also create new reports using the report painter or report writer, there additional reports using transaction code GRR3, you can use transaction code OKD3 to import them and then transaction code OKB6 to generate them. Lastly if you are a technical person you will mainly be driven from the business regarding chart of accounts, cost elements, activity types, etc, however it is good to understand why a business what's the reports in a specific manor and how they decide to categorize groups, elements etc.


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