Period End Controlling

Period-End Posting In CO
SAP AG
PeriodEnd Postings In CO: Unit Contents

Overhead Management
Cost Object Controlling (Order Related)
Selling Goods and Services
Profitability Accounting
Reconciliation Ledger
PeriodEnd Closing Process
SAP AG
SAP AG
TACO10
17-1
PeriodEnd Postings In CO: Unit Objectives

At the conclusion of this UNIT, you will be
able to:
Post Statistical Key Figures, perform an
Assessment of costs and settle an Overhead Order.
Allocate overhead surcharges, and assign Process
costs, to an order. Deliver material to stock,
calculate WIP and Variances. Settle the balance of
an order.
Execute Profitability Accounting Reports.
Explain the purpose of the Reconciliation Ledger
and execute appropriate reports.
Explain the PeriodEnd process.
SAP AG
SAP AG
TACO10
17-2
You Are Here!

HR
MM
FI
SD AA
+ABC
CO
CO
12
$$
Postings to CO
From Other Modules
Event-Based
Postings in CO
1
12
OM PC Profit
FI
CO
Period-End
Postings in CO
Planning and
Plan Integration
AC040
$
t
OM PC Profit
Reporting Tools
Reflecting Your
Business in CO
INT EXT
OM PC Profit
FI MM HR AA SD
Which
Button?
AcceleratedSAP
R
Overview of CO
Getting Started
Course Review
SAP AG
SAP AG
TACO10
17-3
PeriodEnd Postings In CO: Business Scenario

As you continue your review, you find that the second
major category of transaction involves postings
performed at the end of each accounting period. Here
again, there are a number of transactions of this type,
some having broad applicability throughout CO, while
others are more specific.
Your review reveals that many of these period-end
postings involve allocations. The purpose is to
assign the costs to their proper locations. As you
explain to the auditors, these period-end closing
activities follow a particular sequence, and are
intended to provide accurate periodic operating
results to management.
You find that the auditors have many questions in the
production area. You must explain the process flow
in CO that accumulates production costs during the
period, and then calculates the balance
sheet WIP values.
R
SAP AG
SAP AG
TACO10
17-4
Overhead Cost Controlling

At the conclusion of this TOPIC, you will be
able to:
Post Statistical Key Figures to a
Controlling Object.
Perform an Assessment of costs from one
Cost Center to several others.
Perform a Settlement, of an Overhead
Orders costs, to a Cost Center.
SAP AG
SAP AG
TACO10
17-5
Entering Statistical Key Figures

Cost Center 4110
Periods
12
Type 01
Employees
20
20
20
20
Type 02
Counter no.
1300
1355
1275
1325
Posting
period
SAP AG
SAP AG
TACO10
17-6
Statistical key figures are used in calculations in the information system and to provide a basis for
periodic allocations. For example, the statistical key figure Employees might be used to report on
personnel costs per employee, or used to apportion costs incurred by the Cafeteria cost center to all the
cost centers which it supports.
Statistical key figures are created as master data records. When the master record is created, it must be
classified in one of two statistical key figure categories: fixed values or totals values. A fixed values
(Type 1) statistical key figure is used to post values that are valid as of the period posted and for all
following periods in that fiscal year. You need not post a new statistical key figure value for the
balance of the year unless the value changes. A totals values (Type 2) statistical key figure is used to
post values that are valid only for that posting period. A separate posting is required for each
subsequent accounting period.
Linking Statistical Key Figures to LIS Data

Assign key figures to quality assurance costs by number of purchase orders
Allocation of processes to cost centers
Vendor: 1 - 1000
Material no.: *
Purchased by: *
...
LIS
4000 purchase orders

placed domestically
Cost center
"Production 1"
Variant
"Domestic"
database
Vendor
0005
1500
0100
No. of Orders
1500
6000
2500
Cost center
"Quality
assurance"
Vendor: 1001 - 2000 Variant

"Foreign"
Cost center
"Production 2"
Material no.: *
Purchased by: *
...
Reference base:
number of purchase
orders
6000 purchase orders

placed abroad
SAP AG
SAP AG
TACO10
17-7
Statistical key figures can be linked to an appropriate field in the Logistics Information System (LIS).
In this example, the costs in the Quality assurance cost center are allocated to the production cost
centers on the basis of the number of purchase orders created for each receiving cost center. The
values for the statistical key figure number of purchase orders could be posted manually in Cost
Center Accounting to the production cost centers.
Instead of manually posting values for the statistical key figure, you can link it to an appropriate field
in (LIS).
Periodically, you can copy the LIS values into cost controlling as values for the statistical key figures,
making manual entry unnecessary. Variants must be defined to select the correct LIS data.
Periodic Activities in Overhead Cost Controlling

Cost Centers
Orders
Senders
Quantity based
(Activity & Process)
Cost based
-
Accrual costs (on CCtr only)

Periodic Reposting
Distribution
Assessment
Surcharges (except CCtr)
Order settlement
- Indirect (with defined

sender quantity)
- Indirect (with undefined
sender quantity - Inverse)
- Target = Actual
- Quantities through Template
Cost Centers
Orders
Receivers
Projects
SAP AG
SAP AG
TACO10
17-8
There are several methods available to carry out periodic allocations in Overhead Cost Controlling.
Pure cost allocations are used to move costs from sender objects to receiver objects. A value flow
always takes place. It is possible to also include a quantity flow in the cost allocation. This is optional
and dependent on whether you activated the Record quantities indicator in the master record of the
cost element(s) used in the cost allocation. The type of cost element used in executing cost allocations
(primary and/or secondary) depends on which form of allocation is being used. Please note, that
technically accrual costs and periodic repostings are not considered to be cost allocations.
Activity allocations can also be utilized in the periodic allocation process, depending on the cost
accounting method used. In activity allocation, a quantity flow always takes place. An additional
value flow takes place either immediately or at the end of the period. Activity allocation is always
executed using an allocation cost element.
If the Activity Based Costing application component is active, periodic process allocations can be
performed using process templates. These are also quantity based, with an associated value flow.
Typical Activities for Overhead Objects

Senders
Receivers
Allocation cost center

"Periodic Reposting"
Retaining the original

cost element (Primary)
Main cost center

Internal order/project
Process
Service cost center

"Distribution"

Cost center
Process
Service cost center

"Assessment"
With use of assessment

cost element (Secondary)
Cost center
Process
Credit object
Cost Center/Standard order
Accrual cost calculation"
With use of accrual

Cost center
Production cost center

Credit via
"Order surcharge"
With use of overhead

cost element (Secondary)
Order/Project
"Settlement"

cost element or with
settlement cost element
Internal order
Project
Cost center
Order
Project
...
R
SAP AG
SAP AG
TACO10
17-9
Of the allocation methods listed above, the first four can be used only within Overhead Cost
Controlling. The last two can be applied to objects outside of OCC, such as projects.
All allocations can be repeated as often as desired in an accounting period.
Periodic Cost Allocation Methods

Method
Technique
Accruals
Costing Sheet
Surcharges
Costing Sheet
Periodic Reposting
Cycle / Segment
Distribution
Cycle / Segment
Assessment
Cycle / Segment
SAP AG
SAP AG
TACO10
17-10
The goal of accruals is to debit a given cost center with additional cost. Similarly, the goal of
surcharges is to debit a given order with the appropriate overheads. For both of these, the calculation
is carried out with the aid of a costing sheet.
The goal of the other allocation methods is to move costs from a sending cost center (crediting the cost
center) to one or more receivers such as cost centers and orders (debiting the receivers) in order to
assign overhead costs to the true cost originator. These allocations are defined and carried out with the
aid of cycles and segments.
Cost Center Accrual Costs
Cost Center
Accrual Cost
Calculation
in FI and AM
Transfer
Amount taken from

feeder systems
or calculated in
Controlling
Accrual Cost Calculation

in Controlling
- Overhead method: activityindependent, defined as a
percentage overhead
- Target = actual method:
activity-dependent,
adjustment based on
operating rate
Accrual Cost Amount:
Consideration of
Timing differences
Opportunity costs
Valuation differences
SAP AG
SAP AG
TACO10
17-11
Operating expenses may be allocated differently in financial accounting than in cost accounting. Some
of the situations that may require a different allocation approach in FI and CO are:
Timing differences: For example; FI may not accrue estimated maintenance expense on plant &
equipment. However, CO may accrue for each period to prevent fluctuating activity type prices.
Opportunity cost: For example; A company may own a building that could be used as a rental
property or used internally for production. If the choice is made to forego the rental income and
use the buildings internally, there is an opportunity cost which is not shown in FI but is required in
CO.
Valuation differences: For example; The method of calculating depreciation expense in FI/AA
may be different to the requirements of CO.
Accruals posted in FI will automatically be transferred to CO. However, for posting accruals in CO
that are not reflected in FI, there are two methods available:
The Overhead method calculates activity-independent accruals by spreading a percentage
overhead across a reference cost element base.
The Target=actual method is used to calculate activity-dependent accruals. You plan the activitydependent primary costs with the aid of an accrual cost element on the cost centers for which you
want to calculate the accrual. When calculating an accrual for actual costs, the R/3 System
determines the target costs of the relevant cost center based on an activity type and inserts the
target values in the fields for actual values.
Allocation Cycles
Cycle 3
Cycle:
- hierarchical
- iterative
Cycle 2
Cycle 1
Segment 3
Receiver 1
Segment
3
Sender 1
Segment
2
Receiver
1
Empfnger 2
Rules
Segment
3
Sender 1
Receiver 1
Segment
2
Receiver
1 Sender
Empfnger
2
Empfnger 3
1
Sender 1
Segment
1
Sender
2
Receiver
1
Empfnger
2
Segment
2Empfnger
2
Empfnger 3
Empfnger
4
Sender
1
Empfnger
1
Segment
1
Sender
21
Receiver
Empfnger
2
Empfnger 3
Sender
1
.
.
.
.
.
Empfnger 3
Empfnger
4
Sender 1
Sender
2 1
Empfnger
Empfnger 2
Segment
1
Sender
2
Empfnger
2
Empfnger
3
Empfnger 4
Sender .1. . . .
Empfnger
4
Sender
2
Admin
Empfnger
2
Empfnger
3
.....
Empfnger 3
Empfnger
4
Mainte-. . . . .
Sender
2
Sender 2
Production
Empfnger 3
Empfnger 4
nance
.....
Empfnger
4
Sender
2
.
.
.
.
.
Admin
Empfnger 4
.....
Cafeteria
.....
Sales
.....
R
SAP AG
SAP AG
TACO10
17-12
Periodic Reposting, Distribution, and Assessment are defined with cycles and segments. An
allocation is performed by executing one or more cycles. A cycle may contain multiple segments. A
segment is used to define a sender-receiver relationship and the rules according to which the sender
values are to be allocated to the receiver(s).
Theoretically, you can define a cycle for an entire controlling area. For operational and system
performance reasons, however, you can create several cycles, which are processed sequentially. This
division into cycles is advisable for several reasons:
You can allocate the costs of organizational sub-areas separately by dividing them into cycles.
You do not have to repeat all the cycles if errors occur or changes are required. For example,
assume you have divided your allocations into four cycles. An error occurs in executing the third
cycle. You can correct this error and repeat the allocation for this cycle. You only have to repeat
the fourth cycle if it is dependent on the results of the third cycle.
Multiple cycles may be attractive to organizations with a large number of cost centers or business
processes, where it is too time-consuming to process allocations in a single cycle. Dividing
allocations into multiple cycles also allows you to allocate costs at different times.
If no cyclical links exist between your cost centers (when a receiver is also a sender), you can
deactivate the Iterative indicator in the cycle definition header. In this case, the SAP R/3 System
processes the segments in the cycle in succession without iteration. This makes processing much
faster. If you want to process the allocation iteratively, you must activate the "Iterative" indicator.
Parallel processing of cycles, using cycle run groups, can bring considerable time savings.
You create separate cycles for plan and actual allocations.
Periodic Reposting
Clearing Cost Center
473120 +15,000.473120 - 15,000.-
Telephone
January
Allocation Rule:
Statistical key figure
(long-distance calls)
Long-Distance
2000
Long-Distance
2000
Long-Distance
1000
2100 - Finance &

Administration
473120 +6000.-
2200 - Human
Ressources
473120 +6000.-
2300 Purchasing
473120 +3000.R
SAP AG
SAP AG
TACO10
17-13
A Periodic reposting is used purely as a posting aid.

Transactions relevant to Controlling (CO) such as telephone costs, postal charges, insurance, and so on
are entered in Financial Accounting (FI) and posted to an allocation cost center, which is used
exclusively for cost collection. This minimizes the number of different cost center assignments you
have to make when entering data in FI. At the end of the period, the costs in the allocation cost center
are reposted to the cost centers which actually incurred the costs according to rules defined in the
allocation cycle.
Original (primary) cost elements are retained.
Periodic repostings should only be used when the identity of the allocation cost center is not important
to the receiver cost centers. In periodic allocation transactions, line items are recorded for both the
sender and receiver sides in order to document the allocation in full detail. However, in a periodic
reposting, the identity of the sender allocation cost center is not stored in the totals records. You can
only analyze where the costs come from using the line items, not the totals records. The SAP R/3
System therefore stores data records in a way that uses less memory.
The receivers on a periodic reposting can be other cost centers, WBS elements, internal orders or cost
objects. You can restrict the allowed receiver types in Customizing.
Periodic reposting can be reversed and repeated as often as desired.
Distribution
Electricity
Electricity Cost
Cost Center
Center
416100
416100 +23,000.+23,000.416100
416100 -- 23,000.23,000.-
Electricity
January
Allocation Rule:
Fixed percentages
30%
20%
50%
4220 - Production,
Production,
Pumps
4240 - Production,
Production,
Paints/
Paints/Solvents
4260 - Production,
Production,
Bulbs
416100 +6900.-
416100 +4600.-
416100 +11,500.-
SAP AG
SAP AG
TACO10
17-14
A distribution is intended for the transfer of primary costs from a sender cost center to receiver
controlling objects. Only cost centers may serve as senders in a distribution allocation.
The receivers on a distribution can be other cost centers, WBS elements, internal orders, cost objects or
CO-OM-ABC business processes. You can restrict the allowed receiver types in Customizing.
Primary postings (such as energy costs) are collected on a service cost center and allocated at periodend closing according to rules defined in the distribution cycle.
Only primary costs can be distributed. The original cost elements are retained on the receivers.
Line items are recorded for both the sender and receiver sides in order to document the allocations in
detail. In comparison to a periodic reposting, a distribution updates the partner in the totals record so
that it may be identified on the totals record level in the information system.
Distributions can be reversed and repeated as often as desired.
Assessment
Cafeteria
420000
6000.416100
1000.612000
2000.
9000.631000
-9000.Assessment (Cafeteria)
420000 Direct Labor

January
416100 Electricity
612000 Maintenance
Allocation Rule:
Statistical key figure
(Employees)
Employees
30
Employees
10
Employees
50
1000 - Corporate
Services
1220 - Motor Pool
3200 - Marketing
631000 +3000.-
631000 +1000.-
631000 +5000.R
SAP AG
SAP AG
TACO10
17-15
An Assessment is designed for the allocation of primary and secondary costs from a sender cost center
to receiver controlling objects. Only cost centers or business processes may serve as senders in an
assessment allocation.
The receivers on an assessment can be other cost centers, WBS elements, internal orders, cost objects,
or CO-OM-ABC business processes. You can restrict the allowed receiver types in Customizing.
Primary and secondary costs are allocated at period-end closing according to rules defined in the
assessment cycle.
Each segment of an assessment cycle is assigned an assessment cost element (secondary cost element
category = 42). All costs allocated in an assessment are classified on the receiver(s) with these
assessment cost elements.
Line items are recorded for the sender and receiver sides in order to document the allocations in detail.
The original cost elements are not displayed on the receivers; therefore, an assessment allocation is
useful when the breakdown of costs is unimportant to the receiver.
Similarly to a distribution, an assessment updates the partner in the totals record.
An assessment can be reversed and repeated as often as desired.
Sample Sender-Receiver Relationship

Receiving
Cost Center
Administration"
Sending Cost Center

Energy"
Costs to be allocated:
Material
Wages
M Floor Space:
40
Allocated Costs:
Material
300
Wages
400
Tracing
factor:
M Floor
Space
Receiving
Cost Center
Production"
3000
4000
M Floor Space:
360
Allocated Costs:
Material
2700
Wages
3600
SAP AG
SAP AG
TACO10
17-16
This is an example of a Sender-Receiver relationship within an Allocation Cycle. The same principle
applies to Periodic Repostings, Distributions and Assessments.
Here, the sending Cost Center has costs to allocate to the receiving Cost Centers. This allocation will
be done using an appropriate Tracing Factor (a user-defined key for determining cost and quantity
assignments in periodic allocations, in this case a Statistical Key Figure representing the Number of
M Floor Space that each Receiving Cost Center occupies).
The allocation cycle uses this information to determine the costs to be allocated to each Receiving
Cost Center as follows:
Receiving Cost Center Administration occupies 40 M Floor Space
Receiving Cost Center Production occupies 360 M Floor Space
Total number of M Floor Space is 400
Therefore, Administration is allocated costs of;
Material Costs = (40/400) * 3000 = 300
Wages Costs = (40/400) * 4000 = 400
Overhead Cost Allocation via Surcharges

Credit Object:
Cost Center
Orders
Costing Sheet
Area 1
Area 11
Debiting under
overhead cost
element
Area 12
Surcharge
Cost Center 1
Credit
Object:
Internal Order
Crediting
under
overhead cost
element
Crediting under
overh.
overh. cost element
Cost Center 2
- Percentage of base
cost element
- In reference to
quantities
- On the basis of
dependencies
- On the basis of
fixed and
variable
cost portions
Costing Sheet
Debiting under
overhead cost
element
SAP AG
SAP AG
TACO10
17-17
The Surcharge is another form of periodic cost allocation. The receiver is an order, and the sender is a
cost center or another order.
A surcharge can be calculated on the basis of a percentage of base costs, or as a fixed amount per a
reference quantity. For example, assume that a surcharge must be calculated for material handling
costs when lengths of plastic pipe are withdrawn from inventory and issued to an order. The surcharge
amount could be calculated as a percentage rate of the cost of the pipe, or as a fixed overhead amount
per meter of pipe length.
The costing sheet is the mechanism used to define the base costs, allocation percentage, and the
allocation cost element. The costing sheet is assigned in the order master record.
Overhead Surcharges - The Costing Sheet

Costing Sheet (A00001)
Base
Overhead
B000
C010
B001
B002
C011
Base:
B000
Portion:
Total
From cost
element
To cost
element
400000
419999
Total
Fixed
Variable
Text
Credit
Material
MaterialO/H
Wages
Salaries
Manuf. O/H
E01
E02
Credit: E01
Overhead: C010
Valid to
Cost el
12/31/99
655110
Dependency D010
Valid from
Valid to
CO area OT
01/01/94
...
12/31/99
1000
10
% Fxd CCtr
4130
0.0
Surcharge var.
var.
100.0 Surcharge fixed
*
Apport.
Apport. as base
SAP AG
SAP AG
TACO10
17-18
The costing sheet functions as follows:

Cost elements or ranges of cost elements are collected in base lines.
Example: the base B000 is defined as the range of cost elements from 400000 to 419999 all costs
for raw material.
A surcharge is calculated on one or more base lines.
Example: the overhead C010 is defined to be 10% on actual material costs for the date range
indicated. (OT is the overhead type. The value 1 indicates actual surcharge, and 2 is
planned surcharge).
The surcharge results in a cost center (or other order) being credited under a credit cost element.
Example: E01 specifies that cost center 4130 is the sender, and the credit will be posted under cost
element 655110.
Order Settlement
Possible
Settlement
Receivers
Orders
Cost Center
Debits
% Credits
Order Balance
Settlement
Options:
Project
- Cost element specific via

settlement cost element
- Settlement rule to all
all cost elements or
differentiated based on
origin layout
- Distribution: % / amount /
equivalence number
- Based on settlement
hierarchy
Order
Profit. Segment
G/L Account
Asset
Customer Order
With Cost Collector
..
.
R
SAP AG
SAP AG
TACO10
17-19
Internal orders are usually used as an interim collector of costs and an aid to the planning, monitoring,
and reporting processes. When the task is complete, the costs have to be passed on to their final
destination (cost center, fixed asset, profitability segment, ... etc.). This process is called "settlement".
It is another form of periodic cost allocation.
Settlement may occur at the end of each period, or at the end of the order's life, depending on the type
of order and its business purpose.
An order settlement can be made to numerous different types of receivers, as long as the receivers are
defined as valid in customizing and no impending system restrictions (such as locks) prevent
settlement. Examples of possible settlement receivers include cost centers, other orders, projects,
profitability segments, fixed assets, and G/L accounts.
A settlement rule must be defined for each order. This rule is defined in the order master record. It
may specify that all of the costs on the order are settled to a single receiver, or may be split to multiple
receivers.
Settlement can be structured quite flexibly with the use of the many available settlement options.
Settlement of Order Costs

Order: 600123
400000
403000
620000
Cost Center: 4010
400000
403000
620000
600030008000-
300015004000-
Cost Center: 4020
400000
403000
620000
650000
Using original cost elements

Order: 601231
400000
403000
620000
800040007000-
3000150040009,500-
Order: 603200
650000
9,500R
Using settlement cost elements
SAP AG
SAP AG
TACO10
17-20
Order settlement can occur using either the original cost elements that were posted on the order, or
using one or more settlement cost elements (a type of secondary cost element).
The use of original cost elements allows you to identify in detail the types of costs that were allocated
to each receiver, such as material, supplies, and personnel costs.
Alternatively, the use of settlement cost elements clearly identifies which costs on a receiver were
posted as a result of an order settlement.
After settlement, the costs that had been incurred on the order are still visible, even if the order cost
balance is zero. This allows you to analyze and report on your order costs at any time.
Each time an order is settled, a settlement document is created. The settlement document number is
required if you reverse a settlement run or repeat a period closing. The number ranges for settlement
documents are defined in customizing. To manage data volumes, you can define the retention period
after which settlement documents can be archived. This is specified in the settlement profile.
In addition to the settlement document, the system also creates the following documents:
A CO document containing purely cost accounting-related data
An FI document containing all accounting-related data (external settlement only)
Periodic Quantity Allocation Methods

Method
Technique
Indirect Allocation
(with defined sender
quantity)
Cycle / Segment
Indirect Allocation
(with undefined sender
quantity - Inverse)
Cycle / Segment
Target = Actual Activity

Allocation
Cycle / Segment
Process Assignment
Template
R
SAP AG
SAP AG
TACO10
17-21
There are three forms of periodic allocations that are based on allocating quantities. In each case,
there is an associated cost flow.
The first two methods, Indirect Activity Allocation with defined or undefined sender quantity, are both
executed with the use of cycles and segments. This is the same technique used with periodic
reposting, distribution, and assessment.
The process allocation is performed with the use of a process template, which is defined in CO-OMABC customizing.
IAA Method 1 - Defined Sender Quantity

Receiving
Cost Center
"Production 1"
Sending
Cost Center
"Quality Control"
Activity
"Tester hours"
Activity Price:
Defined Activity
Quantity:
Tracing
factor:
Number of
Test Items
Test Items:
6000
Calculated Activity
Quantity Received:
600
Resulting Cost:
30000
Receiving
Cost Center
"Production 2"
50/Hr
1000 Hrs
Test Items:
4000
Calculated Activity
Quantity Received:
400
Resulting Cost:
20000
R
SAP AG
SAP AG
TACO10
17-22
This is an example of Indirect Activity Allocation with Defined Sender Activity Quantity.
The sending cost center has 1000 Tester Hours (the activity type being allocated) to send to the
receiving cost centers.
However, we cannot determine, directly, how many Tester Hours should be assigned to each of the
receiving cost centers. The system will calculate this using an appropriately defined Tracing
Factor.
In this case, we assume that the number of Test Items (for each receiving cost center) is a
reasonable approximation of how the Tester Hours are used. The number of Test Items is
represented in the system as a statistical key figure (the value for this may have come from the
LIS, or may have been entered manually).
The Indirect Activity Allocation cycle uses this information to determine how many Tester Hours
each receiving cost center should be allocated, as follows:
Receiving cost center Production 1 had 6000 items tested
Receiving cost center Production 2 had 4000 items tested
Total number of Test Items is 10000
Therefore, Production 1 is allocated (6000/10000) * 1000 Tester Hours = 600 Hrs
Resulting value flow to Production 1 is (600 Hrs) * (50/Hr) = 30000
IAA Method 2 - Undefined Sender Quantity

Receiving
Cost Center
"Production 1"
Sending
Cost Center
"Quality Control"
Activity
"Tester hours"
Total Costs:
Inversely calculated
Activity Quantity:
Tracing
factor:
Number of
Test Items
Test Items:
6000
Calculated Activity
Quantity Received: 6000
Resulting Cost:
30000
Receiving
Cost Center
"Production 2"
50000
10000
Test Items:
4000
Calculated Activity
Quantity Received: 4000
Resulting Cost:
20000
R
SAP AG
SAP AG
TACO10
17-23
This is an example of Indirect Activity Allocation with Undefined Sender Activity Quantity.
Here, the sending Cost Center has an unknown number of Tester Hours to send to the receiving Cost
Centers. We only know what the total costs are.
Also, as with the previous method, we cannot determine, directly, how many Tester Hours should be
assigned to each of the receiving Cost Centers. Therefore, the system will calculate this using an
appropriately defined Tracing Factor.
In this case, we again assume that the number of Test Items (for each receiving Cost Center) is a
reasonable approximation of how the Tester Hours are used. The assumption is made that it takes one
hour to test one item. The number of Test Items is represented in the system as a Statistical Key Figure
(the value for this may have come from the LIS, or may have been entered manually).
The Indirect Activity Allocation cycle uses this information to inversely determine how many Tester
Hours each receiving Cost Center should receive, as follows:
Receiving Cost Center Production 1 uses 6000 Test Items
Receiving Cost Center Production 2 uses 4000 Test Items
Total number of Test Items is 10000
Inversely calculated Tester Hours equals the number of Test Items (i.e. 10000 Hrs)
Therefore, Production 1 is allocated (6000/10000) * 10000 Tester Hours = 6000 Hrs
Resulting Value Flow to Production 1 is (6000 Hrs) * (50000/10000) = 30000
Business Process - Assignment Techniques

Composite
Approach:
Cost
Assignment
Bottom-Up
Approach:
Process
Distribution
Assessment
ATyp
Assessment
Process
Process
Cost Objects
3
Process
Template &
Indirect
Direct &
Indirect
ATyp
Direct
Charging
Quantity
Tracing
Quantity
Price
Profitability
Segments
Processes
Cost Centers
Process
Resource Consumption
4
R
Process Consumption
SAP AG
SAP AG
TACO10
17-24
Here we can see that there are two basic approaches to the assignment of Business Processes.
The Composite approach: This corresponds to a very simple ABC model. Only costs (not quantities)
are allocated from cost centers to processes and finally from processes to cost objects or profitability
segments. The cost assignment is done on the basis of tracing factors which are linked to the receiving
objects. These tracing factors represent the Resource and Cost drivers. As no quantities are allocated,
no measurement of Idle Capacity is possible.
The Bottom-Up approach: This starts at the end of the value flow chain. Based on the number of
products produced, the corresponding process quantities are pulled by the cost objects. The processes
in turn pull the required resources quantities (activity types) from the cost centers. These resource
quantity flows are then valued at the appropriate activity type prices. The process price can then be
determined and the process quantity flows valued accordingly.
Resources consumed by processes may be allocated using the existing allocation techniques found in
R/3. The "value flows" resulting from assessments and distributions and the "quantity flows" from
direct, indirect or structured process assignments may be used. "Structured Processes" will lend
flexibility in quantity tracing by introducing a template structure allowing calculations and
"reusability" in the identification and usage of resource drivers.
The process template can now be used as an additional tool to trace processes to cost objects. The
process template dynamically calculates the cost driver quantities being consumed by the
corresponding cost objects based on operational data related to these cost objects.
Period-End in Overhead Cost Controlling (1)

Asset Accounting
Investment Management
Human Resources
Inverse activity allocation
Overhead Surcharges
Periodic repostings
Settlement of internal
orders
Accrual Costs
Distribution
R
Assessment
SAP AG
SAP AG
TACO10
17-25
At period end closing the costs in the overhead cost management area have to be allocated from
service cost centers to production cost centers. From production cost centers, the costs are then
allocated to cost objects or to profitability segments.
A possible sequence of the steps is shown in the diagram above:
In order to ensure the proper sequence of cost flows, application components that affect the
overhead management area, such as HR and FI-AA, have to be closed first. It may be necessary to
settle investment orders to AA. This capitalization of assets may result in additional depreciation,
which must be transferred to CO-OM. Surcharges may have been applied to investment orders
prior to the settlement to AA.
Allocations of costs and activities from cost centers may be posted to overhead orders, followed by
the calculation of surcharges. The orders can then be settled to cost centers. The service cost
centers can then perform cost and indirect activity allocations to production cost centers, followed
by accrual cost calculations to cost centers, if applicable.
After these period end closing activities, all overhead orders and all service cost centers should have a
balance of zero.
Period-End in Overhead Cost Controlling (2)

Cost Center
Balance
Assessment to
Profitability
Analysis
Variance
Analysis
Calculation of
Actual activity
prices
Revaluation of
the activity
quantity flows
R
SAP AG
SAP AG
TACO10
17-26
Even if you calculated a plan activity price, and valued all activity flows with this plan price, the
production cost centers will still not have a balance of zero. This could be attributable to a variety of
reasons, but fundamentally is due to imperfect planning. Actual costs and activity flows will almost
certainly not be equal to what was planned.
In order to do a period end closing for these production cost centers, you may do the following:
Execute a cost center variance calculation, where the variances between target costs and actual
costs are calculated by variance categories. The data is stored and can be analyzed later at any
time. This tool can not allocate costs, so the cost centers will not be balanced by this variance
analysis.
Calculate actual activity prices. The system accomplishes this by dividing the actual costs for the
period by the actual activity quantities produced in the period. The actual activity price can be
used just for comparison purposes with the plan price. But once the actual activity prices have
been calculated, they can also be used to revalue the activity quantity flows. The revaluation of all
activity quantity flows with actual prices should result in a zero balance for the production cost
centers.
Any remaining balances on any cost centers should be passed to profitability analysis by assessment.
Calculating the Actual Activity Type Price

Cost Center
Value-Based
+ Debits from:
Feeder systems
Allocations
within CO
- Credits from:
Allocations to
other CO objects
S
P
L
I
T
T
I
N
G
Quantity-Based
- Credits from:
Activity
allocations
for each activity type
Actual activity price calculation

for each quantity unit
of each activity type
SAP AG
SAP AG
TACO10
17-27
Activity allocations are used to credit cost centers (move costs from the cost centers). Most cost
centers at period end do not have a zero balance because the actual costs incurred and the actual
quantities of activities produced are different from the planned values. Consequently, planned activity
prices will be incorrect.
To balance the cost center, you can allocate the over- or under-absorption (debit or credit balance)
directly to Profitability Analysis. Alternatively, the activity quantity flow can be revalued using an
actual activity price determined at the end of the period.
A prerequisite for actual activity price calculation is the assignment of the posted actual costs to the
various activity types. This can be done with the aid of cost splitting, which takes place in two steps:
1) The actual cost center costs are assigned to the activity types by cost element according to target
costs. If no target costs are available for a cost element, splitting is executed on the basis of the target
costs of the assigned cost element group.
2) If no target costs exist for the entire group, the remaining actual cost center costs are assigned to the
activity types by splitting rules. If no splitting rules are defined, the cost center costs are distributed to
the individual activity types on the basis of equivalence numbers.
Activity allocation can be revalued in Cost Center Accounting with actual activity prices. The
revalued flows can be posted in data records specially set up for this purpose, or through changing the
existing allocation postings.
Variance Categories
Total Variance
Input Side Variances
Output Side Variances
Input Price variance
Output Price variance
Input Quantity variance
Output Quantity variance
Resource Usage variance
Fixed Cost variance
Remaining Input variance
Remaining variance
SAP AG
SAP AG
TACO10
17-28
Variance calculation provides information on any discrepancies between target and actual costs. A
number of variance categories are used for this analysis, grouped together as input side variances and
output side variances. The input side deals with all cost center debits and some credits, whereas the
output side focuses on cost center activity allocations.
Variance calculation is cumulative - the total of all variances equals the total variance.
If you do not activate all the categories for input side variance, any remaining unclassified variances
are collected under the remaining input variance category.
If you do not activate all the categories for output side variance, any remaining unclassified variances
are collected under the remaining variance category.
If you do not activate any of the variance categories, all variances are collected under the remaining
variance category.
Input Side Variance Categories

Where does the over/under-absorption come from?
TARGET
From varying costs?
Actual
debit
Did the
prices change?
Input Side
Variance
Input Price
variance
40 cents
50 cents
+20%
Did the consumption

quantities change?
Input Quantity
variance
40 cents
80 cents
+100%
Were different input

materials used?
+50%
40 cents
Resource usage
variance
R
60 cents
SAP AG
SAP AG
TACO10
17-29
The input side of cost center variance categories comprises the total of all debits and some credits to
the cost center. Some credits, such as repostings, are included because they can be interpreted as a
reduction in the costs incurred to produce activities. Credits due to activity allocations are treated on
the output side.
Input side variance is divided into the following categories:
The input price variance is the difference between target and actual costs due to differences
between the plan and actual prices of materials or services. To calculate the prices, and with them
the price variances, you must have recorded consumption quantities in addition to costs during the
period.
The input quantity variance is the difference between target and actual costs due to differences in
the plan and actual consumption quantities. To calculate quantity variance, you must have
recorded consumption quantities.
The resource usage variance is the difference between target and actual costs due to the use of
different materials or services than those specified in planning.
The remaining input variance is the difference between target and actual costs that cannot be
assigned to any of the above categories. Input side variances will occur if you deactivate one of
the above variance categories in the variance variant.
Input side variance categories are displayed using cost elements.
Output Side Variance Categories

Where does the variance come from?
From varying
allocations?
Were
incorrect
prices
used?
Were the correct
amount of
activity
allocated?
Did the
operating rate
change?
Actual
credit
TARGET
Output Side
Variance
Output price
variance
Assembly hrs
USD 40,USD 70,USD 110,-
Alloc. 700
meter
1 2 6 0
line item 200
400
1300
Fixed costs
Output quantity
variance
Fixed cost
variance
R
SAP AG
SAP AG
TACO10
17-30
The output side of cost center variance categories comprises all crediting due to activity allocations
from the cost center. Allocated actual costs are compared with target or plan costs on the output side.
Output side variance is divided into the following categories:
The output price variance is the difference between target costs and allocated actual costs due to
the use of an activity price which does not fully credit the cost center. This can be the result of
using manual activity prices or average period activity prices, for example.
The output quantity variance is the difference between target costs and allocated actual costs due
to a difference between the actual activity allocation quantities and the quantities that were posted.
The measured quantity can be entered on the sender cost center and then be compared with the
allocated quantity. A difference results in an output quantity variance.
The fixed cost variance is the difference between target and actual costs due to different operating
rates in plan and actual, while fixed costs remain unchanged. It is made up of the sum of the
volume variance and the secondary fixed cost variance. Fixed cost variance is displayed using
cost elements.
The remaining variance includes differences between target and actual costs which cannot be
assigned to any of the above categories. Remaining variances will occur if you deactivate one of
the output side variances or the input variance in the variance variant.
Cost Object Controlling (Order Related)

able to:
Allocate overhead surcharges to an order
Allocate Process costs to an order
Deliver material to stock
Calculate WIP
Calculate Variances
Settle the order balance
SAP AG
SAP AG
TACO10
17-31
Process Chain: Order-Related Manufacturing

Order archived / deleted
Settlement
Variance calculation
Goods receipt
Order request
Order creation
HEADER
Availability check
OPERATIONS
OPERATIONS
MATERIAL
MATERIAL COMPONENTS
COMPONENTS
Release of order
WIP calculation
PRODUCTION
PRODUCTION RESOURCES
RESOURCES
COSTS
COSTS
Surcharging
PLAN
PLAN
TARGET
TARGET
ACTUAL
ACTUAL
20
50
Shop paper printing

Material withdrawal
Reval. with actual prices

Allocating process quantities
100
Confirmations
SAP AG
SAP AG
TACO10
17-32
At the end of the period, it is necessary to calculate the overhead surcharges for all of the costs that
have been debited to the production order. These debits may include both material and activity costs.
If the production order has not been completed at the end of the period, it may be necessary to
calculate and capitalize your Work In Process value. Within R/3, as component materials are issued to
the production orders, their value is credited to the inventory accounts, and debited to a consumption
expense account. The value does not move directly from raw material inventory to work in process
inventory accounts. It is also necessary to calculate the additional value that has been added to the
order through activity allocations, overhead surcharges, and process assignments. Although this value
is reflected on the production order cost object, it is not visible in FI and Profit Center Accounting
(PCA) without the use of the WIP calculation and the settlement transaction. The WIP calculation will
consider the debits and credits (for any partially delivered quantities) for the production order and
calculate a remaining WIP value. This value can then be passed to FI and PCA by means of the
settlement transaction. Transferring this value to FI will result in a debit to the Work In Process
inventory accounts, and a credit to a P&L account. If your order is final delivered, no WIP is
calculated for that order, and any existing previous WIP balance is cancelled.
Delivering the produced materials to stock credits the production order. The order balance after the
final delivery is the value of scrap and variances. You can use the tool variance calculation to
analyze the reasons for the variances in detail. These variance categories and scrap values can be
passed to CO-PA. However, only the remaining order balance, or price variance, as one total value
can be passed to FI.
The last step of the period-end closing is to settle the order balance, the WIP and the variances to FI,
Profitability analysis and PCA.
Cost Object Controlling with Processes

Material
Statistical key figures/LIS
Cost Center:
Energy
Activity:
KWh
Process Quantity
fix/variabel
Process:
Painting
Process Template
Process:
Drying
PP- Production
Order
Actual costs
SAP AG
SAP AG
TACO10
17-33
Process costs must be allocated to the cost objects at the beginning of the period end closing process.
Using cost drivers, the process template calculates the process quantities which are to be allocated to
the material/ cost object. This means that process quantities are pulled into the cost objects by the
production process using the process template.
Processes can use activities of cost centers to provide their process quantities. By allocating the
activities with the inverse activity allocation method, you can use data from a number of sources as
resource drivers, such as statistical key figures, data from the material master record, and data from
external sources. In this manner, activities are pulled by the process; the process determines the
activity quantity to be allocated by its resource drivers.
By dividing the costs of the consumed activities by the process quantities, the price per unit of a
process can be calculated. The process costs to be debited on a material/ cost object are determined by
multiplying the process quantity by the unit price. Consequently, process quantities are always valued
by the unit price of the process. A process quantity allocation will always have a combined quantity
and value flow.
For actual production, the functions within the process template can utilize the actual transactions that
were executed for the order to determine the cost drivers for the process allocation. Once the process
quantity can be calculated for the cost driver, this quantity can be multiplied with the process price,
and the result debited to the order. A document is created, and the process is credited for the same
amount.
Overhead Calculation
Direct material costs
Material overhead
Material costs
+
Direct production costs
Production overhead
Production costs
=
Cost of goods manufactured
+
Administration overhead
+
Sales overhead
Costing
sheet
Cost of goods sold
SAP AG
SAP AG
TACO10
17-34
The overhead costing sheet has the same function in period-end closing activities as it does for
calculating overhead surcharges when planning product cost (producing cost estimates).
Production order costs are controlled by a costing variant, just as a cost estimate is controlled by a
different costing variant. Consequently, it is possible to assign a costing sheet to the production order
automatically. The costing variant is always linked to a valuation variant, which itself is linked to a
costing sheet. The overhead sheet is then copied into the production order, and controls the overhead
surcharge calculation.
It is necessary to execute a separate transaction to apply the overhead surcharges to the production
orders. It does not happen dynamically during any other transaction process.
The calculation of the overhead surcharges will debit the production order and credit the overhead cost
center.
Simultaneous Costing: Actual Debit, Work in

Process (WIP)
Material Withdrawals
800
Production Order
Material:
Settlement:
Material
Production
Surcharges
0815
Material 0815
100 %
Confirmations
1200
Actual Costs
800
1200
400
Surcharges
400
2400
Plant Activity
-1200
Partial Delivery
1200
1200
WIP activated
1000
WIP non-activated
200
Settlement
Financial Accounting Profit Center

1000
1000
200
200
SAP AG
SAP AG
TACO10
17-35
The value basis for the calculation of work in process (WIP) can be either the actual costs incurred on the order,
or the planned costs for the completed operations.
When using the actual costs approach, the WIP value per order is the difference between debited actual costs and
the total credits for any partial deliveries.
When using the planned costs approach, the WIP value is determined by multiplying the quantity remaining at
each operation with the planned costs for that operation. The planned costs are determined by using either the
current standard cost estimate or a version specific cost estimate. The version specific cost estimate is most
common in repetitive manufacturing.
In both cases, you can use customizing to determine which portion of the costs should be capitalized (such as
100% of the material costs, 80% of the material overhead costs, and 0% of the production overhead costs). It is
possible to capitalize the entire WIP value.
Customizing will also define if the calculation basis should be the actual or planned costs. This can be defined
by the different types of manufacturing order types and the manufacturing plant.
Variances: Target Versions

Product Costing:
Plan Costs
Order:
Plan Costs Target Costs
Scheduling
Order:
Actual Costs
Production
Target Version 2 Basis:

Order Plan Quantity
Price variance...
Res.-usage variance...
Quantity variance..
Input variance ...

Order Actual Quantity
Price variance...
Quantity variance..
Input variance...
Totals.

Order Actual Quantity
Scrap ...
Price variance...
Quantity variance..
Input variance...
Lot size variance...
Output-price variance. ...
SAP AG
SAP AG
TACO10
17-36
The two scenarios for order settlement are full and periodic. Full settlement requires the order to be
final delivered before variance calculation can be processed. For objects with periodic settlement
this is not a prerequisite. The first scenario is called Controlling by lot, the other Controlling by
Period.
For objects with full settlement, variances can be determined by comparing the following:
Target Version 0: Compares the actual order with the target costs based on the current standard
cost estimate for the material. The target costs are determined on the basis of the completed
quantity for the order. The variances calculated from this version determine the variances between
actual production and the product standard.
Target Version 1: Compares the actual order costs with the target costs based on the planned costs
of the order. Again, these target costs are determined on the basis of the completed quantity for the
order. The variances calculated from this version determine the variance between planned
production and actual production.
Target Version 2: Compares the planned order costs with the target costs based on the current
standard cost estimate for the material. These target costs are determined on the basis of the
planned order quantity. The variances calculated from this version determine the variance between
the current QSID (quantity structure ID) and valuation, and the product standard.
Target Version 3 (not shown in the slide): Available since 4.0, we can use this version to compare
the actual order costs for production with any other cost estimate that has been prepared for the
material. The target costs for this version are based on the completed quantity. These variances
could indicate the variances due to alternate production methods.
For the scenario Controlling by lot you use full settlement.
Variance Analysis
by cost element
variances:
input side
Price
20
50
100
Quantity
Variances between the

planned and the actual
prices of the resources
Variance between the
planned and the actual input
quantities of the resources
variances:
output side
Variance between planned lot
size fixed costs and actual lot
set up size fixed costs calculated in
the delivery
Lot size
Resource Variances between the

planned and the actual
usage of resources
Outp.price Variance between the targeted

crediting (S-price) and the actual
v
crediting of the order (V-price)
S
Variance, which is not

part of one of the other
input variances. e.g.
overhead
Remaining Variance, which is not part of

sum of
one of the other input variances.
variances
e.g. overhead
<> total variance
Input
overhead 25%
150,- (actual)
instead of
100,- (target)
SAP AG
SAP AG
TACO10
17-37
Input price variances: Differences between the planned prices and the actual prices of the materials
and activities.
Input quantity variances: Differences between the planned quantities and the actual quantities of the
materials and activities.
Resource-usage variances: Differences due to materials and activities being used that were different
from those that were planned for use.
Remaining input variances: The system calculates variances for each cost element on the input side. If
it cannot assign a variance to any of the above categories, it assigns the variance to the remaining input
variance category. This can happen when costs are entered without a quantity, when the overhead
rates are changed, or when the calculated overhead surcharge changes due to a change in the
calculation base.
Lot size variances: Differences between the lot-size-independent planned costs and the lot-sizeindependent actual costs that are passed on when you deliver the order quantity to stock. A lot-size
variance occurs when the lot-size-independent costs, such as set-up, do not change even though you
change the quantity of goods manufactured.
Output price variances: Differences between the target credit (confirmed quantity at standard price)
and the actual credit (confirmed quantity at moving average price) that was posted when the goods
were received. This can occur for materials with moving average price control.
Remaining variances: Differences between the target costs and the charged actual costs that cannot be
assigned to the category for lot-size variances or to the category for output price variances. Variances
due to rounding can also occur in this category.
Variances: Integration
Component Structure
for 10 Pieces
Material
600.-
Cost Object
Produc.
Produc. Surcharge
1100.300.-
Material 0815
Quantity Produced:
Produced: 10 pc
Actual
Material
Master
Material
Production
Surcharge
Accounting standpoint
Standard price 200.-
Stock receipt
Variances
Financial Accounting
FI
Warehouse
2000
MM
Price Difference
800
1200
400
2400
- 2000
400
Target Version 0
Price
Quantity
Resource
Input
Lot Size
Remaining
150
150
100
0
0
0
COPA
Profitability Analysis
400
Variances
Warehouse
400
Settlement
SAP AG
SAP AG
TACO10
17-38
There are two types of value flows that can occur when settling a production order. These are settling
values to FI and settling values to CO-PA. Within FI, the remaining order balance after all debits have
been processed, and the material is delivered to stock, is considered a price difference. For CO-PA,
the variances that occur during the production process are categorized during variance calculation, and
these variance categories can be transferred into CO-PA.
For materials with standard price control, the credit applied to the order during delivery will be based
on the current standard price from the material master. The remaining order balance will be passed to
FI as a price difference during settlement processing.
For materials with moving average price control, the credit applied to the order during delivery is
based on a valuation variant, which can determine if the current moving average, standard or another
alternative price from the material master should be used to credit the order during the delivery. FI
will always debit inventory according to the price indicated by the price control indicator. With
moving average materials, the remaining order balance is settled to the inventory account, and the
moving average price is recalculated to reflect this adjusted value. (If there is inadequate stock
available during settlement, then the FI posting will be made to the price difference account).
Variance calculation can be used to determine the causes of the difference (such as price variance or
resource-usage variance) per cost element by comparing data according to the target versions,
explained in the previous slides.
You can transfer the variance categories based on target version 0 to Profitability Analysis during
settlement processing.
Settlement of Variances to PA
Variance
Category
Price
20
50
100
Quantity
Price
100
20
50
Quantity
PA Settlement
Assignment
Value Field
MATERIALS
400000
A
400100
Material
400200
001
MVARP
MATERIALS
400000
A
400100
Material
400200
002
MVARQ
INT. ACTIVITIES
600000
Text
620000
003
AVARP
INT. ACTIVITIES
600000
Text
620000
004
AVARQ
Cost Element Group
SAP AG
SAP AG
TACO10
17-39
You can settle (or transfer) the production variances calculated in Product Cost Controlling for both
final production orders as well as run schedule headers (settled periodically) to CO-PA. The
individual variance categories (such as material price variance, material quantity variance, etc.) can be
transferred separately.
A PA transfer structure consists of one or more items called assignment lines. In these assignment
lines you assign a cost element group and a variance category to a value field of the operating concern.
To assure correct settlement to Profitability Analysis, you must assign each combination of the cost
element group and the variance category to one value field in the operating concern.
Note the following when you define a PA transfer structure:
Every debit cost element must be in the PA transfer structure. You can either group all cost
elements into a cost element group or define a number of groups for materials, internal activities,
business processes, other overhead costs, etc. These groups have the category cost elements.
Every variance category must be represented in the PA transfer structure. The variance categories
are specified by the system and have the category variances.
Each debit cost element or combination of cost element group and variance category can only be
assigned to one value field.
You should make sure that:
the current standard cost estimate is selected for valuation in Profitability Analysis
the cost components of the standard cost estimate are linked to value fields
Warehouse Settlement:
Material with Standard Price
Warehouse
Production Order
Costs
= Order balance
Order credit:
Full order balance
- Credit from
delivery
Start Inventory
+ Stock
-
= End Inventory
Full amount to price

difference account or
material ledger
Stock
SAP AG
SAP AG
TACO10
17-40
During settlement, the remaining order balance is settled to FI.
If the price control indicator in the material master is set to S, the difference is updated to a price difference
account. The moving average price is recalculated for informational purposes.
If material ledger is active, the price differences will be posted to the material ledger, where they are
used to calculate the actual material prices at period closing.
= Order balance
SAP AG
SAP AG
Warehouse-
- Credit from
delivery
Ordercredit:
Full order balance
Costs
Under-absorption
: Affectedinventory
Production Order
No under-absorption
: Full balance
Warehouse Settlement:
Material with Moving Average Price
Warehouse
Value Flow
Only
For warehouse
shortfall
Difference to price diff.
Account or material ledger
TACO10
Starting inventory
+ Stock
- Stock
= End inventory
+ Additional costs
from settlement
= New inventory
value
= New variable price
per piece
R
17-41
During settlement, the remaining order balance is settled to FI.
If the price control indicator V (moving average price-controlled material) is set in the material master, the
amount of the order balance is debited to the finished goods inventory account on the balance sheet. The total
value of the inventory balance and the moving average price is updated.
If the warehouse inventory is smaller than the order quantity at the time of settlement due to outward stock
movements in the interim, the following will occur:
If there is any inventory on hand, that portion of the order balance is settled to the inventory account, and the
moving average price is recalculated.
The remaining costs are updated automatically to a price difference account.
If material ledger is active, the price differences will be posted to the material ledger instead.
Period-End Sequence in Cost Object Controlling

Function
Result
Process Cost Alloc.
Processes are assigned
Revaluation at Actual
Activity Prices
Activity quantity flows are revaluated
Overhead
Overhead surcharges are calculated
Work in Process/
Results Analysis
WIP/ results analysis values are calculated
Variances
Variances are calculated:

Scrap
Price
Quantity
Settlement
Values are settled:

WIP Posted to FI
WIP Posted to PCA
Resource Usage
Lot size
Output price
Variances to PA
Price difference
to FI
R
SAP AG
SAP AG
TACO10
17-42
During period-end closing, process quantities are assigned to cost objects by using the process template. Activity
quantity allocations can be revaluated by the actual activity prices, if calculated in cost center accounting prior.
Overhead surcharges are calculated on the actual costs incurred to date using the costing sheet specified in the
order.
WIP is calculated either on the actual costs incurred or on the basis of the operations or reporting points
confirmed to date. This is controlled by the results analysis key specified in the order.
Variances and scrap are calculated either cumulatively (full settlement) or by period (periodic settlement). This
is controlled by the variance key specified in the order.
The settlement process results in the following postings:
Using the posting rules, postings for WIP are generated in Financial Accounting and Profit Center Accounting.
The variances and scrap are settled to Profitability Analysis according to the assignments in the PA settlement
structure (if allowed by the settlement profile).
The variances and scrap are settled to Financial Accounting as price differences.
If you use cost object hierarchies, you can use the distribution to allocate the cost on hierarchical cost
objects down to the periodic cost objects, for example run schedule headers. This applies only to
controlling by period- scenarios.
Selling Goods and Services

able to:
Process a small make-to-order scenario for
the provision of services.
Generate revenues using the billing
functionality in the SD module.
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Selling Goods and Services - Example

Sales order
A customer orders 99 pumps,

which we will deliver from
unrestricted stock
99
Item 10
99 pumps
Item 20
The customer wants us

to install the pumps in his plant
onsite
installation
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TACO10
17-44
This example combines the sale of a product from finished goods inventory together with the sale of a
service.
If a customer orders both products and services, each item is depicted as a separate sales order item.
Example - Selling Goods with Order Item 10

Sales order
Item 10
Profitability
Analysis
Billing Document
COPA
99 pumps
Product
Costing
COPC
Cost of Goods Sold
Production
PP
Production Variances
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SAP AG
TACO10
17-45
First sales order item (Item 10):

The first item is related to products, which we produce in a make to stock environment. The
production process is controlled by a production lot, which delivers the finished goods to
warehouse unrestricted stock, for sale at a later time.
In this case, the sales order item is not a cost object.
The products are shipped to the customer without postings to CO. When the billing document is
created in SD, revenues and cost of goods sold postings are made to Financial Accounting and to
CO-PA.
Since the sales order item is not a cost object in this scenario, the revenues will be transferred
directly to profitability analysis (CO-PA) during the billing process. The cost of goods sold
posting to CO-PA is based on a cost estimate created previously in Product Cost Planning.
Production variances are transferred to PA during settlement of the production order.
Example - Selling Services with Order Item 20

SD
Billing
Sales order
Cost center
4712
Activity FEP 15 min
Profitability
Analysis
Activity allocation
COPA
MM
Item 20
onsite
installation
Order Settlement
Invoice
External
activities
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SAP AG
TACO10
17-46
Second sales order item (Item 20):

The second item is related to a service, which we provide at the customer's location. It entails
installing the pumps that were sold in sales order item 10.
In this case, the sales order item is a cost object.
A sales order-specific cost estimate exists for the cost of the service in the second sales order item.
The costs incurred by providing the service will be controlled on the sales order item. In this
example, cost center 4712 allocates 15 minutes of activity FEP to the sales order item. There are
also material costs charged to the sales order item for parts used in the installation.
Since the sales order item is a cost object in this scenario, the revenues will be posted to the order
item when the billing is done.
When this sales order item is settled to CO-PA, both cost and revenue information will be
transferred to a profitability segment.
Profitability Accounting
able to:
Execute a Profitability Analysis Drill Down
Report.
Execute typical Profit Center Accounting
reports.
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17-47
Definition of Profitability Accounting

Period
Costs
Fixed
Costs
Variable
Costs
Cost-of-Sales
Accounting
Net
Sales
Margins
Full
Costs
Full
Absorption
Standard
Costs
Product
Costs
Variances
Period
Accounting
Gross
Sales
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AG
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TACO10
17-48
There is no simple definition of profitability. Many hard questions must be answered when defining
what profitability might be for a given situation. Therefore, a profitability accounting system must be
extremely flexible to handle a broad variety of possible requirements.
The following list provides an example of questions that a profitability accounting and reporting
system must be able to answer.
Timeliness: Are profitability reports required on a real-time or periodic basis?
Method: Will profitability statements require a cost-of-sales or period accounting format?
Presentation: Should data be reported by only by account balance or in greater detail using
flexibly defined key figures?
Valuation Basis: Will margins be calculated using standards, or are actual costs with variances
necessary?
Scope: Are margins, as currently defined, deep enough, or is full absorption of period costs for net
sales figures desired?
Profitability Reporting Options in R/3

ECEIS
SDSIS
FISL
Evaluation
of profits
COPA
ECPCA
Profit. segments
Product
group
Profit centers
PrCtr 1 PrCtr 4
Region
Distr. channel
costingbased
PrCtr 2
PrCtr 3 PrCtr 5
accountbased
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TACO10
17-49
There are several different tools available in R/3 that can be used for profitability reporting.
Depending on the task to be accomplished, some tools are more appropriate than others.
Within Controlling, two modules have been designed specifically for certain types of profitability
reporting:
Profitability Analysis (CO-PA)
Profit Center Accounting (EC-PCA).
The Executive Information System (EIS), Sales Information System (SIS), and Special Purpose
Ledger (SL) can also be configured to perform some profitability accounting and reporting tasks as
well. These tools are not specifically designed for this purpose, however. In general, CO-PA and ECPCA might be better choices for most profitability accounting and reporting requirements.
Profitability Accounting Methods

Cost-of-sales accounting
Period accounting
Revenue
Revenue
Sales deductions
Sales deductions
Cost of sales
Stock changes
Capitalized internal activities
Changes to work in process

Total output
Gross results
Sales and distribution costs
Administration costs
Research and development
Total costs
Material costs
Personnel costs
Depreciation
Result
Result
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SAP AG
TACO10
17-50
Two accounting methods used for generating profitability statements are the cost-of-sales method and
the period accounting method. Applying either method to a given set of business transactions under
a given set of accounting rules would, in concept, yield the same bottom-line result (profit). The
primary difference between the two methods is in how the overall profit and loss picture is presented.
Companies must choose to use one of these methods for generating their legal financial statements.
Country-specific accounting standards and legal requirements often determine the choice. However,
the methods facilitate two different types of analyses, both of which may be useful. So a company
may want to track profitability using both methods.
Cost-of-sales accounting: With this method, the emphasis is on matching the revenues for goods
and/or services provided (the value that a company gains as a result of sales) against the related
expenses for those items (the value that is lost when products are transferred out of the company).
This accounting method displays profit and loss information in a manner well suited for conducting
margin analyses. Consequently, it is particularly appropriate for the sales, marketing, and product
management areas.
Period accounting: With this method, the emphasis is on summarizing activity over a period of time
for a given organizational unit. This accounting method presents the revenues and primary expenses
that have been incurred during a given period of time, and the associated changes in stock value levels,
work-in-process, and capitalized activities. It is particularly appropriate for the production and profit
center areas.
Data Flow in Profitability Analysis

Order Settlement: Production Variances
Financial
Accounting
FI
Production
Sales
PP
SD
Billing Doc
Profitability
Analysis
COPA
Product
Costing
COPC
Cost of Goods Sold

Activity / Process
Overhead
Management
COOM
Assessment
Settlement
Direct Postings from Financial Accounting

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17-51
Data from Sales and Distribution (SD) is one of the most important sources of information for
Profitability Analysis.
In costing-based CO-PA, information can be taken from SD at two points in the sales order cycle:
when an order is created or changed [optional], and when an invoice for an order is generated.
In account-based CO-PA, data from SD is received at two points in the sales cycle: when a goods
issue is performed, and when an invoice for an order is generated.
Costs from other areas of CO can be transferred into CO-PA periodically, through activity and process
allocations, settlements, and assessments.
It also possible to create a direct posting to CO-PA from FI through a manual journal entry.
Account-Based and Costing-Based

Account-based
profitability segment
Account
Costing-based
profitability segment
Plan
Act.
800000 Revenues
808000 Sales deductions
890000 Cost of goods manufactured
550000 Cost center cost assessment
231000 Price difference account
- Display by accounts
- Reconcilable with Financial Accounting
at account level
Value field
Plan Act.
Sales quantity
Revenues
Sales deductions
Variable material costs
Variable production costs
Other var. costs of goods manuf.
Variable over-/under-absorption for CCtrs
Variable price variance from prod.
Variable qty variance from prod.
Variable other variances from prod.
- Display in items of the contribution
margin scheme
- Reconcilability at a higher level
(account groups and item groups)
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17-52
Profitability Analysis offers two methods. You can use either method alone, or both simultaneously.
The account-based method:
Costs and revenues are displayed in accounts. This makes it possible for you to reconcile your
data with Financial Accounting at the account level. In contrast to costing-based Profitability
Analysis, this type uses cost and revenue elements, which gives you a unified structure for all of
accounting. The system posts all revenues and costs to both financial accounting and Profitability
Analysis at the same time and using the same value approach. In particular, it posts the cost of
sales to Profitability Analysis at the point of goods issue.
The costing-based method:
Costs and revenues are displayed in value fields that you can define. The cost elements are
assigned to these value fields. In addition to the value fields, you can also define quantity fields.
Value fields let you break down costs into the categories you have selected, independently of
Financial Accounting. For example, you can decide in how much detail you want to see the
variances for production, and then select the corresponding value fields. In addition, costing-based
CO-PA allows you to post estimated values, such as sales commissions, to be used in profit
reporting. Costing-based CO-PA also lets you report on detail product cost information.
In this method, you can only reconcile the data with Financial Accounting at a higher level, since
accounts are not used.
Source of Value Fields

SD
Quantity
Revenue
Billing
Deductions
:
CO-PC
Costs of goods manufactured var
Cost estimate
Costs of goods manufactured fix

:
FI
Bonus
General
ledger
Freights
:
CO-OM
PS
CO-PA
Cost Center
Order
Process
Sales Costs
Administration Costs
Variances
WBS- Element
Network operation
Additional Costs
1993
1994
1995
Costs of Marketing
Development Costs
R
Costed Discounts/ Bonus

:
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SAP AG
TACO10
17-53
Value fields are only required in costing-based Profitability Analysis. These are the fields that contain
the currency amounts and quantities that you want to analyze in CO-PA. They form the structure of
your costs and revenues.
There are two types of value fields:
Value fields that contain amounts in currencies are also referred to as "amount fields".
Value fields that contain quantities are referred to as "quantity fields".
Value fields are freely defined. Settings are made in customizing which will populate value fields.
Revenues, sales deductions and other values (such as stock values) are defined as condition types in
SD. These conditions are assigned to CO-PA value fields. When a billing document is generated in
SD a posting is made to the corresponding value field.
Examples: Domestic revenues, customer discounts
Cost center and internal order costs can be allocated to value fields.
Examples: R&D Expenses, trade fair expenses
Components of a product cost estimate can be mapped to value fields.
Example: Material input
FI postings can be posted to a value field.
Example: Commission payments.
Period End Closing - Profitability Analysis
Cost Center
Admininstration
400000
430000
630000
20,000
30,000
50,000
- 50,000
COPA
Assessment
Allocation Rule:
Fixed percentages
Value Field:
Field:
Admin Costs
50,000
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17-54
Allocation of Overhead costs to Profitability Analysis is separate and distinct from the Overhead Cost
allocation cycles in cost center accounting. Overhead costs can be assessed to CO-PA using CO-PA
specific assessment cycles. This function makes it possible to transfer costs from production cost
centers as well as the costs in sales and administrative cost centers to Profitability Analysis. These
costs are always transferred to a single profitability segment.
Production cost centers: These cost centers are first credited during production as the activities they
perform are required (machine hours, assembly hours, and so on). The amount of the credit is based
on the activity quantities confirmed by production and the activity unit prices. To be reflected in COPA, any over or under absorption that remains in the production cost center must be passed on to the
appropriate profitability segments.
Sales and Administration cost centers: Sales, general, and administrative cost centers can transfer
any remaining costs to CO-PA at the end of each period.
Reporting in CO-PA
Flexible
Flexible hierarchy
hierarchy
Company
code
Division
...
A B C
Product
Z group
Product
Line items
Report form
"Step-down form"
Revenues
- Sales deductions
Net revenues
- CGM variable
Contr. margin I
- CGM fixed
...
Report form
"Object list/hit list"
Exception reporting
yy > 25 TDM
Z
X
A
B
...
xx
xx
xx
xx
Product group A
Product 1 yy
Product 2 yy
Product 3 yy
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SAP AG
TACO10
17-55
A number of different methods are available to analyze your profitability segments. You can:
Create flexible hierarchies of characteristics, navigate within this hierarchy and display the report
in step-down form for the value fields or accounts.
Display a hit list of segments, sorted according to criteria that you define.
Display the segments that fulfill certain criteria in order to highlight the critical segments in this
exception reporting.
You can define your own reports according to your own requirements at any time. In doing so, you
can choose either
a basic report, which is easy to define and lets you quickly analyze the desired information, or
a form report, which you can format and structure using all the available functionality to create
reports for repeating analyses.
Sample CO-PA Drilldown Report
Co.
A
Co.
B
Co.
C
MANUFACTURER
CO- PA data basis
Report and
drilldown
structures
Glass Ceraprducts mics Plastic
DISTRICT
District 3
District 2
District 1
Company
Distr. channel
Product group
Region
Country
Manufacturer
Customer grp
District
PRODUCT GROUP
Glass Ceraproduc ts mics Plastic
PRODUCT GROUP
Glass Ceraproducts mics Plastic
District 3
District 2
District 1
PRODUCT GROUP
Co.
C
DISTRICT
Co.
B
Co.
C
Co.
B
DISTRICT
Co.
A
District 3
District 2
District 1
Analysis of "Plastic" from

manufacturer "Co. B"
Co.
A
Co.
A
Co.
B
DISTRICT
MANUFACTURER
Co.
C
MANUFACTURER
Analysis of
Product Group "Plastic"
MANUFACTURER
Analysis of
Product Group "Ceramics"
Glass- Ceraproducts mics Plastic
District 3
District 2
District 1
PRODUCT GROUP
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TACO10
17-56
The above example shows how you can quickly analyze your data:
When creating drilldown reports, both characteristics and value fields are selected.
You place the characteristics in a sequence, creating a hierarchy. The selected characteristic
combination makes it possible to access all the profitability segments that meet your selection
criteria. Three characteristics, each with three different characteristic values, have a potential of
defining up to 27 profitability segments (not all of which necessarily exist). The diagram above
utilizes a cube to represent this example, with each characteristic appearing as one of the three
dimensions of the cube.
You can navigate anywhere within the hierarchy. You can analyze all 27 profitability segments as
a combined whole, or choose one characteristic and look at that part of the data. If you choose one
value for each of the three characteristics, you can look at exactly one of the 27 elements of the
cube.
Production Variance Analysis

Profitability
Analysis
Product
groups
Highlighted values in
profitability
Inquiries to production
management
Solution approach
Product group
level
Production
variances
Product level
Production
variances
Single order
for product
Production
variance, lot
size
Summarization hierarchy
over production orders
Summarization also over
variances
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17-57
Production variances can be settled by variance category to costing based Profitability Analysis.
This will enable you to access detailed variance information at the product level, and analyze impacts
on product profitability.
Unfavorable variances may be due to an unrealistic cost structure used in creating the product cost
estimate, or unanticipated changes during the actual production.
Variances between the plan cost and actual cost amount during production can be viewed in
Profitability Analysis and traced back to individual production orders.
Data Flow in Profit Center Accounting

PrCtr 1
PrCtr 4
PrCtr 2
PrCtr 3
Financial
Accounting
FI
Production
Product
Costing
PrCtr 5
Sales
PP
SD
Profitability
Analysis
COPA
COPC
COOM
Overhead Management
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TACO10
17-58
Account Assignment Logic in Controlling

When Controlling is active in R/3, each posting to a revenue or expense account that has been set up
as a cost element in CO requires an account assignment object. This specifies where the revenue or
cost will reside in CO. Examples of real account assignment objects are cost centers, internal orders,
production orders, profitability segments, etc. Note that profit centers are not real account assignment
objects!
The master records of controlling objects contain a profit center field. When Profit Center Accounting
is active, the various controlling objects are linked or assigned to the profit center identified in that
field. This causes the system to generate a statistical posting (additional posting) in EC-PCA to that
profit center whenever there is a debit or credit posting to the object.
Whenever there are postings within CO (allocations) which move revenues and/or costs between
objects with different profit center assignments, Profit Center Accounting will be updated. The ECPCA module keeps track of all internal value flows.
Sometimes a profit center cannot be determined automatically by the system during a transaction. In
these cases, the system assigns a dummy profit center to the posting, in order to ensure that EC-PCA
has complete data. These costs can subsequently be moved to the correct profit centers.
Profitability Accounting with Profit Centers

Profit Center
Profit
Profit
Center1
Center
Cost Center
Group
Area 1
Area 2
Profit
Center 2
Individual Controlling Objects
Cost Center
Overhead
Orders
Line
items
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Profit Center Accounting (EC-PCA) lets you determine profits and losses by profit center using either
the period accounting or the cost-of-sales approach. It also lets you analyze selected balance sheet
items and so-called "statistical key figures" (number of employees, square meters, and so on) by profit
center. Consequently, you can calculate all the key figures commonly used in cost accounting (return
on investment, cash flow, sales per employee, and so on).
Multiple profit center hierarchies (profit-oriented, functional, regional, and so on) make it possible to
analyze data in different ways in multi-dimensional organizations. Drill-down reporting to the
controlling objects linked to a Profit Center is possible.
For example, you can drill down from a profit center report to all cost centers linked to the profit
center for further analysis. You can then drill-down further to the transaction where the posting
originated.
Result: Period Accounting

Result Position
800000
889000
Sales Revenue
Sales Deduction
-10000.500.-
* Net Revenue
-9500.-
895000
893015
-6000.5000.-
Factory Output of Production

Costs of goods sold
*Stock Changes
-1000.-
893000
...
-1500....
Inventory change in Process
** Total Output
400000
430000
...
-12000.-
Material Costs
Salaries
8500.1500....
** Total Costs
10000.-
*** Result
-2000.-
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TACO10
17-60
In period accounting, business results are represented according to cost and revenue elements. This
makes it possible to recognize which factors of production caused the costs that were incurred. The
total costs for the period can then be compared to the total revenues earned during the same period.
These costs include the costs of all the goods and services produced in the period, regardless of
whether or not they were sold, plus the goods and services produced in previous periods and sold in
this period. This sum, together with the capitalized internal activities and the changes to work in
process, yields the total result for the period.
Result: Cost-of-Sales Accounting

Result Position
Function
Area
Sales Revenue
Sales Deduction
Account
Assignment
800000
889000
Derivation
of
Function Area
-10000.500.-
* Net Revenue
Costs of goods sold
Variances of Production Costs
( Material, production costs,
stock changes)
-9500.893015
0100
(Production)
Production of Variances
400000
Class 4 on
Prod. CCtr
895000
893000
231500
5000.7500.-
Prod. Order
CCtr Type
Acct Number
Acct Number
-7500.-
*Cost of sales
5000.-
**Gross Result
-4500.-
Sales and Distribution

Administration
...
0300(S&D)
0400(Admin.)
*** Result
1000.1500.-
CCtr Type
CCtr Type
-2000.-
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17-61
The more market-oriented cost-of-sales approach compares the costs to the corresponding revenues
during an accounting period.
Revenues are only compared to the costs incurred for the quantity of goods or services sold during the
analysis period.
When products are sold from stock, costs may have been incurred during a previous period.
By dividing the company into functions (production, sales, administration, etc.), cost-of-sales
accounting shows why costs occurred in your enterprise and displays the economic purpose of those
costs.
The presentation of operating results according to business functions is made possible by utilizing the
characteristic functional area. The functional area can be derived for all existing postings in
Financial Accounting and in Controlling, and stored in the document. This data is transferred to Profit
Center Accounting and can be organized and analyzed there according to functional areas.
The functional area is used in Financial Accounting in order to calculate profits and losses using the
cost-of-sales accounting method. Accordingly, you can also use the functional areas in Profit Center
Accounting to report on profits according to cost-of-sales accounting.
If using functional areas, the report will not show individual cost elements but rather a breakdown by
function area.
Note: Profit Center Accounting transfers data according to the period accounting principle. You can
only produce profitability reports in the cost of sales format by using the functional area.
Note: It is recommended to use the reconciliation ledger when working with functional areas.
Balance Sheet Items and Key Figures

Result
Balance sheet items

-
A
N
A
L
Y
S
I
S
Assets
Material stocks
Work in process
Payables/receivables
Down Payments
Key figures
- Return on investment
- Return on sales
- Equity turnover
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If you assign balance sheet items to profit centers, the person in charge is responsible not only for the
profit center's operating results, but also for its fixed capital. The profit center can then be viewed also
as an investment center. You can also calculate key figures which indicate the success of the profit
center in managing its fixed capital (return on investment).
You can transfer the following balance sheet items to profit centers at the end of the period:
Fixed assets (acquisition costs and accumulated depreciation)
Material stocks (raw materials, semi-finished and finished products)
Work in process
Payables and receivables
In addition to the automatically determined balance sheet items, you can also transfer other balance
sheet items directly to Profit Center Accounting.
Note: PCA reporting is intended to calculate financial key figures such as ROI, but PCA is not
intended to produce a full balance sheet.
Profit Center versus Business Area

Profit Center
Business Area
Aims
Enterprise-Controlling
Internal Balance Sheet and P&L
Organizational
Master Data with

hierarchy structure
Organizational Unit
Aspects
Derivation Object Statistical Object
From CO-Account Assignment
Reporting
Hierarchical reporting
One-dimensional
Allocations
CO-Allocation methods
FI-Postings
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Profit Centers are areas of responsibility within the company, whereas Business Areas reflect
business/strategic units within the company, and are broader in scope.
Automatic account assignment of postings to PCA is more accurate due to the derivation of the profit
center from various CO objects. Postings not assigned to profit centers are collected, and the PCA
account assignment monitor can identify the missing assignments. No such functionality exists for
business areas.
Postings made to profit centers can be further allocated within PCA. Postings made to business areas
require a separate line item entry per business area.
Period end closing is simpler within Profit Center Accounting than with business areas, in that no
reconciliation postings or subsequent adjustments are required in PCA.
Pre-delivered reports and a reporting data base exists in PCA, allowing for reporting along hierarchical
structures. Business areas do not use organizational hierarchies.
Comparison CO-PA with EC-PCA

Value Fields
Revenues
Sales deductions
1,000,000
100,000
-------------Net revenue
900,000
Var. material costs
400,000
Var. production costs 190,000
Prod. variances
10,000
-------------Contribution margin 1 300,000
Material overhead
50,000
Production overhead
50,000
Research & development 10,000
Marketing
50,000
Sales and administration 40,000
Profit Center Accounting

Cost and Revenue Elements
800000 Revenue
808000 Sales deductions
Net revenue
893000 COGM of sales
231000 Price differences
1,000,000
100,000
-------------900,000
690,000
10,000
651000 Research & development

10,000
671000 Marketing
50,000
655000 Sales and administration
40,000
-------------Result
100,000
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17-64
Profitability Analysis (CO-PA) and Profit Center Accounting are two forms of profitability accounting.
One main distinction between the two approaches is that profitability segments in CO-PA are cost
accounting assignments and are directly integrated in the flow of data in cost accounting.
In contrast to EC-PCA, where profits are collected for areas of responsibility within the company, COPA lets you analyze the profitability of different external market segments, defined according to
products, customers, orders, or any other desired combinations of characteristics.
The aim of CO-PA is to provide the accounting department and decision-makers in sales, marketing,
product management and corporate planning with information about the market, while PCA focuses on
internal cost and revenue controlling.
Reporting in CO-PA is multi-dimensional, while reporting in EC-PCA is two dimensional and list
oriented.
Unlike EC-PCA, CO-PA lets you use an account-based or a costing-based approach. In the costingbased approach, you can define your own value fields for analysis. In account-based CO-PA, the
values are represented in accounts.
EC-PCA and CO-PA should not be regarded as alternative components. On the contrary, they
complement one another and jointly provide you with a flexible and comprehensive profitability
accounting tool, allowing a market-oriented viewpoint as well as a responsibility oriented controlling
tool.
PCA Report Options
Report
Writer
Standard
Reports
User
Defined
Reports
Report
Painter
Master
Data
Index
Line
Item
Reports
Standard
Reports
User
Defined
Reports
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17-65
You can analyze all the data stored in the summary record table for Profit Center Accounting (table
GLPCT) using the Standard Reports or your own Report Writer and Report Painter reports. If your
system stores line items in Profit Center Accounting, you can call up a line item report and then access
the original documents from these reports using the report/report interface. Report Writer reports are
particularly useful for list-oriented reporting. Some of the standard reports delivered with the R/3
System are Report Writer reports, while others were created using the Report Painter. The Report
Writer component (FI-SL) forms the technical basis of the information system.
Report Painter Reports: The Report Painter is an easy way to define your own reports to meet your
requirements. The Report Painter is based on the functionality available in the Report Writer, but uses
a graphic report structure as the basis of your report definition. The Report Painter displays the rows
and columns exactly as they will appear in the finished report.
Line Item Reports: You can carry out a more detailed analysis of the postings to Profit Center
Accounting using line item reports. This lets you access the actual and plan line items in Profit Center
Accounting, provided that you have elected to have your system stores these. From the actual line
items, you can also access the original FI, SD, MM or CO document.
Master Data Index: The master data index provides you with an overview of the master data in Profit
Center Accounting postings for each revenue or cost element broken down by profit center (report
group 8A24).
Reconciliation Ledger
able to:
Explain the purpose of the Reconciliation
Ledger.
Execute some reports to enable the
reconciliation between FI and CO.
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Reconciliation Ledger: Overview

Feeder Systems
Controlling
Recon.ledger
(optional)
Transactions G/L account planning

Customer/vendor
Objects
posting
Material consumption
Wages, salaries
Depreciation
Interest
...
Update
Documents
Ind. allocation
Distribution
Assessment
Order settlement. . .
Real account
assignment
Cost center
Order
Project
...
In a posting relevant to
cost accounting:
One debit and/or

credit posting
to an object
(affecting costs)
FI line items
G/L account
transaction figures
Postings within CO
Additional
statistical
assignment
Cost center
Order
optional
Project
Proftblty seg.
Recon.object
...
Optional additional
statistical account
assignments
CO line items
Cost element totals records
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In cost account assignment, note the following:

You must always enter a real CO account assignment object.
In addition, you can enter, assign, or derive as many statistical objects as you want.
For each posting line, you can only assign each object type once.
Account assignment to more than one actual object is not usually allowed. The only exception is
the account assignment to a cost center and an additional account assignment object. In this case,
the cost center is updated statistically.
Revenues can only be posted to profitability segments, sales orders, customer projects, or revenuebearing orders. You can also enter them statistically in cost centers.
A statistical posting is always made to the profit center.
In the case of primary postings from Financial Accounting and Materials Management, the system
generates accounting documents, which store the details of business transactions as seen from external
accounting. These are stored in a central document file.
In addition, line items are written in Controlling for these business transactions, provided they are
assigned to controlling objects, such as cost centers. They document the business transactions as
viewed from Controlling. These line items are managed in a CO line item file. The line items are also
summarized into totals records, which are managed in a CO totals record file.
Data Flow with Use of Reconciliation Ledger
External Accounting
Reconciliation
Ledger
primary
costs
adjustment
posting
allocations
001
002
CO Applications
Controlling
Objects
Company Code
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If you have activated the reconciliation ledger, all feeder system postings relevant to cost controlling
and all transactions within CO create postings to the reconciliation ledger. You can use the data stored
there to produce reports on any object type (such as cost center) or object class (such as overhead,
production, or profitability objects).
Certain types of CO transactions may move costs across company codes or business areas. This is due
to the nature of the controlling area, and its possible link with multiple company codes. Consequently,
the expenses posted in these FI organizational units may not agree with the corresponding costs in CO.
The reconciliation ledger can produce reports that display information on these differences.
You can also use the data in the reconciliation ledger to generate postings to FI that update it to match
the cost assignments in CO.
In addition, you can define functional areas in FI, and utilize them in the reconciliation ledger to make
data evaluation possible at the functional area level.
Reconciliation Reports
FI
Difference
(such as from
reposting)
General
Ledger
CO
Reconciliation
Ledger
Reconciliation Report
for Company Code 0001
OK
Account
400000
415000
FI
200000
500000
CO
150000
500000
Balance
50000
0
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Special cost element reports are supplied in the SAP R/3 System for evaluating the reconciliation
ledger. With these reports you can compare the values in internal and external accounting, display the
costs incurred for each object class, and see the cost flows between company codes.
You use the cost flows overview report to document the cost flows in Controlling, as well as the
reconciliation postings. This report displays all the cross-company-code, cross-business-area or crossfunctional-area cost flows in Controlling.
PeriodEnd Closing Process

able to:
Describe the typical sequence used in
PeriodEndProcessing within Controlling.
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Summary of Period-End Closing in Overhead

Cost Controlling
Asset Accounting
Investment Management
Human Resources
Closing of service cost centers

(using cost and activity allocations)
Closing of production cost centers

using revaluation of
activity quantity flows
and/or assessment to CO-PA
Settlement of
overhead orders
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At period end closing the costs in the overhead cost management area have to be allocated from
service cost centers to production cost centers. From production cost centers, the costs are then
allocated to cost objects or to profitability segments.
Overhead Cost Controlling
In order to ensure the proper sequence of cost flows, application components that affect the
overhead management area, such as HR and FI-AA, have to be closed first. It may be necessary to
settle investment orders to AA. This capitalization of assets may result in additional depreciation,
which must be transferred to CO-OM.
Allocations of costs and activities from cost centers may be posted to overhead orders, followed by
the calculation of surcharges. The orders can then be settled to cost centers. The service cost
centers can then perform cost and activity allocations to production cost centers.
After these period end closing activities, all overhead orders and all service cost centers should
have a balance of zero.
To bring the production cost centers to a balance of zero, you can use the revaluation of the
activity quantity flows with the actual activity price and/or you can assess the balance to CO-PA.
Summary of Period-End Closing in Cost Object

Controlling
Process Cost Alloc.
Revaluation at actual
activity prices
Overhead surcharging
Calculation of Work
in Process/ RA
Settlement of the cost object
Profit Center
Accounting
PrCtr 1
Profitability
Analysis
Financial
Accounting
Calculation of
variances
Material Ledger
PrCtr 4
PrCtr 2
R
PrCtr 3
PrCtr 5
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Cost Object Controlling
During period-end closing, process cost are assigned to cost objects and the actual activity price is used to
revaluate the activity quantity flows of the period.
Overhead surcharges are calculated on the actual costs incurred to date using the costing sheet specified in the
production order.
WIP is calculated either on the actual costs incurred or on the basis of the operations or reporting points
confirmed to date. This is controlled by the results analysis key specified in the order.
In certain scenarios instead of WIP calculation you do a results analysis, which is controlled by the results
analysis key either.
Variances and scrap are calculated either cumulatively (full settlement) or by period (periodic settlement).
This is controlled by the variance key specified in the order.
The settlement process results in the following postings:
Using the posting rules, postings for WIP are generated in Financial Accounting and under some
circumstances in Profit Center Accounting.
The variances and scrap are settled to Profitability Analysis according to the assignments in the PA
settlement structure, if the settlement profile allows this.
Summary of Period-End Closing in Profitability

Accounting
Balances of cost centers
Profitability
Analysis
Profit Center
Accounting
Distribution
PrCtr 4
FI- data
PrCtr 1
PrCtr 3
Assessment
PrCtr 5
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Profitability analysis
Balances of cost centers are assessed to profitability segments.
Profit Center accounting
Distributions and assessments from a profit center to other profit centers can be carried out.
Balance sheet information can be transferred to profit centers.
PeriodEnd Postings In CO: Unit Summary

Having completed this UNIT, you should now
be able to:
Post Statistical Key Figures, perform an
Assessment of costs and settle an Overhead Order.
Allocate overhead surcharges, and assign Process
costs, to an order. Deliver material to stock,
calculate WIP and Variances. Settle the balance of
an order.
Execute Profitability Accounting Reports.
Explain the purpose of the Reconciliation Ledger
and execute appropriate reports.
Explain the PeriodEnd process.
SAP AG
SAP AG
TACO10
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SAP AG
TACO10
17-75

Period End Controlling

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Period-End Posting In CO

PeriodEnd Postings In CO: Unit Contents

PeriodEnd Postings In CO: Unit Objectives

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PeriodEnd Postings In CO: Business Scenario

Overhead Cost Controlling

Entering Statistical Key Figures

Linking Statistical Key Figures to LIS Data

4000 purchase orders

Vendor: 1001 - 2000 Variant

6000 purchase orders

Periodic Activities in Overhead Cost Controlling

Accrual costs (on CCtr only)

- Indirect (with defined

Typical Activities for Overhead Objects

Allocation cost center

Retaining the original

Main cost center

Service cost center

Retaining the original

Service cost center

With use of assessment

With use of accrual

Production cost center

With use of overhead

Retaining the original

Periodic Cost Allocation Methods

Cost Center Accrual Costs

Amount taken from

Accrual Cost Calculation

Accrual Cost Amount:

2100 - Finance &

A Periodic reposting is used purely as a posting aid.

420000 Direct Labor

1220 - Motor Pool

Sample Sender-Receiver Relationship

Sending Cost Center

Overhead Cost Allocation via Surcharges

Overhead Surcharges - The Costing Sheet

The costing sheet functions as follows:

- Cost element specific via

Settlement of Order Costs

Cost Center: 4010

Cost Center: 4020

Using original cost elements

Using settlement cost elements

Periodic Quantity Allocation Methods

Target = Actual Activity

IAA Method 1 - Defined Sender Quantity

IAA Method 2 - Undefined Sender Quantity

Business Process - Assignment Techniques

Period-End in Overhead Cost Controlling (1)

Inverse activity allocation

Period-End in Overhead Cost Controlling (2)

Calculating the Actual Activity Type Price

Actual activity price calculation

Input Side Variances

Output Side Variances

Input Price variance