COST CENTER ACCOUNTING

I Configuration

1) Standard Hierarchy
2) Cost center category
3) Cost center spilt
4) Allocation methods
A) Assessment B) Distribution
5) Planning profile & layout

II Master Data

1) Cost center
2) Cost center group
3) Statistical key figure
4) Statistical key figure group
5) Activity type
6) Activity type group

III Planning

1) Input planning (CE or Expenditure planning)

A) Activity dependent planning
B) Activity independent planning
2) Output planning (Activities planning)
3) Statistical key figure planning
4) Resource planning
5) Plan activity price calculation
A) Manual activity price
B) System calculated activity price

IV Actuals

1) Actual Statistical key figures

2) Allocation of departmental actual cost
A) Assessment
B) Distribution
3) Indirect activity allocation
4) Direct activity allocation
5) Actual activity price calculation
6) Cost center variance calculation

V Information systems
I.1 Cost center Standard Hierarchy

 it is the height node in the Cctr accounting structure

 it contains the list of Cctr
 it is created at co area level not at cocode level
 not possible to define/assign more than one STD hierarchy for single co area

Alternative STD hierarchy: we can have N no of alternative STD hierarchies to address the reporting
requirements and configuration purpose

I.2 Cost center category

 it is further classification of Cctrs

 grouping of Cctrs based on Cctrs category wise for reporting purpose
 Cctr categories having the following options
 Lock indicator for postings
Planning primary cost
Planning secondary cost
Actual primary cost
Actual secondary cost
Revenue
 Function area
 Activity type master

Ex: Labor activity (If you give Cctr category in activity master then it will only use for specified
Cctr)

 Cctr category can be used for

Validation
Substitution
 It is mandatory in Cctr master
 It will be assigned Cctr master and activity type master

II.1 Cost center

 it controls the OH expenditure

 it is a location/responsible area/etc… where the cost incur
 Cctr can be setup on what level the cost to be collected and controlled
 Cctr can be setup
Department wise/location wise/responsibility area wise/region wise/work center wise (machine
wise/work location wise)/product wise/division wise/etc…
 Cctr is only valid for specific cocode level
 We need to assign the cocode to Cctr
  The cocode field only it displays incase if you assign more than one cocode to the single co area
in such case we need to assign the cocode to the Cctr, otherwise sys won’t display the cocode
field in the Cctr

Cctr currency

Case 1: if the cocode & co area currency type are different then always Cctr currency is the
cocode currency

Case 2: where the co area having the cocode currency type 10 in such case we can assign any
currency in the Cctr master

Control tab

Lock: it is for blocking for posting against the Cctr

What are the factors to be consider while finalizing the cost center

 Reporting criteria-at what level you want to monitor and view the cost
 Planning level-plan vs actual
 Profit centers
-Values from OH Exp (Cctr)/goods movement data (MM) (SD) like mat consumption, stock, sales
COGM, COGS to profit centers
-we can assign single profit center to more than on Cctr.
-not possible to assign more than one profit center to single Cctr
 Work centers
-it represents the place where the work performs and WC can be group of
machines/place/group of the employees/group of any
-limitation is not possible to assign more than 6 activity types for single WC
-BOM is nothing but list of the components & planned quantities which are required to
manufacture the product
-Routing it contains the list of sequence of process steps (operations) and each operation
specifies which work center to be performed and what are the activities to be performed at the
work center. And planned quantities are required for each activity or resource wise.
 Activity type and activity price
-activity types are used as base to allocate the OH from Cctr to the product
-activity price maintained with combination of Cctr & activity type
 Allocation criteria

II.2 Cost center group: We can have N no of Cctr groups to address the reporting requirements and
configuration purpose

II.3 Statistical key figures

1) For reporting purpose

 2) For allocation base
 We can maintain SKF key figure order wise for reporting purpose

Ex: SKF for no of employees

SKF for no of systems

SKF for no of Software license

SKF for Power usage

SKF for Square feet of the area

 SKF can be used on base in allocation method to allocate the cost b/w cost objects (Cctr to Cctr)
o Canteen dept cost need to allocate to the other dept’s based on no employees
In this ex SKF is no of employees & allocation base is the SKF no of employees
o SAP license fee to be allocated to other dept’s based on SAP users
In this ex SKF=No of systems
o Power expenditure to be allocated to the other dept’s based on the power units
consumed in the dept’s
In this ex SKF=no of units
 SKF needed only if you are using the cost allocating based on SKF otherwise no need.

SKF having the two categories

1) Fixed category:
o not required to enter the values every period ex: no of systems
o Fixed SKF values are not only for the entered period, it is valid for the next following
month till the next change or till the next fiscal year
o Need to be select those key figures having the constant values for the entire fiscal year
2) Total category
o These key figures wont update for the following periods
o Which are the key figures not constant and varies period to period for those key figures
need to change the fixed category for their hierarchy
o In total category need to update or enter the vales every period

II.4 Statistical key figures Group: Group of similar nature (category) of key figures either based on
reporting criteria or configuration purpose

II.5 Activity Types

 To convert the RM to another stage we need to perform some activities are called as activity
types
RM -------> FG
 Machine setup
Labor
Sharpening
Painting
Assemble
Printing
Packing

Purpose & usage of activities:

 To record and track the activities which are spent on job (order) and also measure/track the
output of the dept’s or activities of dept’s

Plan activities

Actual activities

 To allocate the OH based on resource used (activities spent) from Cctr (Dept) to Order (job)
 Activities can be used to allocate the OH both Direct (MFG) & Indirect (Service)
 To calculate plan activity price (plan resource price) or actual activity price
 To get the cost breakup in the product costing

The below factors need to be consider during the finalization of activity type

1) Work center
 We can assign maximum 6 activity types per work center
 Single activity type can be assigned to multiple work centers
 We can assign maximum one Cctr to single work center, and the same Cctr can be assigned
to multiple work centers
2) Activity type & Activity price
 We can maintain the activity price for each combination of Cctr & work center
 Assume if you want to change or if you want to maintain the different price for the same
activity & same dept (Cctr), in such case either we need to increase the no of activity types
or no of Cctrs

Ex:

o Where you want to maintain (Change) different price for the skill labor and unskilled
labor in such case we need to define two activity types or two cost centers
o Where you want to charge the different price based on the high value machine & low
value machine in this case also either we need to increase the Cctrs or activity types
3) Reporting criteria (Product costing reports)

Activity type category: It specifies how the planned activity units are recorded / maintained against
the activity type
  Direct activity allocation:- Manual maintain 1 & 4
 Indirect activity allocation: - we are depending on the other dept’s ex power 2,3 & 5

Plan activity price: - system calculated price

Plan price can be calculated based on activity

Plan activity rate/price=plan cost/plan activity qty’s or units

Plan price based on capacity

Plan price=plan cost/plan activity capacity

Activity price indicator: - (how the price to be calculated) system calculated price

Actual price can be calculated based on activity

Activity type category (5) ------ Actual activity rate/price=actual cost/actual activity qty’s or units

All price based on capacity

Activity type category (6) ------Actual activity price=actual cost/actual capacity

Allocation Cost element: the allocation cost element require allocating the cost from Cctr to other
objects like Cctrs/orders/WBS element

Lock indicator: if you activate then it cannot be use for activity (Cannot post)

II.6 Activity type groups

Grouping of similar activity type based on reporting criteria or configuration purpose

III Planning

Purpose: - to compare between plan & actual, to analyze the variance & to calculate plan activity
(Resource) rate

 To control departmental or OH expenditure

Planning is three types

 Input planning
 Output planning
 SKF planning

III.1 Input Planning (Cost element planning) CE vs Cctr

Cost element planning can be done in two ways

  Cost element planning w/o ref to activity (CE vs Cctr)
 Cost element planning with ref to activity (CE vs Acty type vs Cctr)

Activity independent planning

Production cost center

Salaries 10,000 Labor activity 200hrs

Staff welfare 7,000 Cleaning activity 100hrs
Depreciation 30,000 Machine activity 400hrs
Power 10,000
Total 57,000 Total 700hrs

Labor HR rate=salaries + staff welfare/labor hrs =10,000+7,000/200=85

Cleaning HR rate= salaries + staff welfare/cleaning hrs=10,000+7,000/100=170

Machine HR rate=Depreciation + Power/Machine hrs=30,000+10,000/400=100

If not system calculated=Total CE’s/Total activity hrs=57,000/700=81

Activity Dependent Planning CE vs Acty type vs Cctr

 Cost element planning with reference to activity is called as activity dependent planning
 Prerequisite
o Output planning
o Cost element planning
 Activity dependent planning not required splitting

III.2 Output/Activities planning: Acty type vs Cctr

 Manual planning-can be entered in KP26

 Integrated planning-long term planning (PP-Cctr)

Activity independent planning

Manual planning

-Can be use standard layouts

-Can be created new layouts

Excel Upload

-New layouts

I.5 Planning profile & layouts

The own planning layouts might be require in the below business cases

 Where the cocode & co area currencies are difference in this case where you want to plan in
cocode currency
 Where you want to upload the excel planning

Configuration steps for Excel Planning upload

 Need to create the layout for entering the planning

 Need to create planning profile
 Need to assign layout to the planning profile
 One planning profile can have N no of planning areas
 One planning area can be assigned N no of layouts

Distribution key

 it specifies how the total amount to be distributed individual periods

Integrated excel indicator

 need to be selected if you want to upload the excel planning

File description

 keep the blank, it updates automatically after attaching the layout to the planner profile at the
time of saving the planner profile

Owen creation of layouts

 Set planner profile KP04

 Maintain Input planning KP06
 Activities or Output planning KP26
 User Define planer Profile KP34
o This planning profile is common for both activity dependent & independent planning
 Create planning layout for cost element planning KP65
 Create planning layout for activity type planning KP75
 Create planning layout for statistical key figures KP85

III.3 SKF planning: SKF vs Cctr

SKF Planning KP46

Manually can be entered

Can upload through excel

I.3 Cost center Split: it is only required in the activity independent planning

 It specifies how and what base cost/amount to be allocated to the activity types. This
conditions are specified in the spitting rule
 The main purpose of splitting rule is split the amount to the activity type for the purpose of
sys calculated activity price
 It required only in case of activity independent planning
 Cost center split can be done by splitting structure, splitting structure contains the
assignments, each assignment specifies the rules and also relationship between source CE—
Acty type—Splitting rules, splitting rules specifies splitting method, splitting method specifies
on what base the amount to be split & allocated to the activity types.
 Splitting structure linked to the Cctr, need to assign splitting structure to the Cctr which
Cctrs having both expenditure & activities. Assign the splitting structure to the Cctr where
you want to allocate the cost to the activity type based on the splitting rules.
o Salaries + staff welfare------- labor Acty and cleaning Acty  one splitting rule
o MISC cost------cleaning Acty +labor Acty +machine Acty one splitting rule
 One splitting structure can have n no of splitting rules
 Unallocated method:- which are the cost elements not allocated in splitting structure, those
can be assigned to the this method
 ‘12’ splitting method used for both plan & actual
o In case of planning the amount will be splitted based on plan activity units
o In case of actual the amount will be spitted based on actual activity units
 ‘0’ splitting method is for unallocated amount
 During the execution of splitting program it splits the amount based on splitting rule ,
splitted amount allocated to the activity types for the purpose of activity price calculation
o KSS4 During this step it won’t calculate the price, just it allocate the amount to the
activity types

III.5 Plan activity price calculation

Plan activity price calculation In case of activity independent planning

 Need to execute the splitting KSS4

o Splitting program it only allocate the cost to the activity types, it won’t calculate the
price
 Execute the plan activity price calculation KSPI
o =plan cost of the all periods of the current year /plan activity units of all the periods of
the year
 The resulted price updates for all the periods in case of average price method through KP06 &
KP26
 Display output planning KP27
  Activity price report KSBT

Plan activity price calculation In case of activity dependent planning

 Not required spitting structure, the reason is that during the planning itself the amount is
allocated to with reference to activity type wise hence the splitting structure or splitting rules
are not required
 Both input & output planning is required
 Cost element planning with reference to activity type wise
 CE vs Acty type vs Cctr
 Prerequisites are input planning & output planning
 Not required to perform any splitting
 Perform the plan activity price calculation KSPI
 If any cost element not done planning with activity type wise in case of activity dependent
planning the cost equally distributed to the activity types

IV Actuals

Actual values flow to Cctrs

 FI-OH Exp, MM-Consumable price diff & revaluation of inventory, Asset acct- Depreciation, HR-
Salaries, CO-Internal orders, Project WBS element, Service orders, Maintenance orders, etc…
 FI-During the data entry need to enter the Cctr manually or can be set the default Cctr against
the CE in configuration OKB9
 MM-During the GI to the Cctr can be enter manually or can be se the default Cctr against the
CE in configuration OKB9
 FI-Asset acct every Asset master linked with the Cctr and at the month end while executing the
Dep program that Dep updates to the other Cctr
 FI(FCR & Ex rate diff)-Automatic transactions and default Cctrs can be set against the CE in
configuration
 Internal Order-At the time of internal order settlement and we can give the Cctr in IO master
 CS/PM/QM/Projects(WBS)-if the settlement rule is Cctr then at the time of orders settlement
the values are transferred to the Cctrs
 Cctr to Cctr-During the execution of allocation we can distribute the values to Cctr
 Cctr to PP- At the time of activities confirmation against the order system allocates the cost
from the Cctr to production
 Cctr to COPA-During the month end executing the COPA assessment the values are transfer
from Cctr to COPA
 The default different CO objects can be maintain for the same cost element based on plant
o Ex: CE 100045 Bank chargesPlant 1010E_ASSM (Cctr)
o CE 100045 Bank chargesPlant 2010S_MFG (Cctr)
  The default Cctrs can be overwrite manually
 if the CO object is maintained both in OKB9 Automatic account assignment and KA02 Cost
element, this scenario always give the priority for OKB9 setting

Change the Cctr in Asset master

 AS02 Change asset masterTime defendant tabmore intervalAdd intervalfrom the date
of new interval we can maintain the new Cctr

Change the existing STD hierarchy in in Cctr

 It’s not possible to change the Cctr STD hierarchy in the master based on the time interval, that
means the STD hierarchy allow to change the entire period interval in the Cctr

Functional area change in Cctr master

 We need to consider the below factors while changing the functional area in Cctr master
o Always prefer to change at the starting of the period before posting the transactions
o It the transactions already posted in to the Cctr in such case you need to ask the user to
transfer the balances to other Cctr or reverse the transactions then change the
functional area in the Cctr master
o After updating the FA in the Cctr then transfer the balances back
Actual SKF
 when you enter the actual SKF in KB31N
o The total SKFs are not updated in the following month and the entered key figures are
only valid for the specific entered period Ex: Power units
o In case of the fixed SKF the values are updated in to the following months till the next
change of SKF units

Manual Reposting of cost

 Transferring the cost from one Cctr to other CO object

 We can transfer only primary cost element cost
 Not possible to transfer secondary cost element cost
 In case of manual reposting of the Cctr, the amount is directly reduced from the debit side of the
sender Cctr CE and there will no separate line item shows credit side of sender Cctr for the
reduced amount. In the receiver side Cctr the allocated amount will be added to the same CE

Manual cost allocation

 Transferring the cost from one Cctr to other CO object

 We can transfer both primary & secondary cost element cost
  In the sender side Cctr it is credited as a separate line item under the same CE, in the receiver
side Cctr it is debited directly under the same CE

Repost line item

 We can repost the values from one Cctr to other CO object with reference to FI Doc & specific
line item

I.4 Allocation Methods

 Redistribute the cost (apportionately) from one dept to other dept’s

 The allocation methods are used to allocate the cost between the cost centers

I.4.A Distribution Method

Advantage

 Can be allocate only primary cost element cost

Disadvantage

 Can’t be allocate secondary cost element cost

 In the receiver side tractability of sender will lost
 We can't able to see or track directly the allocated amount from other dept's in receiver
side

Cycle segment method

 It is called as variant
 One single cycle we can maintain n no of segments
 By cycle segment method we can maintain rules between sender & receiver, and also we are
specifying relationship between send & receiver
 Each segment contains the who is sender and who is receiver & what cost to be allocated
(Which cost element cost) and also it contains the sender and receiver rules

Sender rules

 Posted Amount of %
 Fixed amount
 Fixed rate

Receiver rules

 Variable portion
 Fixed %
 Fixed amount
  Fixed portion

Will define separate segments in the below cases

 Each sender having the different sender rules even though all receivers having same receiver
rule
 Where the different receiver rules for each sender wise
 Where the receiver again it becomes the sender in such cases we need to define different
segments

Iterative indicator

 The purpose is sys will consider the independent segment with cycle
 And also the iterative repeated until each sender fully credited

The iterative indicator need to select in the below cases

 Where you having the more than one segment in the single cycle
 Where the independent relationship between the two segments that means one segment
receiver becomes the another segment sender

Cumulative indicator:

Case 1: The purpose is if this indicator is activated then the sender amount posted/allocated up to
the current period based on the cumulative tracing factor (cumulates from the Period 1 to current
period)

Case 2: In the current period the allocated amount (Sender amount) determines or posted less than
the amount allocated in the previous periods (total amount till period-already allocated amount)

The below are the prerequisites or the cumulative indicator can be used in below business cases

 The sender or receiver relationship should be stable with the fiscal year (that means no sender
or receiver shouldn’t be deleted in the fiscal year)
 The cumulative indicator should be applicable only in case of sender rule is (Posted amount),
receiver rule is (Variable Portion)

Field Groups: which amount currency values are transferred that is objective currency or transaction
currency (Doc currency)

Consumption: If you want to allocate the consumption Qty then select this check box

Sender rule share in %: what % of the posted amount to be allocated, it is applicable only when
sender rule is posted amount

Functional area: FA only use if you want to allocate the specific FA values
 Ex: allocate the values only relevant to FA R29

Cost element: we need to specify which cost element values to be allocated

Ex: allocate only Salaries, rent & Dep values only

Sender values tab: the sender values by default its copied form sender rules which are specified in the
segment header tab

 Version: ‘0’ (or) we can leave blank

 By default it takes ‘0’ version, in case of the planning we need to specify which plan
values need to be allocated

Receiver tracing factor tab: we need to specify the receiver %, but the receiver % should not be cross
100% from less than 10%

Lock indicator: cannot be used for specific segment

Note: receiver fixed amount method is always highest priority

Ex: sender is fixed rate & receiver is fixed amount in this case, it ignores the sender rule and
always highest priority is receiver rule fixed amount method

I.4.B. Assessment Method

 Note: the consumption Qty not possible to transfer through assessment method
 Segment header tab: The purpose to enter the Secondary cost element in the segment header
tab during the assessment in the sender side the allocated amount is credit under the
specified assessment cost element and debits in receiver side
 Sender values: version ‘0’ also not required for actuals, if in case of plan its required
 Note: in the sender side all the allocated amount are totaled (Sum-up) & it is credited under the
separate cost assessment cost element, in the receiver side it is debited as a separate
assessment cost element
 In the receiver side we can't get the breakup of allocated amount

Allocation Structure:

 This allocation structure can be assign in the assessment cycle segment

 Allocation structure contains assignments and each assignment represents grouping of source
CE’s and further it is linked to the assessment CE. That means the assessment CE can be used for
debiting & crediting purpose while allocating the grouping of the cost during the execution of
the cycle
 The allocation structure can be used in the assessment cycle and also settlement rules of the
order