MC Training CO Module

November 2010

Agenda
Introduction to CO Master Data Costing PCEs, analysing, Activity rates, updating etc. Integration PP, MM, PM, FI Integration.xlsx Cycles Inter BA balances Period ends checklists, processes

Introduction to CO

Agenda
Overview Components within CO

Overview
Controlling is the Management Accounting module within SAP and provides you with information for management decision-making. It facilitates the monitoring and optimisation of processes, involving recording both the consumption of activities (Prod. Lines/hours) and the services (QA, Ops planning etc.) provided. As well as documenting actual events, the main task of controlling is planning Actual vs. Plan data = VARIANCES.

These variance calculations enable you to control business flows. analyse and use to improve performance.
Contribution margin statements (PA Income Statement) are used to control the cost efficiency of individual areas (product, channel, customer etc.)of an organisation, as well as the entire organisation(Company, plant, BA etc.)

Overview cont.

Internally focused (FI is external) Measurement tool Facilitates management by exception (variances) Planning - What if scenarios Facilitates strategic decision making

Information System - Reporting

Overview cont.
External reporting - FI
Balance Sheet Cash flow statement Profit & loss (P&L) Retained earnings report

External Accounting SAP Financials

Internal reporting CO

Cost centre reports Budget reports Product costing reports

Internal Accounting SAP Controlling

Profitability reports

Overview cont.

Financials (FI)

Controlling (CO)

Balance Sheet

Primary Cost Elements

Chart of Acc's Income Statement

Orders

Product Costing

Profitability Analysis

Cost Centre Accounting

Production Controlling

Secondary Cost Elements

Cost Element vs. GL Account Financial Accounting Balance Sheet Accounts Adjustment Accounts Income Statement Accounts Controlling
Cost Centre Accounting Internal Orders Product Costing Profitability Analysis

General Ledger Accounts Payable Accounts Receivable Fixed Assets Treasury

Chart of Accounts

Primary Cost Elements Secondary Cost Elements

Cost Elements

Introduction to CO

Overview Components of CO

Components of CO

Cost Centre Accounting Internal Orders Product Costing Profitability Analysis (PA)

Components of CO
Cost Centre Accounting
Cost Centre Responsibility Accounting Follows structure of CCS Support Cost Centres Production (Line Cost Centres) Overhead Cost Centres Cost Element Cost Elements list.xlsx A cost element classifies/groups costs consumed within a Controlling area. Primary Cost Element - costs that originate outside the company; relate directly to the income statement in FI (1 to 1) and must be included in the FI Chart of Accounts. Secondary Cost Element - costs that result from internal allocation activities; NO relation to G/L accounts in FI. These accounts are exclusively for cost accounting and are only maintained in CO. They are used for cost allocation, assessments and settlements.

Components of CO
Internal Orders
2 Types : Real Orders & Statistical Orders

Real Orders Collect Real postings Settled at period end to Cost Centres Eg. Maintenance orders ZPMO, Capex orders - ZCAP

Statistical Orders Information postings Not settled to Cost Centres at period end Eg. Projects - DME

Components of CO
Product costing
Able to establish a Unit Standard Costs (PCE) using standard material prices, quantities, times, activity rates, scrap rates. Standard cost allow for planning Standard GP etc. into the future Standard costs provide comparisons to actual costs variances to monitor and improve performance Stock valuation

Includes Raw Materials (include railage inward) Packaging Materials Manufacturing Overheads Machine Labour Crates Full of Bottles(CFBs) zero value Excludes Transport between plants Warehouse, Distribution, Selling and Admin

Components of CO
Profitability Analysis
Evaluate market segments Country Region Products Brands/Flavor/Pack Size Customers Activity Cluster/Trade Channel Any combination of above Provide Sales/Marketing info Multi-dimensional The aim of Profitability Analysis is to analyze the flows of costs and revenues and to provide all levels of management with information on the profitability of market segments, products, as well as the overall profitability of the company.

Agenda
Introduction to CO Master Data Costing PCEs, analysing, Activity rates, updating etc. Integration PP, MM, PM, FI Cycles Inter BA balances Period ends checklists, processes

Master Data

Cost centres Cost centre groups Cost Element Groups Material Master Material Price & Additives

Master Data Cost Centres KS03:Check active date, open for posting, hierarchy, plant..

Master Data Cost Centre Groups KSH3:Check CC which group assist in reporting

Master Data Cost Elements Groups

KAH3: Check groups available for reports, see what accounts fall into which groups

Master Data Material Master

Access via transaction MM03 Key areas to check: Do not cost, Origin Group, Costing lot Size

Master Data Material Master

Access via transaction MM03 Key areas to check: Planned Price, Standard Price, price Control, Valuation Class

Master Data Material Master

Access via transaction MM03 Key areas to check: Procurement Type E or F

Master Data Material Prices & Additives Receive data from procurement Update via Template send to BSC (includes bought FGs) Must follow-up regularly with Procurement to ensure latest prices are in system

Material

If not then large price variances will occur Std cost will be incorrect
Plant Planned price 1 Date 1 Planned price 2 Date 2 Planned price 3 Date 3

Sugar Sugar Sugar Sugar

Z050 Z051 Z200 Z300

100.65 28.02.2010 100.65 28.02.2010 100.65 28.02.2010 110.25 28.02.2010

108.05 30.06.2010 108.05 30.06.2010 108.05 30.06.2010 112.67 30.06.2010

115.68 31.12.2010 115.68 31.12.2010 115.68 31.12.2010 119.23 31.12.2010

Material Number

Plant

Costing Lot Size

Costing from date

Costing to date

Valuation date

Quantity

Price in entry currency

Price unit

Cost Element

Orig

Sugar Sugar Sugar Sugar

Z050 Z051 Z200 Z300

1000.0 1000.0 1000.0 1000.0

01.01.2010 01.01.2010 01.01.2010 01.01.2010

30.06.2010 30.06.2010 30.06.2010 30.06.2010

01.01.2010 01.01.2010 01.01.2010 01.01.2010

1000 1000 1000 1000

12.67 12.67 12.67 12.67

kg kg kg kg

Agenda
Introduction to CO Master Data Costing PCEs, Activity rates, Prod. Variances & Recoveries Integration PP, MM, PM, FI Cycles Inter BA balances Period ends checklists, processes

Costing
We use a Standard Costing system which is a control technique comparing Standard costs to Actual costs, generating variances, which are analysed and used to stimulate performance. A Standard Cost allows you to accurately forecast into the future Planning. A Standard cost is a predetermined unit cost for each cost unit, it contains the standard quantity and price of each resource used to produce the finished product. Allows us to calculate Total Cost of Manufacture for COGS and Stock Valuation for our monthly/annual financial reports. Compare costs with competitors(difficult) and benchmark across plants, regions and countries. Standard Cost : Product Cost Estimate PCE
BOM Rate Routing (standard time and cost centre) Activity Rates (Production Costs, Volume, Hours) Material Master Standard Material Prices

Costing Key transactions

Key transactions in Product Costing

CK11N CK13N CK33 CK24 CK40N

Create a PCE Display a PCE Comparison of Itemizations Price Update with Cost Estimate - Mark & Release Create and Execute a Costing Run

CK74N CK75N CK76N

CA23 CS03 MM03

Additive costs - Create Additive costs - Change Additive costs - Display

Display Rate Routing Display BOM Display Material Master - Costing2: Planned Price if RM etc. - Costing1: "Do not Cost" - Costing 1: Origin Group - Costing1: Costing Lot Size -MRP2: Procurement Type

Can be sent in a upload file to BSC for mass upload

std time, rating etc.

Can be sent in a upload file to BSC for mass upload Unchecked for costing to work Sugar, Concentrate, Packing mat, Grp Mnf - Trf in = must be maintained Must be maintained = generally 1,000.000 Must be maintained = generally E or F

PCEs : Own Manufactured Goods

CO Costing Sheet PP Master Data MM Master Data
Sugar Material Master Concentrate Material Master Crowns Material Master Bottle Material Master

Standard Cost Sugar Concentrate Crown Bottle O/H Labour

$ xxx xxxx x xx xx

BOM Sugar Concentrate Crown Bottle

units xxx xx x x

CO Master Data
Routing hrs 1. Cleaning & San. 2. Flavour change 3. Size change 4. Gross bottling time Labour Activity Price Machine Activity Price per hr

O/H Machine xxx TOTAL xxxxx

Costing PCE (CK13N)

Costing Cost Sources

Material Cost
BOM gives material and standard quantity Standard quantity (includes scrap allowance) x Standard Price(material master) = Material Cost

Labour and Machine Cost(Overheads)

Labour cost Depreciation (plant & containers) Maintenance costs Overheads (Caustic, stationery, Forklift, etc.) Service Cost centres assessed

4 Activity types
Labour (hours) Machine (hours) Maintenance (hours) Volume (units)

Costing Rate Routing (CA23)

2000 cases is the installed Manufacturers rated speed to run 1 pack, 1 flavour perfect operating conditions in I Hour Plan time = 2.186 hours, therefore running at 45.7% of rated speed Plan activity for activity rates based on 45.7%

BOM (CS03)

Costing Labour & Machine Costs

Labour
KP06 : Use layout: DF, Activity Type: LABOUR

Machine (Overheads)
KP06 : Use layout: SAPALL, Activity Type: MACH Plan maintenance costs on predetermined Settlement orders Depreciation from the run in FI and forecast

Cycles CCA & PA

Must review cycles (KSU3 & KSU9) Cycles must represent the current/future conditions volume, mix, effort, usage, etc. Must reverse cycles when revising rates

Costing Activity Rate

1. 2. 3. 4. 5. 6.

Rate achieved : Total cost for line(direct and allocated) / Planned Hours(volume)

7. 8. 9. 10. 11.

12.

Reverse PA and CCA Cycles KEUB and KSUB 1. The PA cycle must only be run after the activity rates are calculated and confirmed as correct Update your RE costs - costs on the lines, costs on service cost centres KP06. Update RE costs in settlement orders for PM Check Equivalence numbers are correct for each production line KP26 - It must be a 0 for LABOUR and a 1 for MACH. Ensure LTP process has been run so you have the latest volumes, which give you the latest hours in Act. Sched column Run KPSI to move the hours from Scheduled to Plan. The calculation uses Plan hours so it is important to run this transaction and to check that it is correct. 1. The schedule hours and plan hours must be the same for Labour and Mach do not continue if different. 2. You must run KPSI before Assessment cycles are run as some cycles use Plan hours to allocate/split costs of Service Cost Centres Run Settlement orders , KO9G, to get maintenance costs into cost centres(view costs are in via transaction KSBL ) Run CCA cycles KSUB, to get Service cost centre cycles onto lines Run KSS4 splitting of costs taking all Labour costs for Labour rate and all other costs to machine rate calculation Run KSPI price calculation, then - Do a recon to check: rate x hrs = cost Once you have checked your rates and costs reconcile , Run PA cycles KEUB 1. Prior to running , an Over/Under difference will exist, this will now move to account 720000 Cost Assessed to PA. 2. Run S_ALR_87013611 to further check there should now be the Labour value, machine value and a very small value assessed to PA = Over/Under should be = 0 For Syrup room, it will have volume allocation.

Costing Activity Rate (KSBL)

Correct

Costing Activity Rate (KSBL)

Incorrect

Costing Activity Rate (Recon)

Costing Activity Rates :Labour

Labour cost

248 473 / 118.633 Hr = 2094.47/Hr (why different to labour above?)

Costing Activity Rates : Machine

Machine cost

1,824,075 / 118.633 Hr = 15375.78 / Hr

Costing Activity rates (KP27)

Note: Price Unit must check if per 1, 10 ,100, etc. Equivalence number 0 for labour, 1 for machine Plan activity = Act. sched

Costing Activity Rates (CK13N)

Costing view costs for a period (S_P99_41000111)

Costing CK13N options

PA Income Statement allocation to the value fields for COGS

Costing Production Variances & Overhead Recovery

Backflushing Product Cost Collector Variance Analysis Overhead Recovery

Costing Production Variances

Backflushing
Assembly backflush when finished product comes off line Component backflush consumption of raw materials Activity backflush consumption of activities (hours) Backflushing has to happen timeously: Stock available in Warehouse (transferred ex Production) Raw material stock quantities updated Updates cost collectors (daily) & therefore reporting Standard (PCE) required

Costing Prod Var : Product Cost Collector

Costing Production Variances

Product Cost Collector: Order 700007 , FG 1012

Component Backflush : consume raw materials DR CR DR CR DR CR DR CR DR CR Product Cost Collector: std price x actual quantity used Stock - CFB Product Cost Collector: std price x actual quantity used Stock - Raw materials Product Cost Collector: std price x actual quantity used CCA - Water Recovery Product Cost Collector: std price x actual quantity used Stock - Raw materials Product Cost Collector: std price x actual quantity used Stock - Raw materials CFB Closures Water CO2 Final Syrup DR 55 205.19 -55 205.19 6 253.21 -6 253.21 11 507.63 -11 507.63 1 235 326.00 -1 235 326.00 1 235 326.00 11 507.63 6 253.21 55 205.19 CR Net Effect Order 700007 -

Activity Backflush : consume activities DR CR DR CR Product Cost Collector: std price x actual quantity used Machine Allocation in CCA - Recovery Product Cost Collector: std price x actual quantity used Labour Allocation in CCA - Recovery Machine Labour 761 101.11 -761 101.11 103 676.28 -103 676.28 2 173 069.42 Assembly Backflush - Issue to Warehouse FG Stock DR CR Stock - Own manufactured (Account 181200) Product Cost Collector: PCE x units produced ------> Variance : Account 420020 DR/(CR) 2 155 507.20 -2 155 507.20 -2 155 507.20 17 562.22 103 676.28 761 101.11

Costing Production Variances (FS10N)

Production variances (KKBC_HOE)

Production variances (KKBC_HOE)

Costing Production Variances & OH Recovery

Costing Overhead Recovery

From KKBC_HOE Product cost collector : Actual Hours x Std Activity Rate for Labour & Machine Recovery less the Actual costs in the Cost Centre, the difference get posted directly to the PA Income Statement in COEs as Under/Over Recovery

Costing Variances
Understanding variances
Target Cost Actual Cost = Production variance (Target quantity x Std Activity rate) (Actual quantity x Std Activity Rate) = Production variance. Variances must be seen in conjunction with Prod Over/Under costs from Actuals assessed to PA. If a production variance occurs it means the plant has not produced to Std, therefore it has either been inefficient (taken longer/shorter vs. the Std time), incurred more or less money than it should to produce the actual quantity. Factory Output @ Std Rounding difference Actuals posted @ two decimal places Target posted @ PCE value per 1000 units therefore effectively @ 5 decimal places Note : Material variance Target uses PCE and Actual uses the Standard from the Material Master Therefore you cannot change the planned prices for the current month once PCEs are marked and released There will be a difference on materials with no unit variance ???

Agenda
Introduction to CO Master Data Costing PCEs, analysing, Activity rates, updating etc. Integration PP, MM, PM, FI Cycles Inter BA balances Period ends checklists, processes

Cycles
There are 2 types of Cycles CCA & PA CCA CCA Cycles assess costs that are not directly allocated to the Prod. Lines Indirect production costs like Service Cost centres eg. Ops Planning, Quality etc. to the Prod. Lines These costs must be included in the Activity rate calculation for stock valuation and to ensure full recovery of the costs. CCA cycles use Secondary cost elements to collect and allocate the costs to the Prod. Lines. PA PA Cycles assess costs from CCA to the PA income Statement to Value Fields. PA Value fields.xlsx PA Cycles allocate costs to PA that are not Recovered via the Production Lines (Activity rates) or any Manual Adjustments or postings Manual postings include Discount Adjustments, Revaluation, Price variance Costs that are not recovered via the Production Lines activity rates include MD, HR, Finance etc. The costs above must get allocated to a value filed in the PA income statement as they do not form part of the Cost of Sales @ Std which gets automatically posted. See KE30.

Cycles must be reviewed at least 2wice a year to ensure that the allocation of costs still represent what is actually happening or what is planned to happen Cycles must be reversed when doing a new RE, if costs change and journals are processed, when re-calculating the Activity rates: Numbers will remain as per the last cycle if not reversed.

Cycles CCA Cycle

Overhead Assessment Rules
Southern Region
Z050 (Lakeside) 2010 Assessment Rules Assessment Rule LOD Bottles Crates Ops Plan Boiler Sorting - PE Quality Eng -Main Fixed % Fixed % Hours Fixed % Fixed % Fixed % Fixed % 40% 60% 25% 30% 38% 20% 15% 9% 40% 40% 20% 25% 12% 25% 25% 41% 10% 5% 10% 10% 100% 100% 100% 100% 60% 24% 40% 16% 60% 100% 100% Line 1 Line 2 Line 3 Line 4 SR

Fact O/H 1
Water Treatment Raw Material Store Operating Supply Store

Fixed %
Fixed % Hours Hours

0%
100% 0%

Cycles
ASSESSMENT CYCLES CCA & PA Cycles - Actual & Budget/RE CCA (LOD to Prod Lines, Service to Prod Lines) RE/Budget KSU7 Create Create Actual assessment cycle Create Plan Assessment cycle KSU8 Change Change Actual assessment cycle Change Plan Assessment cycle KSU9 Display Display Actual assessment cycle Display Plan Assessment cycle Delete Actual Assessment cycle Indirect Actual Production Overheads transferred to Production Line cost centres Actual Assessment Overview - what & when run KSUB Execute Indirect Planned Production Overheads transferred to Production Line cost centres

Actual KSU1 KSU2 KSU3 KSU4 KSU5

Create Change Display Delete Execute

KSU6

Overview

Actual KEU1 KEU2 KEU3 KEU4 KEU5 KEU6

Create Change Display Delete Execute Overview

PA (Adj. to Disc, Act non-cash, Act to PA) RE/Budget KEU7 Create Create Actual assessment cycle Create Plan Assessment cycle KEU8 Change Change Actual assessment cycle Change Plan Assessment cycle KEU9 Display Display Actual assessment cycle Display Plan Assessment cycle All planned cost centre costs are transferred to KEUB Execute Profitability Analysis. Delete Actual Assessment cycle Cost centre actual costs are transferred to Profitability Analysis Actual Assessment Overview - what & when run Display - Cycle Overview(segments, sender/receiver etc) RE/Budget KEUE Execute

Actual KEUD

Execute

Cycles CCA : KSU9

Cycles CCA : KSU9

Cycles CCA :KSU9

Cycles PA : KEU9

Cycles PA : KEU9

Agenda
Introduction to CO Master Data Costing PCEs, analysing, Activity rates, updating etc. Integration PP, MM, PM, FI Cycles Inter BA balances Period ends checklists, processes

Inter BA balances
Controlling Area will balance but business areas will not balance cannot proceed with month-end as FI & CO will not balance. In almost all instances it is an error from a maintenance order an expense(repair hours) are posted in one BA for an Asset(equipment) in another BA Require a CCA journal to fix : KB21N, before doing journal all cycles must be reversed - PA & CCA Run report S_ALR_87013611 select account 730400 Check which BA does not balance, double click on the Over/under line Go into line items Change variant to show TPBA (Trading partner BA) and sort Once found a CCA journal must be processed to correct KB21N: using the hours to correct, move the expense to the asset BA

Agenda
Introduction to CO Master Data Costing PCEs, analysing, Activity rates, updating etc. Integration PP, MM, PM, FI Cycles Inter BA balances Period ends checklists, processes

Period ends
Refer to the Group issued 2010 Month-end Checklists and Data Checks 2010 Month end Checklists and Data Checks.xlsx Workshop issues