01 Controlling A. & D. WS - RU BDGT & CO-PA

Product costing: Budget & CO-PA
Moscow, May, 20-23

Product costing & CO-PA
AWS: Product costing & CO-PA: assumptions and

flow
DWS:
Product costing BDGT & CO-PA: EBM model
 The EBM model integrates the product costing. It works with
both actual and planning values (product cost planning and
actual costing/material ledger)
 Origin of the values:
 Planning values: EBM model provides you a procedure to
upload the budget directly into SAP R/3. all the values are
entered in SD, PP and CO module by executing different
transaction. The result of the product costing planning process
is the release of the standard costs (used to evaluate the
products and the semi-finished materials) and create the
Budget orders you can use to create 15A plan. You can also
tansfer all the budget values to CO-PA.
 Actual values: the actual values flow is related to the Month-
End closing activities.
3
HSEE Product costing/Cimplify Russia 22.05.2008
Product costing BDGT & CO-PA: general assumptions
 Actual values: the actual values flow is related to the Month-End
closing activities. Sales department will invoice, PP department will
confirm and settle PP orders and CO department will execute the
Material Ledger. All these activities will drive the actual values to
CO module. So the product costing with the actual values can be
done at the end of the month and it’s also possible to transfer all
these figures to CO-PA
 In this way CO-PA can be the result of your product costing
calculations.
 EBM model allow you to compare plan and actual values in CO-PA,
let you create 15A both plan and actual and provides an easy and
automatically way to upload many figures to HIP.
 Before explaining the 2 flows: budget and acutal, it’s important to fix
some assumptions.
4
Product costing BDGT & CO-PA: EBM assumptions
 Why to used CO-PA
 Profitability Analysis (CO-PA) is mainly a reporting tool. PA enables you to
evaluate market segments, which can be classified according to products,
customers, orders or any combination of these, or strategic business units,
such as sales organizations or business areas, with respect to your
company's profit or contribution margin.
 So, PA is that part of CO where operations will access its performance factors
and profitability statements contain margins, standard cost variance, sales
information, allocations and other related profit or loss data. CO-PA helps you
to analyze profitability of customers, markets and products at various levels of
contribution margins.
 CO-PA allows you to calculate the cost of goods sold, because its driver is
the quantity sold. The structure behind is made up of the sales conditions and
the product costing, The profitability is measured down to the SD billing
document line and it is adjusted periodically against standard costs and other
costs by material ledger posting.
5
 How is used in EMEA countries:
 The aim of the system is to provide your sales, marketing, product
management and corporate planning departments with information to
support internal accounting and decision-making.
 In Holcim Central Europe this tool is mainly used by CFO (Peter
Ruetzler) according to the analysis provided by the controlling
department of each group company (leaded by Lucio Greco and Jean-
Daniel Pittleoud). Holcim Romania and Holcim Croatia has this tool and
it was uploaded during “Rainbow Project” when Holcim Italy, Croatia and
Romania were part of the same region.
 Now different solutions exists: for example Holcim Italy had applied it to
Cement, Aggregates and RMX (a special solution has been studied to
add the cost of transports using the Logistic Execution module). Holcim
Switzerland and South Germany only uses it for Cement. Holcim Spain
has only implemented the sales part without the product costing.
6
 How does it works:
 In CO-PA you can define such a master-data that is the basic structures of
this form of profitability analysis. This includes both units you want to
evaluate (characteristics) and the categories in which you analyze values
(value fields) in which to store your data for analysis.
 Using the SAP master data (customer, product, customer hierarchy) or CO-
PA derivation rules, the system can derive additional characteristics. The
combination of characteristic values forms a multidimensional profitability
segment, for which you can analyze profitability by comparing its costs and
revenues.
 During daily transactions, sales related information is flowing into PA. Along
with sales, discounts, rebates, etc. Production costs are also transferred
into PA as “standard costs”. Only at month-end, we will transfer the actual
production cost to PA and variances will appear in the controlling P&L
statements.
The way of updating PA with the actual production cost coming from
Material ledger is by running the Periodic Valuation transaction.
7
 Which information provides:
 The most common PA report is a price water-fall that starts with the Base
list price. This value will be decreased by competitive discounts, surcharges
and bonus to have Net sales. Usually it represents two kind of Net sales:
before and after transports. Then this initial value will be reduced again with
the packing costs (bags and other packing material costs) to have Cash
Revenue at station bulk, and with the shipping costs to have the Cash Mill
net. Then there are the Variable costs and this means Commercial margin
then the fixed cost and this means Contribution margins. In the end, this
value will be decrease by depreciation to have the Net Margin.
 It could be implemented both the plan and actual CO-PA in order to

compare what is planned with what happened during a month.
8
 Which information provides (2):
 All the characteristics and value fields can be combined together in order to
display cross-check reporting, filtering characteristics according to our own
personal needs, and pulling off the value fields out of that. It’s possible to
change the display parameters online directly from the displayed report:
store report structures with predefined sort orders, number formats and so
on, and execute these online or in the background at any time.
 Other information are related to the possibility to integrate also the Budget
into SAP. For example in order to build up a “15A plan” directly in SAP, to
upload automatically HIP with the budget figures, to create the PP
production orders one time for all the year automatically using the MRP
module.
9
 If you don’t have CO-PA what you should do.. :
 If a country company has no CO-PA may use other reporting tool out of
SAP R/3 suite. It may transfer all the information stored into SAP to an
external database where to create table and reports. Another option is to
use external program to elaborate the information, so setting up its extractor
into SAP and drive to this program the relevant data it needs.
 So, normally, the option is to create a structured reporting tool internal or

internally of SAP. This choice can give you advantages and disadvantages
and a pre-requisite.
10
 If you don’t have CO-PA what you should do.. (2):
 Pre-requisite:
- CO-PA does no calculations, it derives the values from the other module.
So, these modules (above all PP and SD) must be implemented and work
correctly. This could be an advantage or a disadvantage: if the users is
doing something wrong, if a PP setting in the order or MM one in the
material master data is wrong, if a sales condition is wrong in the invoice
this also affect CO-PA and the result in the report will be a wrong one
(disadvantage). More than this, as far as the actual product costing is
related to Material ledger postings, if user made mistakes these mistakes
goes to CO-PA too. But, on the other hand, this could be an advantage:
- CO-PA (as the Material Ledger tool) obliged you to do everything in the
right way in the original module. As far as CO-PA doesn’t calculate
anything, because it’s just a result, it’s not possible “to adjust” or “to fit”
the values directly in CO-PA.
11
 Main advantages & disavantages:
 ADVANTAGES:
- The main advantage is: CO-PA provides everything the company needs
while also being easier to work with.
* Data is much more accurate and people are
benefiting from that;
* The software is very intuitive, users just needs
little training to use CO-PA
- Reports match different information from Sales and Production, so give
the opportunity to understand if it’s a sales or production problem.
Besides, the possibility to select different scenarios by setting values in
different characteristics (region, plant, product, customer..) explains you
where the main problems comes from. In the end, the cost splitting show
you where are concentrate the most of the costs (electrical energy
expenses, labour costs…)
- CO-PA completes the information elaborated by the other SAP R/3
modules by their own
12
 ADVANTAGES (2):
- CO-PA fulfills additional needs that other SAP products (such as SAP
Business Information Warehouse and SAP Strategic Enterprise
Management) did not
- Drill-down up to the original document is very useful to understand the
origin cause of a business problem
- CO-PA enabled to increase transparency and accuracy in product
profitability and historical trending and it enables the accounting
department to generate accurate and timely segmented profit-and-loss
reporting
- CO-PA reduces the likelihood of costing and reporting errors simply by
automating these processes. It takes employees less time to validate and
correct allocations.
13
 DISADVANTAGES:
- Sometimes there’re difficulties in integrating SAP CO-PA with General
Ledger in the financials component, and therefore in transferring
accurate settlement data to the component (i.e. other shipping costs or
intern-unit transportation costs, Holcim Central Europe set up a fixed
cost instead of using the actual values)
- Sometime it’s difficult to derivate all the characteristics due to the
complexity of the business (i.e. RMX: it’s difficult to determine the right
level of detail for the transfer of data to CO-PA)
- Too high level of details might cause performance problem (i.e. too
many characteristics)
- If some assignment in customizing is wrong defined the reports could
split wrongly the production costs to the cost component (but it’s more
related to product costing with material ledger than CO-PA itself)
- The best solution is to have both Budget and Actual. But it also means
to spend time to transfer the sales budget to CO-PA, to fit the
production planning and to calculate the plan tariffs. 14
 Profitability Analysis VS Profit Center Accounting (EC-PCA)
 Profitability analysis, as profit center accounting is another form of

profitability accounting. However, it is incorporated in operative cost
accounting, i.e. the profitability segments in CO-PA are accounting
assignment objects and are thus directly integrated in the flow of data in
cost accounting.
 In contrast to EC-PCA, where profits are found for areas of responsibility

within the company, CO-PA lets you analyze the profitability of different
segments of your operative business as defined accourding to products,
customers, orders or any combinations of groups of these or as
organizational units, such as company codes or business areas. The aim
of CO-PA is to provide decision makers with information about the market.
15
 Profitability Analysis VS Profit Center Accounting (EC-PCA) (2)
 Master data and basic structures in CO-PA can be defined with sufficient
flexibility to meet company specific requirements. This is done by
choosing the objects for evaluation (characteristics) and key figures to
create a company-specific multidimensional structure for analysis. While
PCA has rigid structure not modifiable because it represents the strategic
business units.
 Unlike EC-PCA, CO-PA lets you use an account-based or a costing based

approach. In the costing based approach, define value fields for analysis.
In account based the values are represented in accounts.
16
 Profitability Analysis impacts in BW:
 The main impact you can have is related to the integration of the Budget
into SAP. This allows you to upload automatically most of the budget
figures needed by HIP (The extractors are already developed for Holcim
Italy).
 A problem could be the one due to the MRP settings in material master
data (more related to planning than CO-PA itself). Due to these settings
SAP generate purchase requisition the user has to use or to ignore
(anyway he must not delete).
17
 EBM runs using the COGS concept (cost of good sold)
 It means that the driver of all the evaluations is the REAL quantity. For
Budget will be real quantity per standard costs. For Actual will be actual
price per real quantity.
 CO-PA uses SD structures to fill in the information related to the
invoicing (net sales, bonus & discounts..)
 CO-PA uses PP structure as routing and BOM to evaluate the
production (“material valuation”, see the next slides)
 EBM model runs using Costing-based Profitability Analysis

 it groups costs and revenues, CO-PA won’t replicate exactly the
accounts structures, it will use group of accounts. So, it is not
permanently reconciled with financial accounting. The advantage is that
in this way it’s easier to create reports and have reports that underlines
clearly the most important information.
18
 COGS: material evaluation
 Material valuation is based on the material’s components and activity
structures, or what we call BOM (Bill of Materials) and Routing
(Operations).
 BOM: Bill of material is the component structure that is defined in order
to “build” semi-finished and finished products.
- These products have also an added value that is given thru the
manufacturing process, which uses personal and material resources.
- This is what we call Routing : Personal resources do give material
value by posting onto the production order a given time multiplied by
the rate. This is called the Tariff, and each manufacturing center
( cost center) has one tariff per activity type. Activity type is what
defines the operation done on the workshop.
- The given results of the materials valuation ( BOM ) and Routing is the cost
estimate
19
20
 Routing and BOM integration for material valuation
21
Clinker in Merone (Italy, I101)
Frantumazione Macinazione crudo Cottura Macinazione cotto

Costi principali Costi principali Costi principali Costi principali
e riaddebito e riaddebito e riaddebito e riaddebito
ausiliari ausiliari ausiliari ausiliari
Assorbimento tariffa Assorbimento Assorbimento Assorbimento
Attività effettiva o Attività Attività Attività
standard
Costo del
prodotto Frantumato Farina Clinker Cemento
Magazzino Magazzino Magazzino Magazzino

Costo medio
ponderato o
standard
22
Real costs go to the process order (cost object):
Process order
Real quantity
consumed in
the resource Actual price
(actual tariff)
BOM Material master data

Routing Activities
Clinker Clinker
Work-center Cost center
23
Electr. Energy RECIPE:

RECIPE:
- Fixed costs
- Variable costs Activity :
El. En. = Kw/h consumed * Std (budget) o Real (actual) tariff
Process = Q.ty consumed (H) * Std (budget) o Real (actual)
Kiln 5 :
- Labor
- Maintenance BOM :
- Other fixed costs Raw meal = TON Consumed * Moved av. Price
- Aux. Costs from Fuels = TON Consumed * Moved av. Price
Assessment cycle Gypsum = TON Consumed * Moved av. Price
- Depreciation Other raw mat. = TON Consumed * Moved av. Price
24
 Paint an example
- Link between cost centers and PP orders
- How to evaluate a material with PP oders
- How to revaluate the PP orders
- How drive the values to CCS
25
EBM chooses
Costing based
26
Here go to the Budgeting presentation
At the end go on here with the product costing with the

actual values.
27
28
29
Central Europe CO-PA model: Organizational CO-PA Structure
30
The idea behind CO-PA implementation is to have a model

represented in the following example:
31
 What we have to do:
32
The characteristics are the units you want to

evaluate (characteristics), they are the dimension of
the CO-PA info-cube.
 They could be standard or custom. The first one are

created automatically into CO-PA by SAP itself. If
they belong to the second group they must be
derived from the original tables and transferred to
CO-PA.
33
In Holcim Central Europe they are:
34
 Value fields:
 they are the fields that contain the currency amounts and
quantities that you want to analyze in CO-PA.
 They represent the structure of your costs and revenues.
 There are two types of value fields:

- Value fields that contain amounts in currencies
- Value fields that contain quantities
 They could be delivered by SAP or created by the users. If

the determination of a value fields is very difficult it’s
possible to develop an user exit or use the condition table.
35
Here you have, an extract

from the list of value fields
(description with related code)
to be managed by Holcim
C.E.:
Just one value field is quantity
related: Sales quantity.
36
 CO-PA line items example:
 show an italian invoice transferred to CO-PA
37
CO-PA line items
example:
 Characterist.
38
 CO-PA line items example:
 Value fields (Sales quantity)
39
 Periodic Valuation
 During daily transactions, sales related information is
flowing into PA. Along with sales, discounts, rebates,...
even the Production Costs are also transferred in to PA.
- In the budgeting, when we upload the plan figures and we determine a
standard cost we are able to reproduce the production costs by
multiplying the standard costs per the plan quantity, so we speak
about “standard product costs”.
- Only at month-end, we will transfer the actual production cost to PA
and variances will appear in the controlling P&L statements.
The way of updating PA with the actual production cost coming from
Material ledger is by running the Periodic Valuation transaction.
 To drive the production costs to CO-PA we have to use the Cost
component strcuture
40
 The Cost components

are defined as fixed and
variables and they group
accounts or range of
accounts (see the
Central Europe cost
component structure)
 A cost component can
be used for plan values
or for actual values. It
can not assume both the
values.
41
42
 GO to the actual flow
43
HARP requirement:
Inventory valuation vs. inventory movements
Which inventory movements should be disclosed in distribution function ?
Distribution
Production Shipping station at plant Storage costs
Shipping Station
Costs relating to Remaining costs:
Bulk bulk cement Costs related to
operating and
Cement maintaining
i.e. at plant (silo) gg
ed distribution facilities
Ba
Bagging costs e.g. warehouses,
e.g. ‘bags, labor’ terminals
Shipping station at terminal e.g. Road distribution
Costs relating to
bulk cement
ed
gg
Ba
Bagging costs
e.g. ‘bags, labor’
Inter-unit
distribution freight
44
Creating Costing MM View
Pre-requisite: the costing view
Costing view is used whenever there is a cos estimate for material to

be launched.
It is mandatory, since it will manage all prices and cost estimates to
be used for material valuation
45
Creating Costing MM View
Costing view is used whenever there is a cos estimate for material to be launched.
It is mandatory, since it will manage all prices and cost estimates to be used for material
valuation
46
Costing view: Main aspecs
Origin Group. Used to discriminate a cost
component from another using the same primary
account. Used for additional report detailing.
Inform according to material
With quantity structures: Mandatory and eases

he performance when generating costing results.
CHECK ALL MATERIALS (including raw
materials).
Variance key: Defaulted in this view. Let inform

with value PP1
Profit Center: CAUTION. NOT Mandatory system

wise, but it is IMPORTANT TO ENTER the
corresponding profit center for the material.
Material Origin: Check all materials. Used for

detailed reporting on cost component analysis.
47
This sections is filled by default by the system
from MRP2 view data. The costing lot size is the
quantity on which the standard cost will be based
when costed. By default, the value is the same as
the price unit in the Accounting view. It can be
changed.
Version indicator will be carried over from MRP2

view whenever there are production versions
active for the material. NOTHING TO DO HERE.
The valuation data comes from the Accounting

view. NO DATA HAS TO BE ENTERED HERE. ALL
ARE DEFAULT VALUES.
48
This section has NO user intervention. This is
were the results of the costing run is kept, for
each material. When calculating a cost estimate
for future release, the results will be shown in
“future”, corresponding wih the period of the
expected release.
Once the price is released ( no need to do it in
CHE) the standard price will be shown in
“current”.
These planned prices are used for entering a

future price with NO SPPLITING for semi-finished
and finished products and informing the system
of future raw material future prices. No need to
fill, except for raw material, if you want to enter
an target price and take the aactual price of the
raw materials.
49
Costing run: How to cost materials
First, create the costing

run, which means that you
have to give a name and a
date. The name and code
will be the identity of the
costing run.
Before starting, the system
will ask to save the costing
run, and then it will be
ready to run.
Once the costing run is saved, following step is to go thru the 3 main data
processing porcesses
50
Costing Costing
Controlling version: Enter variant: Used
Company Area: CH00 01 to set up the
Code for the strategy to
costing run: cost material:
This means Use IT01, as in
that there is Italy
one costing
run per
CoCode
This is were the organizational and

costing informaion must be entered
This data is mandatory and shows the
organizational and costing data. This is
“how” the system isgoing to calculate
costs
51
Costing date FROM: This is

the date from which the cost
estimate will be valid
This is the date until the

material costing is valid.
Usually, 31.12.9999
This is the date that the

system is going to look for to
validate the material structure
(BOM, Routing)
This is the date that the system is going
Date management
to look for in order to valuate the
material structure ( tariff pricess,
material prices, etc)
52
Once all the information for

the costing run has been
entered, the costing run MUST
be save in order to continue.
From this point, once the

costing run is saved, we can
exit the transaction or the
system and carry the work
afterwords.
Once saved, we can start

processing the cost estimate
53
These are the necessary

steps to execute from
beginning to end, a proper
costing run.
The procees starts by

stablishing the
parameters and then
executing the
parameters settings. And
this , for every flow step.
54
You can discriminate any

of the values shown here
in order to limit the
material costing. It is
recommended to limit the
material types to ZMGR
adn AMST
You can cost the

material in background,
althought the costing
steps are usually very
fast in their processing.
55
Once the settings ar saved

in the “parameters”
(previous screen), you can
now launch the first step:
Selection. The result will
be all selected materials
For the swiss PA atual values,

you don’t need to cover all
steps. Proceed the same way as
in previous step for the
following 2. That is enough for
CHE needs.
56
Execute PA Actual Valuation
Execute transaction KE27
Introduce Operating
concern: CH00
57
Introduce period
you want to
revaluate value
fields at actual
costs
Record Type:
always “F”: Billing
data
**Note that this revaluation MUST be done after Material Ledger’s Multi-Level All these checks will me marked
calculation. Either if ML is closed or not. as default, although the “Test
**Note that the filling of the screens will be based on an specific variant per country Run” one will have to be de-
( CHE and IT) selected in order to make actual
postings in PA
58
This is the organizational selection, where

Company code, plans, material, etc, will be
introduced in order to entre the revaluation cycle.
All needed input will also be part of the variant
( previous screen)
59
These are the Value Fields that are going to be

revaluated. Althought all value fields are shown,
the ones checked are the ones that will also be
included in the selection variant.
60
This line shows the actual values

for which the system would create a
posting.
A PA Line Item simulation report

can be executed in order to detail
the expected values. Don’t forget
that you can go all the way to the
finish ( line iem report included ) in
test mode.
61
These are the results. You can choose one specific report layout to
show all data included in the revaluation
62
After simulation done, user can repeat the process without “test run” and making actual postings
in PA.
CAUTION!!!: If you run this process twice ( or more), PA postings will be doubled. Each time you
run the revaluation, ( withput test) an actual posting will be done, even if a posting already exists.
63
CO-PA report
Run profitability Report (KE30)

Choose IT-COST report
Selection:
- company code: IT01
- period: 10.2007
- plant: I101, I102, I103
64
From Base list price to Net Sales
65
From Net Sales to Cash Mill Net
66
From Cash Mill Net to Net Margin
67
The menu
In the menu you can select all the variable, those corrisponds to the CO-PA
cube dimensions
You can go through the report by drill-down its variables
68
Drilldown by customer
If you choose customer from the

menu you can drill-down the
period:
Quantity sold Net sales
69
Drilldown by product
If you choose Product from the

menu you can drill-down the
period:
70
ABC analysis
71
ABC Analysis
72
ABC Analysis: Choose strategy
73
ABC Analysis: graphical results
74
ABC Analysis: navigation
75
Only the first corresponding customers are selected (the rest are summed
up as “Remaining”)
76
To have more detail per customer, navigation is possible when pressing

the customer
And choosing the detail
77

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Product costing: Budget & CO-PA

Moscow, May, 20-23

AWS: Product costing & CO-PA: assumptions and

 It could be implemented both the plan and actual CO-PA in order to

 So, normally, the option is to create a structured reporting tool internal or

 Profitability analysis, as profit center accounting is another form of

 In contrast to EC-PCA, where profits are found for areas of responsibility

 Unlike EC-PCA, CO-PA lets you use an account-based or a costing based

 EBM model runs using Costing-based Profitability Analysis

Frantumazione Macinazione crudo Cottura Macinazione cotto

Magazzino Magazzino Magazzino Magazzino

Real costs go to the process order (cost object):

BOM Material master data

Electr. Energy RECIPE:

Here go to the Budgeting presentation

At the end go on here with the product costing with the

Central Europe CO-PA model: Organizational CO-PA Structure

The idea behind CO-PA implementation is to have a model

 What we have to do:

The characteristics are the units you want to

 They could be standard or custom. The first one are

In Holcim Central Europe they are:

 They represent the structure of your costs and revenues.

 There are two types of value fields:

 They could be delivered by SAP or created by the users. If

Here you have, an extract

 The Cost components

 GO to the actual flow

Shipping station at terminal e.g. Road distribution

Pre-requisite: the costing view

Costing view is used whenever there is a cos estimate for material to

With quantity structures: Mandatory and eases

Variance key: Defaulted in this view. Let inform

Profit Center: CAUTION. NOT Mandatory system

Material Origin: Check all materials. Used for

Version indicator will be carried over from MRP2

The valuation data comes from the Accounting

These planned prices are used for entering a

First, create the costing

This is were the organizational and

Costing date FROM: This is

This is the date until the

This is the date that the

Once all the information for

From this point, once the

Once saved, we can start

These are the necessary

The procees starts by

You can discriminate any

You can cost the

Once the settings ar saved

For the swiss PA atual values,

This is the organizational selection, where

These are the Value Fields that are going to be

This line shows the actual values

A PA Line Item simulation report

Run profitability Report (KE30)

If you choose customer from the

Quantity sold Net sales

If you choose Product from the

To have more detail per customer, navigation is possible when pressing

And choosing the detail

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01 Controlling A. & D. WS - RU BDGT & CO-PA

01 Controlling A. & D. WS - RU BDGT & CO-PA