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Controlling Module
Explain the organizational assignment in the controlling module?
Company codes are assigned to the controlling area. A controlling area
is assigned to the operating concern.
Controlling Area is the umbrella under which all controlling activities of
Cost Center Accounting, Product costing, Profitability Analysis and Profit
Center are stored.
Operating Concern is the highest node in Profitability Analysis
What is primary Cost element and secondary cost element?
Every Profit and Loss GL account that needs to be controlled has to be
defined as a cost element in SAP. Just as in FI General Ledger Accounts
exist, in Controlling we have Cost element.
Each FI General Ledger Account that is a Profit and Loss Account is also
created as a Cost element in SAP.
Primary Cost Elements are those which are created from FI general
Ledger Accounts and impact the financial accounts eg. Travelling
expenses, consumption account infact, any Profit and Loss GL account
Secondary Cost Elements are those which are created only in
controlling and does not affect the financials of the company. It is used
for internal reporting only. The postings to these accounts do not affect
the Profit or Loss of the company.
The following categories exist for secondary cost elements:
21 Internal Settlement:
Cost elements of this category is used to settle order costs to objects in
controlling such as cost centers, pa segments etc.
31 Order/Results Analysis:
Used to calculate WIP on the order/project
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41 Overhead
Used to calculate indirect costs from cost centers to orders
42. Assessment
Used to calculate costs during assessment
43 Internal Activity Allocation
Used to allocate costs during internal activity allocation such as Machine
Labour etc
What are cost objects?
A cost object means a cost or a revenue collector wherein all the costs or
revenues are collected for a particular cost object. Examples of this could
be cost center, production order, internal order, projects, sales order
So whenever you look at any controlling function the basic thing you
need to ask yourself is What is the cost element(expense) I want to
control and what is the cost object ( i.e. either the production order, sales
order, internal order) I am using to control this cost element. Sounds
confusing read it again it is very simple
Controlling is all about knowing the cost element and the cost
object. Every time pose this question to yourself what is the cost
element what is the cost object.
At the end of the period all costs or revenues in the cost object are settled
to their respective receivers which could be a gl account, a cost center,
profitability analysis or asset.
It is very important that you understand this otherwise you would
struggle to understand Controlling.
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Cost Center Accounting:
How is cost center accounting related to profit center?
In the master data of the Cost Center there is a provision to enter the
profit center. This way all costs which flow to the cost center are also
captured in the profit center.
Cost centers are basically created to capture costs e.g. admin cost center,
canteen cost center etc
Profit centers are created to capture cost and revenue for a particular
plant, business unit or product line.
What is a cost element group?
Cost element group is nothing but a group of cost elements which help
one to track and control cost more effectively. You can make as many
number of cost element groups as you feel necessary by combining
various logical cost elements.
What is a cost center group?
In a similar line the cost center group is also a group of cost centers
which help one to track and control the cost of a department more
effectively. You can make as many number of cost centers as you feel
necessary by combining various logical cost centers
Infact you can use various combinations of cost center group with the
cost element group to track and control your costs per department or
across departments
What is the difference between Distribution and Assessment?
Distribution uses the original cost element for allocating cost to the
sender cost center. Thus on the receiving cost center we can see the
original cost element from the sender cost center. Distribution only
allocates primary cost.
Assessment uses assessment cost element No 43 defined above to
allocate cost. Thus various costs are summarized under a single
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assessment cost element. In receiver cost center the original cost
breakup from sender is not available. Assessment allocates both primary
as well as secondary cost.
What are the other activities in Cost center?
If you have a manufacturing set up, entering of Activity prices per cost
center/activity type is an important exercise undertaken in Cost center
accounting.
What is an Activity Type?
Activity types classify the activities produced in the cost centers.
Examples of Activity Type could be Machine, Labour, Utilities
You want to calculate the activity price through system? What are
the requirements for that?
In the activity type master you need to select price indicator 1 – Plan
price, automatically based on activity.
When activity price is calculated through system whether activity
price is shown as fixed or variable?
Normally when activity price is calculated through system it is shown as
fixed activity price since primary cost are planned as activity independent
costs.
What is required to be done if activity price is to be shown both
fixed and variable?
In this case you need to plan both activity independent cost which are
shown as fixed costs and activity dependent costs which are shown as
variable costs.
Is it possible to calculate the planned activity output through
system?
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Yes. It is possible to calculate the planned activity output through
system by using Long term Planning process in PP module.
Explain the process of calculating the planned activity output
through Long term planning?
In Long term planning process the planned production quantities are
entered for the planning year in a particular scenario. The Long term
planning is executed for the scenario. This generates the planned activity
requirements taking the activity quantities from the routing and
multiplying with the planned production.
The activity requirements are then transferred to the controlling module
as scheduled activity quantities. Thereafter you execute a plan activity
reconciliation which will reconcile the schedule activity and the activity
you have planned manually. The reconciliation program updates the
scheduled activity quantity as the planned activity in the controlling
module.
You want to revalue the production orders using actual activity
prices. Is there any configuration setting?
Yes. There is a configuration setting to be done.
Where is the configuration setting to be done for carrying out
revaluation of planned activity prices in various cost objects?
The configuration setting is to be done in the cost center accounting
version maintenance for fiscal year. This has to be maintained for version
0. You need to select revalue option either using own business
transaction or original business transaction.
At month end you calculate actual activity prices in the system.
You want to revalue the production orders with this actual activity
prices. What are the options available in the system for revaluation?
The options available are as follows:-
You can revalue the transactions using periodic price, average price or
cumulative price.
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Further you can revalue the various cost objects as follows:-
Own business transaction – Differential entries are posted
Original business transaction – The original business transaction is
changed.
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Internal orders
What is the purpose of defining Internal orders.?
An example would help us understand this much better.
Lets say in an organization there are various events such as trade fairs,
training seminars, which occur during the year. Now lets assume for a
second that these Trade fairs are organized by the Marketing cost center
of the organization. Therefore in this case marketing cost center is
responsible for all the trade fairs costs. All these trade fairs costs are
posted to the marketing cost centers. Now if the management wants an
analysis of the cost incurred for each of the trade fair organized by
the marketing cost center how would the marketing manager get
this piece of information across to them? The cost center report
would not give this piece of info
Now this is where Internal Order steps in .If you go through all cost
center reports this information is not readily available since all the costs
are posted to the cost center.
SAP, therefore provides the facility of using internal orders which comes
in real handy in such situations. In the above scenario the controlling
department would then need to create an internal order for each of the
trade fair organized. The cost incurred for each of the trade fair will be
posted to the internal orders during the month. At the month end, these
costs which are collected in the internal order will be settled from these
orders to the marketing cost center. Thus the controlling person is now
in a position to analyze the cost for each of the trade fair separately.
Thus internal order is used to monitor costs for short term events,
activities. It helps in providing more information than that is provided on
the cost centers. It can be widely used for various purposes .
How can you default certain items while creation of internal order
master data?
You can do so by creating a model order and then update the fields
which you want to default in this model order. Finally attach this model
order in the internal order type in the field reference order.
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Once the above is done whenever you create an internal order for this
order type the field entries will get copied from the model order.
What is the configuration setting for the release of the internal
order immediately after creation?
You have to check the “release immediately” check box in the
internal order type.
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Product Costing
What are the important Terminologies in Product Costing?:
Results Analysis Key – This key determines how the Work in Progress is
calculated
Cost Components - The break up of the costs which get reflected in
the product costing eg. Material Cost, Labour Cost, Overhead etc
Costing Sheets - This is used to calculate the overhead in
Controlling
Costing Variant - For All manufactured products the price control
recommended is Standard Price. To come up with this standard price for
the finished good material this material has to be costed. This is done
using Costing Variant. Further questions down below will explain this
concept better.
What are the configuration settings maintained in the costing
variant?
Costing variant forms the link between the application and Customizing,
since all cost estimates are carried out and saved with reference to a
costing variant. The costing variant contains all the control parameters
for costing.
The configuration parameters are maintained for costing type, valuation
variants, date control, and quantity structure control.
In costing type we specify which field in the material master should be
updated.
In valuation variant we specify the following
a) the sequence or order the system should go about accessing
prices for the material master (planned price, standard price,
moving average price etc).
b) It also contains which price should be considered for activity price
calculation and .
c) How the system should select BOM and routing.
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How does SAP go about costing a Product having multiple Bill of
materials within it?
SAP first costs the lowest level product, arrives at the cost and then goes
and cost the next highest level and finally arrives at the cost of the final
product.
What does the concept of cost roll up mean in product costing
context?
The purpose of the cost roll up is to include the cost of goods
manufactured of all materials in a multilevel production structure at the
topmost level of the BOM(Bill of Material)
The costs are rolled up automatically using the costing levels.
1) The system first calculates the costs for the materials with the
lowest costing level and assigns them to cost components.
2) The materials in the next highest costing level (such as semi-
finished materials) are then costed. The costs for the materials
costed first are rolled up and become part of the material costs of
the next highest level.
What is a settlement profile and why is it needed?
All the costs or revenues which are collected in the Production order or
Sales order for example have to be settled to a receiver at the end of the
period. This receiver could be a Gl account, a cost center, profitability
analysis or asset. Also read the question “What is a cost object “ in the
section Controlling.
In order to settle the costs of the production order or sales order a
settlement profile is needed.
In a settlement profile you define a range of control parameters for
settlement. You must define the settlement profile before you can enter a
settlement rule for a sender.
The Settlement Profile is maintained in the Order Type and defaults
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during creating of order.
.
Settlement profile includes:-
1) the retention period for the settlement documents.
2) Valid receivers GL account, cost center, order, WBS element, fixed
asset, material, profitability segment, sales order, cost objects, order
items, business process
3) Document type is also attached here
4) Allocation structure and PA transfer structure is also attached to the
settlement profile e.g. A1
The settlement profile created is then attached to the order type.
What is Transfer or Allocation structure?
The transfer structure is what helps in settling the cost from one cost
object to the receiver. It is maintained in the Settlement profile defined
above.
The Transfer structure has 2 parts:
a) Source of cost elements you want to settle
b) Target receiver whether it is a Profitability segment or fixed asset or
cost center
So basically for settling the costs of a cost object you need
to define the Transfer structure where you mention what
are the costs you want to settle and the target receiver for
that.
This information you fit it in the settlement profile which
contains various other parameters and this settlement
profile is defaulted in the Order type. So every time a
order is executed the relevant settlement rule is stored
and at the month end by running the transaction of the
settlement of orders all the cost is passed on to the
receiver
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So to put in simple terms:
a) You define your cost object which could be a
production order a sales order for eg
b) You collect costs or revenues for it
c) You determine where you want to pass these costs or
revenues to for eg if the sales order is the cost object
all the costs or revenues of a sales order could be
passed to Profitability Analysis
What do you mean by primary cost component split?
Primary cost split is defined when you create a cost component
structure. When you switch on this setting, the primary cost from the
cost center are picked up and assigned to the various cost components.
How do primary costs get picked up from cost center into the cost
component structure?
This is possible when you do a plan activity price calculation from SAP.
The primary cost component structure is assigned to the plan version 0
in Controlling .
Is it possible to configure 2 cost component structures for the same
product in order to have 2 different views?
Yes it is possible. We create another cost component structure and
assign it to the main cost component structure. This cost component
structure is called Auxiliary cost component structure which provides
another view of the cost component structure.
How do you go about configuring for the sales order costing?
The flow is as follows:
Sales order -> Requirement Type-à Requirement Class-> All settings for
controlling
In a sales order you have a requirement type .In configuration, the
requirement Class is attached to the requirement type and in this
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requirement class all configuration settings are maintained for
controlling.
In the requirement class we attach the costing variant, we attach the
condition type EK02 where we want the sales order cost to be updated,
and the account assignment category. In the account assignment
category we define whether the sales order will carry cost or not. In case
if we do not want to carry cost on the sales order we keep the
consumption posting field blank.
We also define here the Results Analysis version which helps to calculate
the Results Analysis for the Sales order if required.
There are 2 plants in a company code. First plant is the
manufacturing plant and another plant is the selling plant. Finished
goods are manufactured at the manufacturing plant and transferred
to the selling plant. How is standard cost estimate calculated at the
selling plant given the fact that the cost at both the plant should be
the same?
The special procurement type needs to be configured which specifies in
which plant the system is to look up for cost. Here a special procurement
key specifying plant 1 (manufacturing plant) should be configured.
This special procurement type must be entered in the costing view or the
MRP view of the Finished good material master record in plant 2.
When you cost the finished good at plant 2, the system will transfer the
standard cost estimate from plant 1 to plant 2
What is mixed costing in SAP? Give an example to explain.
Mixed costing is required when different processes are used to
manufacture the same material. Mixed costing is required when you have
different sources of supply for purchasing the material.
Let us take an example:-
There is a finished good Xylene which can be manufactured by 3
different processes.
The first process uses an old machine and labour. The processing time is
9 hrs to manufacture.
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The second process uses a semi-automatic machine and labour. The
processing time is 7 hrs to manufacture.
The third process uses a fully automatic machine and the processing
time is 5 hrs.
Thus cost of manufacture for the 3 processes is different. By using Mixed
costing you can create a mixed price for the valuation of this finished
good.
What configuration needs to done for using Mixed costing?
Quantity Structure type for mixed costing must be configured. Here we
specify the time dependency of the structure type . The following options
exist
a) You have no time dependency.
b) It is based on fiscal year
c) It is based on period
This quantity structure type is then assigned to the costing version.
Lets say for a product there exists three production versions.
Explain the process how you would go about creating a mixed cost
estimate?
The process of creating a Mixed cost estimate would be as follows:-
1) Create procurement alternatives for each of the production version.
2) Define Mixing ratios for the procurement alternatives
3) Select the configured quantity structure type and execute a
material cost estimate based on the costing version.
What is Mixing ratios and why are they required to be maintained
before creation of cost estimate?
Mixing ratios are weighting factors assigned to the procurement
alternatives. This weighting factor is obtained from the planning
department based on the usage of the procurement alternatives during
the planning year.
For e.g.
Procurement alternative 1 (production version 1) 40% will be
manufactured
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Procurement alternative 2 (production version 2) 35% will be
manufactured
Procurement alternative 3 (production version 3) 25% will be
manufactured
This % will be maintained as mixing ratios.
Thus when system calculates the mixed cost estimate, system will first
cost each of the production version and then multiply each of the costs
with the weighting factors.
Thus
240 (cost of prod. Vers 1) X 40 = 9600
210 (cost of prod. Vers 2) X 35 = 7350
160 (cost of prod vers 3) X 25 = 4000
Mixed costs 17350/100 = 173.5
There are Result analysis categories in WIP (Work in Process). What
do you mean by the result analysis category Reserves for unrealized
costs?
If you are calculating the work in process at actual costs, the system will
create reserves for unrealized costs if the credit for the production order
based on goods receipts is greater than the debit of the order with actual
costs incurred. The Result analysis category RUCR (Reserves for
unrealized cost) would need to be maintained. Normally this is not
maintained in most of the companies.
Which is the Result analysis category which is normally maintained
for the WIP (Work in Process) calculation?
The Result analysis category WIPR - Work in process with requirement
to capitalize costs is normally maintained for WIP calculation
How do you define a By-product in SAP?
A By-product in SAP is defined as an item with a negative quantity in the
Bill of Material. By-product reduces the cost of the main product. There
is no Bill of Material for a By-product.
How do you calculate the cost for a By-product in SAP?
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The cost for the By-product is the net realizable value. This is manually
maintained in the system for the by-product through transaction code
MR21 Price change.
How do you define a Co-Product in SAP?
A Co-product (primary product or by-product) is indicated by a tick in
the costing view of the material master. In the BOM all the primary
products are represented as an item with negative quantity. A primary
product is also indicated as a co-product in the BOM of the leading co-
product. For primary products the costs are calculated using the
apportionment method, while for by-products the net realizable value
method applies.
Is it possible to use Standard SAP Co-product functionality in
Repetitive manufacturing?
No. It is not possible to use the Standard Co-product functionality in
repetitive manufacturing
How do you got about defining CO-Product functionality in
Repetitive manufacturing?
In the Repetitive manufacturing you need to use the Costing BOM for the
other co-product. Through arithmetical calculation you need to maintain
the quantities in the costing BOM. This co-product will be shown as a
negative item in the leading co-product.
You get an error while executing a cost estimate which says” Item
no 1 (which is a raw material) is not assigned to the cost component
structure?
What could be the possible cause of error in this scenario?
The consumption GL code for the material master is not assigned to the
cost component structure. To find out how you can know which GL code
to assign read the next question.
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In the above scenario how do you know which cost element is being
called for?
In this case you need to the use simulation mode OMWB in MM and
enter the material code plant and the movement type 261 (issue against
production order). You will see the account modifier VBR and against
which the GL code is available.
You get an error while executing a cost estimate, which says” Item
no. 1 (which is a raw material) is not assigned to the cost
component structure?
In this case everything is perfectly configured, what could be the
possible error in this scenario?
In the material master of the raw material the valuation class updated in
the accounting view will be incorrect.
Is it possible to calculate standard cost estimate for a past date?
No. It is not possible to calculate standard cost estimate for a past date.
What is the difference between a product cost collector and
production order?
Both of these are cost objects which collect production costs for
manufactured product. Product cost collector is a single order created for
a material. All the costs during the month for that material is debited to
single product cost collector. No costing by lot size is required in case of
product cost collector.
The latter is where there are many production orders for a single material
during the month. Costs are collected on each of this production order.
Costing by lot size is the main requirement in case of production orders.
What is the meaning of preliminary cost estimate for product cost
collector?
Preliminary costing in the product cost by period component calculates
the costs for the product cost collector. In repetitive manufacturing you
can create cost estimate for specific production version.
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Why is preliminary cost estimate required?
The preliminary cost estimate is required for the following:-
Confirm the actual activity quantities.
Valuate work in process
Calculate production variances in variance calculation
Valuate the unplanned scrap in variance calculation
Is it possible to update the results of the standard cost estimate to
other fields such as commercial price, tax price fields in the
accounting view?
Yes. It is possible to update the standard cost estimate to other fields
such as commercial price etc. in accounting view.
How do you configure that the results of the standard cost estimate
are updated in other fields other than the standard price?
The price update in the material master is defined in Costing type. This
costing type is attached to the costing variant.
What do you mean by Assembly scrap and how is it maintained in
SAP?
Assembly scrap is scrap that is expected to occur during the production
of a material which is used as an assembly.
If a certain amount of scrap always occurs during the production of an
assembly, the quantities and activities used must be increased by the
system so that the required lot size can be produced.
To increase the lot size of an assembly you can enter a percentage, flat-
rate assembly scrap in the MRP 1 view of the material master record.
This assembly scrap is reflected in all the subordinate components. The
system increases the quantity to be produced by the calculated scrap
quantity. This increases both the materials consumed and the activities
consumed and consequently the cost.
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How are scrap costs shows in the standard cost estimate?
Scrap costs are assigned to the relevant cost component and can be
shown separately for a material in the costed multilevel BOM.
How are scrap variances calculated?
Scrap variance are calculated by valuating the scrap quantities with the
amount of the actual costs less the planned scrap costs.
What do you mean by Component scrap and how is it maintained in
SAP?
Component scrap is the scrap of a material that is expected to occur
during production. When an assembly is produced with this component,
the system has to increase the component quantity to enable to reach
the required lot size. The component scrap can be entered in the BOM
item or in the MRP 4 view of the material master
What do you mean by Operation scrap and how is it maintained in
SAP?
Operation scrap is a scrap that is expected to occur during production.
Operation scrap is used to reduce the planned input quantities in follow
up operations and to calculate the precise amount of assembly scrap.
Operation scrap can be maintained in % in the routing and in the BOM.
What are the implications if the operation scrap is maintained in
the routing and if it maintained in the BOM?
If the operation scrap is maintained only in the routing, the costing lot
size is reduced by this percentage.
If the operation scrap is maintained in the BOM, the planned input (not
the output quantity) is increased and any assembly scrap is reduced.
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What is the meaning of additive costs in SAP and why is it required?
Additive costs are used to add costs manually to a material cost estimate
when it cannot be calculated by the system. Examples of such costs are
freight charges, insurance costs and stock transfer costs.
What is the configuration required for additive costs?
To include additive costs in the material cost estimate you need to set the
indicator “Incl. additive costs” for each valuation strategy in the valuation
variant.
Further you also need to set in the costing variant to include additive
costs.
How do you configure split valuation?
The configuration steps involved in split valuation:-
1) Activate split valuation – Configure whether split valuation is
allowed for the company code.
2) Determine the valuation categories and valuation types that are
allowed for all valuation areas.
3) Allocate the valuation types to the valuation categories
4) Determine the local valuation categories for each valuation area
and activate the categories to be used in your valuation area.
What is valuation category and valuation type in split valuation?
In split valuation the material stock is divided according to valuation
category and valuation type.
Valuation category determines how the partial stocks are divided
according to which criteria. The following valuation categories are preset
in the standard SAP R/3 system –
B - Procurement type
H – Origin type
X – Automatic batch valuation
Valuation type describes the characteristic of individual stock.
e.g. EIGEN Inhouse production (SAP standard)
FREMD External procurement (SAP standard)
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Valuation types are assigned to valuation categories.
What are the steps involved before you run a cost estimate for a
split valuated material?
The following are the steps:-
1) Create procurement alternatives based on the valuation types for
the material.
2) Maintain Mixing ratios for the procurement alternatives
How do you create a material master with split valuation?
To create a split valuated material master proceed as follows:-
1. First create a valuation header record for the material. Update the
Valuation category field on the accounting screen; leave the
Valuation type field blank. In the Price control field, enter V
(moving average price). When you save, the system creates the
valuation header record.
2. Then create the material for a valuation type.
Call up the same material in creation mode again. Due to the fact
that a valuation header record exists, the system requires you to
enter a valuation type for the valuation category.
3. Repeat Step two for every valuation type planned.
When a standard cost estimate is run for a finished good does SAP
calculate cost estimate for its components such as raw and packing
material?
Yes. SAP calculates the cost estimate even for raw and packing material
and stores it in the standard price field for information purposes
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How do you prevent the system from calculating the cost estimate
for raw and packing material when you run a standard cost estimate
for the finished goods?
To prevent the system from calculating cost estimates for raw and
packing material, you need to select the “No costing” checkbox in the
costing view of the material master.
How is it possible to apply 2 different overhead rates for 2 different
finished goods?
It is possible through overhead groups. You configure 2 overhead keys.
Define rates for each of this overhead key. These two overhead keys is
then assigned to the two overhead groups. These overhead groups are
attached in the costing view of the finished goods material master.
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Work in Progress
In period 1 there is a WIP posted of 22000 USD in period 2 some
further goods issue are done to the extent of 15000 USD . How will
system calculate WIP for period 2?
System will post a delta WIP of 15000 USD in period 2.
What is the basic difference in WIP calculation in product cost by
order and product cost by period (repetitive manufacturing)?
Generally in product cost by order, WIP is calculated at actual costs and
in product cost by period WIP is calculated at target costs
What are the configuration settings for calculating WIP in SAP?
You define secondary cost elements of type 31 first.
You then need to define the Results Analysis version
This results analysis contains line ids which are basically nothing but
break up of costs
Next you define assignments-> here you assign source cost elements to
the line ids defined above
You also define the secondary cost elements which are assigned to the
line ids.
In the end you define the Finance GL accounts which are debited and
credited when a Work in Progress is calculated.
Please refer to the configuration document for more detailed information
How does SAP calculate Work in Process (WIP) in product cost by
order?
The system first runs through all the production order for the month and
checks for the status of each production order. If the status of the
production order is REL (Released) or PREL (Partially released) and if
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costs are incurred for that order system calculates WIP for the
production order.
The system cancels the WIP for the production order when the status of
the order becomes DLV (delivered) or TECO (Technically complete).
There is a production order with order quantity 1000 kgs. During
the month 500 kgs of goods were produced. What will be the system
treatment at the month end?
The system will first check the status of the production order. Since the
status of the order is not DLV (Delivered) it will calculate a WIP for the
production order.
Why does the system not calculate variance for the 500 kgs which
has been delivered?
In the product cost by order component the system does not calculate a
variance for partially delivered stock on the production order. Whatever
is the balance on the production order is considered as WIP. In the
product cost by period component, system will calculate WIP as well as
variance provided
Is the WIP calculated in the product cost by order component at
actual costs or standard costs?
In the product cost by order component the WIP is calculated at actual
costs.
Is the WIP calculated in the product cost by period component at
actual costs or target costs?
In the product cost by period component the WIP is calculated at target
costs.
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Material Ledger
What precautions have to be taken while switching on the material
ledger for a plant?
A material ledger once activated for a plant cannot be switched off.
Therefore it is important that the material ledger be activated carefully
for a plant.
How do you go about configuring material ledger?
The following are the steps:-
1) Activate Valuation Areas for Material Ledger
2) Assign Currency Types to Material Ledger Type
3) Assign Material Ledger Types to Valuation Area
4) Maintain Number Ranges for Material Ledger Documents
5) Activate Actual costing (whether activity update relevant for price
determination)
6) Activate Actual cost component split
7) Customizing settings in OBYC
What are the problems faced when a material ledger is activated?
When a material ledger is activated it is imperative that actual costing
run has to be done every month. Actual costing run needs to be done
immediately after the new month roll over. After the actual costing run
you cannot post any MM(Materials Management) entry to the previous
period.
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What are the options available while performing revaluation in an
actual costing run?
There are 2 options available:-
Revaluation – You can revalue the finished goods stock
Accrual – You can accrue the revaluation gain or loss without actually
changing the price in the material master.
What is the configuration setting to be done for posting the accrual
in the actual costing run?
In transaction code OBYC select transaction key LKW and maintain the
balance sheet account for accrual.
What are the steps to be taken before you execute an actual costing
run?
The following are the steps to be taken:
1.) Execute all the allocation cycles in the cost center
accounting module.
2.) Execute actual activity price calculation.
3.) Revalue all the production orders with the actual activity
prices. The under or over absorbed cost on cost centers are
passed on to the production order through this step of
revaluation of production orders.
4.) Calculate overheads, do a variance calculation and finally
settle the production order.
5.) Finally execute the actual costing run.
What happens in an actual costing run?
In actual costing run there is a process of single level price determination
and multi level price determination. The production price difference
variances are collected on the material ledger for each of the finished
goods and semi finished goods.
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During single level price determination the price difference collected on a
single finished product is allocated to consumption. This allocation to the
consumption is not individually allocated to the good issues.
In multi level price determination the price difference is allocated to
individual goods issue. The price differences are passed on to the next
level of consumption.
The system calculates a weighted average price for the finished goods
and semi finished goods. This weighted average price is called as the
periodic unit price
What happens when the revaluation is done in actual costing run for
the previous period?
When revaluation is performed in actual costing for the previous period
the price control in the material master is changed from S to V and the
periodic price is updated as the valuation price for the previous period.
What is the importance of the price determination indicator in the
material master for the purpose of actual costing run?
There are 2 price determination indicators in the material master when
material ledger is activated.
They are as follows:-
2 – transaction based
3 – Single level / multi level
In case of material masters having price determination indicator 2 no
actual costing will take place. In case of material masters having price
determination indicator 3 actual costing will take place.
What should be the price control for a material master which has a
price determination indicator 3 where material ledger is activated?
In such a case only price control S is possible where the price
determination 3 is activated in material master.
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Profitability Analysis
Explain the organizational assignment in the PA module?
The operating Concern is the highest node in Profitability Analysis.
The operating concern is assigned to the Controlling Area.
Within the operating concern all the transactions of Profitability Analysis
are stored.
The operating concern is nothing but a nomenclature for defining the
highest node in PA.
What is the functionality of the PA module?
PA module is the most important module when it comes to analyzing the
results of the organization.
In this module you basically collect the revenues from the sale order , the
costs from the production order, cost center or internal order and
analyze their results.
The interesting part about this module is that when it collects the costs
and revenues it also collects the characteristics associated with the costs
and revenues and this is what makes it stand out
So for e.g. using PA module you can find out the following:
Profit of a certain product
Profit of a certain product in a certain region
Profit of a certain product in a certain region by a certain customer
Profit of a certain product in a certain region by a certain sales person
And the list can go on in depth
It is one of the most wonderful modules in the SAP
How do you get all those characteristics defined above and how do
you analyze them?
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To do so while defining Operating concern one has to define
Characteristics and Value fields.
What are characteristics and Value Fields?
In the operating concern two things are basically defined
a) Characteristics
b) Value Fields
Characteristics are nothing but those aspects on which we want to break
down the profit logically such as customer, region product, product
hierarchy, sales person etc
Value Fields are nothing but the values associated with these
characteristics
Eg Sales, Raw Material Cost, Labour Cost, Overheads etc
Once you define the characteristics and value fields these values are
updated in the table.
From where does the characteristics come from?
The characteristics which are defined above basically comes from either
the Customer Master or the Material Master.
How does various values( revenues and costs) flow into PA?
The Sales Revenue comes from the Condition Type in SD.
We need to map the Condition Type in SD to the respective value fields in
customizing to have the revenue flow into PA.
The Cost comes from Cost estimates which are transferred using the PA
transfer structure which we have covered in the Product costing section.
The various cost components of the cost component structure is assigned
to the value field of PA module and this is how the costs come into PA.
Once the actual revenue and the std cost defined above are captured in
PA the variances are also transferred into PA.
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This way the std cost variances equal the actual cost.
So actual revenue- actual cost helps us determine the profit.
How do you configure the assignment of variances from product
costing to COPA module?
The variance categories from product costing along with cost element is
to be assigned to the value fields in COPA
Once you have captured all the costs and revenues how do you
analyze them?
The costs and revenues which we have captured in the above manner are
then analysed by writing reports using the Report Painter Functionality
in SAP.
What is characteristic Derivation in Profitability Analysis Module?
Characteristic Derivation is usually used when you want to derive the
characteristics . An example of this could be say you want to derive the
first two characteristics of product hierarchy.
In such cases you define characteristic derivation where you maintain
the rules, which contain the table names of the product hierarchy fields
and the number of characters to be extracted, and it also specifies the
target characteristic field in PA.
What is the basic difference in customizing in Profitability analysis
as compared to other modules?
In PA when we configure the system i.e. creating operating concern,
maintain structures no customizing request is generated. The
configuration needs to be transported through a different transaction
called as KE3I.
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What is the difference between Account based Profitability Analysis
and Costing based Profitability Analysis?
Account based Profitability analysis is a form of Profitability analysis (PA)
that uses accounts as its base and has an account based approach. It
uses costs and revenue elements.
Costing based Profitability Analysis is a form of profitability analysis that
groups costs and revenues according to value fields and costing based
valuation approaches. The cost and revenues are shown in value fields.
What are the advantages and disadvantages of Account based
profitability analysis vis-à-vis costing based profitability analysis?
The advantage of Account based PA is that it is permanently reconciled
with Financial accounting.
The disadvantages are that it is not powerful as the costing based PA,
since it uses accounts to get values. No Contribution margin planning
can be done since it cannot access the standard cost estimate. Further
no variance analysis is readily available.
The advantages of the Costing based PA are manifold. They are as
follows: -
· Greater Reporting capabilities since lot of characteristics are
available for analysis.
· This form of PA accesses the Standard cost estimate of the
manufactured product and gives a split according to the cost
component split (from the product costing module) when the bills
are posted.
· Contribution margin can be planned in this module since the
system automatically accesses the standard cost estimate of the
product based on the valuation approaches.
· Variance analysis is ready available here since the variance
categories can be individually mapped to the value fields.
Disadvantages:-
Since it uses a costing based approach, it does not sometime reconcile
with financial accounting.