1.1 What is product costing? 13 1.2 Organizational hierarchy 14 1.3 Key features of SAP S/4HANA 16 1.4 Navigating this book 18 1.5 Tips for reading this book 19
4.1 Costing-related configuration 80 4.2 Costing run processes 111
5 Sales order costing 143
5.1 Sales order costing configuration 144 5.2 Sales order costing process 153
6 Actual costs and month-end processes 161
6.1 Cost flow through system 161 6.2 CO integration with other modules 165 6.3 Month-end processing 169 6.4 Work in process (WIP) configuration 182 6.5 Variances configuration 188 6.6 Settlement configuration 190
7 Closing words 193
A About the Author 195
B Credits 197
C Index 198
D Disclaimer 200
6 2 Product cost planning Cost center planning is the first step in the product cost planning cy- cle. The goal of cost center planning is to create activity rates used in product costing, as well as enable variance analysis and under/over absorption by cost center.
Before looking at the details of cost center variance analysis and activity rate calculation, we will start by covering some of the key concepts in con- trolling master data. Profit centers, cost centers, cost elements, statistical key figures, and activity rates are key controlling master data elements that are required in product costing. An understanding of these components of master data is important as you build your understanding of product cost planning.
2.1 Profit centers
Profit centers represent an organizational unit in the accounting and con- trolling modules in SAP. They reflect a management-oriented structure of the enterprise for the purpose of internal control. Both expense and revenue postings require a profit center in order to build a profitability view by prof- it center. Profit centers are created for revenue-generating areas such as product lines, divisions, regions, and functions.
Profit center postings are generated in parallel to postings made in the con- trolling module, and the results are reviewed in a separate ledger. Config- uration for activating profit center accounting is accessed via transaction OKKP or via IMG menu path Controlling • General Controlling • Orga- nization • Maintain Controlling Area.
Profit centers are assigned to balance sheet items such as assets, pay- ables, receivables, and inventory. Profit centers are also assigned to ma- terial masters and cost centers in order to derive a profit center on each posting.
Profit centers are created in the Manage Profit Centers Fiori app or via transaction KE51. They are specific to a controlling area and are extended to relevant company codes in the Company Code tab. You can also assign
21 Product cost planning
profit centers to company codes en masse using the Manage Profit Centers app or transaction KE56 (see Figure 2.1).
Figure 2.1: Profit center display
A dummy profit center ‘999’ should be created for each company code. The dummy profit center is used as a default profit center when a profit cen- ter cannot be determined. The balance in this profit center should be re- viewed at month-end and year-end to move any costs that are not properly assigned. Dummy profit centers are created in configuration using transac- tion KE59, and the dummy profit center indicator is automatically set on the Indicators tab.
A partner profit center is important for profit center consolidations, where
costs and revenues result from intercompany or intracompany transactions. Partner profit centers are configured to show the sender/receiver relation- ship for costs. It can be used in postings resulting from cost allocations or purchases where costs are moved from one profit center to another.
Partner profit centers can be derived from the supplying object if the sender is in the same SAP version. Derivation rules can also be configured if the supplier is not in the same SAP version, using vendor, customer, material, company, etc.
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4 Profit center analysis period
When creating a profit center, ensure that the analysis period date range matches the cost center date range. If a profit center is created with a shorter date range than the cost center, you will receive an error when trying to assign the profit center to that cost center.
The Person Responsible and Standard Hierarchy Node fields are re- quired fields. You can assign profit centers to company codes on the Com- pany Codes tab. The Address and Communication tabs are optional; the fields on these tabs provide contact information for a profit center owner.
2.1.1 Profit center hierarchy
A profit center hierarchy is required for each controlling area. Within a profit center hierarchy, profit center groups are created to combine similar profit centers for reporting and profit center allocations (if applicable). Typically, senior management determines the hierarchy requirements for grouping profit centers.
1 Profit center group—an example
You may want to group together profit centers that produce a similar type of product, or multiple profit centers that represent a division within the company. For example, a retail consumer product company might group health products in one profit center group and home cleaning products in another.
You can build the hierarchy with multiple levels in order to achieve the re- quired level of reporting. The profit center group you assign in the profit center master data is the lowest level above the profit center. The profit center hierarchy can be changed or displayed in the Manage Flexible Hier- archies Fiori app or via transaction KCH6N (see Figure 2.2).
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Figure 2.2: Profit center hierarchy display
Flexible hierarchies were introduced with S/4HANA in order to solve prob-
lems that were previously encountered when trying to reorganize profit cen- ters. Flexible hierarchies enable you to use master data attributes such as country, city, and region, as well as custom fields to build and change hier- archy structures en masse.
Flexible hierarchies are available for profit center, cost center, and company code hierarchies.
2.2 Cost centers
Cost centers are used to manage departmental expenses and to provide decision-making data for management. This requires that all costs be as- signed according to their source. While expenses can temporarily be held on projects, internal orders, or manufacturing orders, they are eventually settled to cost centers as a final cost object.
Cost center accounting enables you to analyze overhead costs according
to where in the organization they were incurred. In addition to plan versus
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actual analysis, you can also see the under/over absorption by cost center. This analysis is important when planning activity rates for product costing. If a cost center is under absorbed, it means that you did not include the total actual spend in the activity rates or material cost for that cost center. The opposite applies if a cost center is over absorbed.
Cost centers are specific to a company code within a controlling area. A
single profit center is assigned to a cost center, so the design of each is consistent. Cost centers are created in the Manage Cost Centers app or via transaction KS01 (see Figure 2.3).
Figure 2.3: Cost center display
4 Cost center creation
When creating a cost center, ensure that the analysis period date range matches the profit center dates; otherwise, you will receive an error if the profit center is not effective for the entire cost center period, and vice versa.
The Person Responsible and Cost Center Category fields, on the Gene- ral Information tab shown above, are required fields. The User Responsi- ble and Department fields are helpful because they indicate the user id of
25 Index
C Index A Cross-plant material status 43 Current price 64 Account assignment group 168 Activity rate calculation 38 Activity type 31 D Activity type rate 38 Discontinuous production 118 Actual costs 161 Discrete manufacturing 115 Additive cost 110 Distribution 37 Alternative BOM 60 Do Not Cost 56 Assessment 37 Dummy profit center 22
B F Backflush 48 Fixed price co-product 62 Balance sheet 15 Formula 166 Base quantity 114 Functional area 26 Base unit of measure 41 Future price 63 BOM usage 60 Bulk material 48, 49 G Business Process Consolidations Group counter 61 (BPC) 169 I C Income statement 15 Company code 14 Continuous production 117 Controlling area. 14 J Co-product 62 Joint production 62 Cost center 24 Cost center category 26 L Cost center group 26 LIFO pool 56 Cost center hierarchy 26 LIFO relevancy 56 Cost center planning 21 Cost component structure 80, 97, M 144 Make to order 143, 163 Cost element 27 Make to stock 161 Cost element group 30 Mark 121 Costing lot size 63 Master recipe 117 Costing sheet 100 Material group 42 Costing type 89, 149 Material master 39 Costing variant 80, 144
198 Index
Material origin 59 Reorganization 137
Material type 39 Routing 53, 115 Mixed costing 108 Moving average price 52 S MRP 44 Sales condition 167 Secondary cost element 29 O Settlement 179 Old material number 42 Settlement profile 179 Operating concern 14 Settlement rule 179 Origin group 56, 96 Special procurement key 47 Overhead group 58 Special procurement key for costing 61 P Split valuation 54 Standard cost 52 Partner profit center 22, 169 Standard value key 166 Planned price 1, 2, 3 65 Statistical key figure 34 Plant 14 Storage location 15 Plant- specific material status 45 Previous price 65 Price control 52 T Price unit 53, 55 Task list group 61 Pricing condition 168 Task list type 61 Primary cost element 28 Tax and commercial price fields 55 Process order 117 Transfer control 93, 152 Process-oriented filling 118 Procurement type 46 U Product cost collector (PCC) 140 Unit cost estimate 110 Product cost estimate 79 Product hierarchy 42 V Production order 115 Profit and loss statement 15 Valuated sales order stock 164 Profit center 21 Valuation category 54 Profit center hierarchy 23 Valuation class 51 Purchase information record 168 Valuation variant 80 Purchase information record (PIR) Variance calculation 176 87 Variance key 60
Q W Quantity structure 60, 92 With Quantity Structure 59 Work in process calculation 172 R Regulated production 118 Release 124
