how to create Cost center creation.ppt
- 2. Objectives To gain understanding of key business processes of SAP Overhead Cost Management (OCM)
- 3. SAP Overview SAP Overhead Cost Management
- 4. SAP Modules - Overview Sales & Distribution SD MM PP QM PM HR FI CO AM PS OC IS Materials Mgmt. Product Planning Quality Mgmt. Plant Maint. Human Resources Financial Accounting Controlling Fixed Asset Mgmt. Project System Office & Comm. Industry Solutions SAP R/3 Overhead Cost Management
- 5. Correlations in Accounting SAP SEM / SAP BW Document Database Consolidation Vendor Customer Human Resources Fixed Assets Material Subsidiary Ledger General Ledger Cash Management Cash management position Liquidity forecast Special Purpose Ledger Special evaluations Parallel reporting Joint Venture Accounting Controlling Cost center Internal order Project system Profitability analysis Profit Center Accounting
- 6. CO Components Profitability Analysis Profitability Analysis Profit Center Accounting Human Resources Financial Accounting FI S&D Sales and Materials Management Materials Management CO PA CO OM EC - PCA Distribution Cost Element Accounting CO CEL HR MM SD Financial Accounting Cost Element Accounting Cost centers Internal orders Profitability segment Asset Revenues Expense Activity types Internal Orders Company Code (9100 A Ltd, 9200 A1 Ltd) Operating concern (9100 – A group) Overhead Cost Controlling Product Cost Controlling Standard Cost Estimate CO Production Order Controlling area (9100 – A group)
- 7. Overhead Cost Management The Overhead Cost Controlling component (CO-OM) helps you to plan, allocate, control, and monitor overhead in your organization By planning in overhead areas, you can develop standards, that allow you to control costs and valuate internal activities. Cost Centre Accounting Cost Center Accounting analyzes where overhead occurs within the organization Costs are assigned to the sub-areas of the organization where they originated. SAP offers a wide variety of methods for allocating posted amounts and quantities. Internal Order Accounting Internal Orders collect and analyze costs based on individual internal jobs. SAP can monitor and automatically check budgets assigned to each job.
- 8. Overhead Cost Management Cost Element Accounting Cost Center Accounting Internal Orders Cost Elements Reconcilation with FI Hierarchies Cost Centers Stat. Key Figures Activity Types Internal Orders Orders Resource Planning Multiple Currency Multiple Valuation Analyze of Plan/ Target/Actual Costs
- 9. OCM Processes SAP Overhead Cost Management
- 10. OCM Process Overview Process decompositions are the starting point for process documentation. They summarise what is involved in the OCM process at a high level Planning Master Data Cost Centre Accounting Actual Posting Period End Closing Reporting Controlling
- 11. Planning Master Data Actual Posting Period End Closing Reporting OCM Processes Planning preparation Cost Centre Planning Internal Order Planning Plan cost distribution Plan cost assessment Plan direct activity allocation Plan indirect activity allocation Plan settlement of overhead cost orders Other planning activities Reposting Actual Cost distribution Actual Cost Assessment Cost Splitting Calculate Actual Activity Prices Settlement of Overhead Orders Manual Cost Allocation FICO Reconciliation Cost Element Cost Centre Activity Type Resource Statistical Key Figures Internal order Groups Manual entries SKF entry Direct activity allocation Indirect activity allocation Order budget
- 12. Master Data SAP Overhead Cost Management
- 13. Organisational Units & Master Data A1 Ltd 9200 A Ltd 9100 HQ 1000 Cost Centers Purchasing 13… Gen Services 14… Company Codes Orders Cost Objects Sales and Marketing 15… R & T 16… Other Cost Objects Operating Concern Controlling Area A Grp Operating Concern (9100) A Grp Controlling Area (1000) Ethylene Propylene Pharma Polyolefins Power Teleco mmuni cation Inform ation techno logy Corporate common Profit Centers
- 14. Cost Element Description A cost element classifies the organization's valuated consumption of production factors within a controlling area Primary Element - costs that originate outside the company; relate directly to the income statement in FI and must be included in the FI Chart of Accounts Secondary 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
- 15. Financial Accounting •General Ledger •Accounts Payable •Accounts Receivable •Fixed Assets •Treasury Controlling •Cost Centre Accounting •Internal Orders •Product Costing •Profitability Analysis Cost Element vs GL Account Chart of Accounts Balance Sheet Accounts Adjustment Accounts Cost Elements Secondary Cost Elements Income Statement Accounts Primary Cost Elements
- 16. Cost Centre Description Organizational unit within a controlling area that represents a defined location of cost incurrence. The definition can be based on: Functional requirements Allocation criteria Physical location Responsibility for costs Defines the smallest area of responsibility within the company that causes and influences costs; the lowest level to which you can meaningfully assign direct and indirect costs
- 17. Cost Centre Standard Hierarchy xx01 - Production xx02 - Maintenance xx03 - Utilities xx04 – Engineering & Projects xx05 – Quality Assurance xx06 – Production Planning xx07 – Production Handling xx08 –Warehousing & Storage xx09 –Executive Office xx10 - Finance xx11 – Human Resources xx12 – Information Technology xx13 - Purchasing xx14 – General Services xx15 – Safety & Security xx16 – Sales & Marketing xx17 – Research & Technology xx18 – Company General A group Standard Hierarchy A Ltd 9100 A1 Ltd 9200 A11 Ltd 9300 A111 Ltd 9400 9101000 – Production Common 9101011 – EG- 1 Plant 9110000 – Finance 9111000 – Human Resources 9111001 – Housing Services 9111002 – Training Centre Functional Area Company Enterprise Cost Center
- 18. Activity Type Description Unit in a controlling area that classifies the activities performed in a cost centre, e.g. maintenance hours for a maintenance cost centre Used in activity allocation process
- 19. Statistical Key Figure Description Used to track quantities and values for various operating activities Designed to be used in reporting and analysis Used to assist in the allocation of costs throughout the OCM environment
- 20. Internal Order Description Used to plan, collect and settle the costs of internal jobs and tasks. Internal orders are categorized as either: Orders used purely to monitor objects within Cost Accounting (such as advertising, training, or trade fair orders) and Productive orders that are value-added, that is, orders that can be capitalized (such as in-house construction of an assembly line).
- 21. Groups Description OCM master data can be grouped together, for example Cost Centre Groups Cost Element Groups Activity Type Groups Statistical Key Figure groups Internal Order Groups Master data groups are used in reporting, planning, allocation, etc. You can divide complex groups into manageable sections by separating them into sub-groups You can create and maintain sub-groups separately and then combine them in larger groups
- 22. Actual Posting SAP Overhead Cost Management
- 23. Manual Entries Description Actual cost entry enables you to monitor and trace costs incurred by your company as they arise. This allows you to identify variances quickly and take appropriate action to deal with them. Actual cost entry involves transferring the primary costs recorded in Financial Accounting (FI) to the Controlling (CO) application component. In the CO component, this transfer occurs real-time from the components FI, MM, and AM, whereby a cost accounting object is recorded during account assignment Process Incorporated into other processes, e.g. FI Journal Entry, Goods Issue, etc
- 24. Manual Entries Primary postings include the following transactions Payroll Material Usage Travel Purchase Requisition / Purchase Order / Goods Receipt / Invoice Inter / Intra Accounting Journals Depreciation
- 25. Manual Entries SAP SEM / SAP BW Document Database Consolidation Vendor Customer Human Resources Fixed Assets Material Subsidiary Ledger General Ledger Cash Management Cash management position Liquidity forecast Special Purpose Ledger Special evaluations Parallel reporting Joint Venture Accounting Controlling Cost center Internal order Project system Profitability analysis Profit Center Accounting
- 26. Statistical Key Figure Entry SKF’s required for reporting and allocations may be entered into the system during the month or at month-end They are recorded with a Controlling document number SKF’s may also be transferred from Logistics Information System (LIS)
- 27. Direct Activity Allocation Description Direct activity allocation involves the measuring, recording, and allocating of business services performed Activity types are used as the cost drivers Activity allocation occurs, for example, when business transactions are confirmed or when posting activity quantities to accounts, eg Plant Maintenance Hour, Production Hours, Utilities, etc The system multiplies the activity produced by the price of the activity type. Activity types are planned using prices set manually or using SAP’s price calculation
- 28. Indirect Activity Allocation Description IAA is a method of allocating actual and plan costs using activity quantities as the basis. IAA is extremely beneficial when calculating the activity quantities on the sender involves too much time or expense. The value can be calculated inversely based on the activity quantities actually consumed or planned on the receivers
- 29. Internal Order Budgets Description The budget is the approved cost limit for an internal order The budget is the limit set by management for internal order costs over a certain period of time Budgets have the following components Original Budget Supplements Returns Transfers
- 30. Period End Closing SAP Overhead Cost Management
- 31. Reposting You can repost primary costs manually using transaction-based repostings, whereby the original cost element is always retained. This function is designed mainly to adjust posting errors. You should always adjust posting errors in the application component where they occurred. This ensures that FI and CO are always reconciled You can only adjust posting errors involving one cost accounting object (a cost center or internal order for example) using a transaction-based reposting in Controlling (CO).
- 32. Product Costing Project A group Allocation Model Cost Centre Accounting Company General PS Executive Management Utilities Administration Storage Production Support Production PC
- 33. Allocations - Description Two types of allocations: Distribution The following information is passed on to the receivers: The original, primary, cost element is retained. Sender and receiver information is documented with line items in the CO document Assessment The following information is passed on to the receivers: The original cost elements are grouped together into assessment cost elements (secondary cost elements). The original cost elements are not displayed on the receivers. Sender and receiver information is displayed in the CO document
- 34. Distribution Company General Materials 100 Staff Salaries 200 Rent & Rates Light & Heating Vehicles Repairs Travelling 20 Hotels 30 Total 0 Administration Materials 60 Staff Salaries 120 Rent & Rates Light & Heating Vehicles Repairs Travelling 12 Hotels 18 Total 210 Production Support Materials 40 Staff Salaries 80 Rent & Rates Light & Heating Vehicles Repairs Travelling 8 Hotels 12 Total 140 Allocation through original cost element
- 35. Assessment Company General Materials 100 Staff Salaries 200 Rent & Rates Light & Heating Vehicles Repairs Travelling 20 Hotels 30 Company General Costs -350 Total 0 Administration Materials Staff Salaries Rent & Rates Light & Heating Vehicles Repairs Travelling Hotels Company General Costs 210 Total 210 Production Support Materials Staff Salaries Rent & Rates Light & Heating Vehicles Repairs Travelling Hotels Company General Costs 140 Total 140 Allocation through secondary cost element
- 36. Cost Splitting Actual cost splitting makes it possible to divide costs into fixed and variable portions The actual costs are split in two stages: In the first splitting step, the system distributes actual costs by cost element to the activity types based on the target costs or target quantities In the second splitting step, the actual costs are distributed on the activity types according to splitting rules. If you have not defined any splitting rules for a cost center, the system splits actual costs based on the equivalence numbers for the activity types. It is only in this way that you can compare the actual costs with the target costs of the activity types and display the variances by activity type.
- 37. Calculate Actual Activity Prices During actual price calculation, the system calculates iterative prices for activity types or business processes based on actual costs and actual activities. The calculation takes into account all activity exchanges between cost centres or business processes. Price calculation, which you can carry out during planning, is based on planned costs and activity. The resulting prices are used to valuate actual activity. After running actual price calculation, you can choose to revalue actual activity at actual prices. This revaluates the activity using the difference between plan and actual prices. By revaluing the actual activity with actual prices, you can fully balance sender cost centres and sender business processes.
- 38. Settlement of Overhead Cost Orders Some or all of the plan and actual costs incurred on an object are allocated to one or more receivers. System automatically generates offsetting entries to credit the sender object. The debit postings assigned to a sender object remain in place even after settlement to a receiver Two types: Periodic – Every period Full – After completion Two methods: Individual By individual sender object Allows to analyze in greater detail Collective Processes a large number of sender objects Used during period-end closing activities
- 39. Fixed Asset Settlement of Overhead Cost Orders Overhead Cost Order Materials 100 Staff Salaries 200 Rent & Rates Vehicles Repairs Travelling 20 Hotels 30 Company General Costs -150 Capitalisation -200 Total 0 Cost Object B Materials Staff Salaries Rent & Rates Light & Heating Vehicles Repairs Travelling Hotels Company General Costs 150 Total 150 Allocation through original cost account or settlement cost element
- 40. Manual Cost Allocation Manual cost allocation involves posting secondary costs manually. The system credits a sender object (for example, a cost center) and debits a receiver object (for example, an order) You can use manual allocation to: Avoid the need for complicated Customizing settings for simple allocations Manually transfer external data Make simple adjustments to incorrect secondary postings.
- 41. FICO Reconciliation The reconciliation ledger is a tool used to portray transaction figures in Controlling in a summarized form It provides reports with which you can monitor the CO/FI reconciliation for each account It can determine and display value flows that were posted in CO across company codes and functional areas Each company code in FI represents an independent accounting unit for which a balance sheet must be created. Data flows between company codes must be posted separately so that no information is lost. These boundaries are not relevant for Controlling (CO). You can use reconciliation postings to transfer cross-company code, or cross-functional area postings made in CO that are relevant to FI, and to automatically create reconciliation postings there
- 42. Month/Year end Closing - Process Map(1/2) SAP Enabled Processes Electronic Processes SAP Job Role Adjust Inventory * GL Doc. entry 9 Review & correct billing errors 3 Release the payroll -5 Ensure payroll Are posted GL Inquiry 4 Ensure settlement & depreciation Are posted Run Depreciation Close the period for AP & AR Close Posting Period Enter journal voucher * GL Doc. entry 8 10 11 Close the period for MM Close Posting Period 7 AP Disbursement -1 Cash Out -2 Fixed Asset WBS Settlement -6 Fixed Asset Run Depreciation -13 Send the monthly Schedule manager Logistics 1 Acknowledge Schedule manager 2 Treasury activities Treasury 6 Simultaneous Costing * Logistics 5
- 43. Month/Year end Closing - Process Map(2/2) SAP Enabled Processes Electronic Processes SAP Job Role Execute Assessment Cycle Allocations 21 Run the Reconciliation Ledger Rec. CO with FI 22 Final Close Of GL Close Posting Period 23 Generated financial reports GL Reporting 24 Temporally Close GL Close Posting Period 17 End Run the foreign Currency valuation * GL Periodic Processing Complete the electronic bank reconciliation * Carry forward balances * Periodic Pro. 15 16 25 Generate a Preliminary financial report GL Reporting 18 Update materials prices * Pricing 14 Determine the Lowest value Principle * Pricing 13 Product Costing * Logistics Material Ledger/ Actual Costing * Logistics 19 20 Close the Period for FA Close Posting Period 12
- 44. Reporting SAP Overhead Cost Management
- 45. OCM Reporting Comprehensive, flexible information system to analyze cost flows Carry out standard recurring evaluations Construct special reports for unique situations Analyse all costs online and trace them right back to the original document Execute all reports available online in background runs as well (helpful for large amounts of data) For hierarchically grouped objects, such as cost centers, you can create separate reports for all hierarchy nodes and individual objects, or you can create all the relevant reports in a single selection run through the database The second option allows you to navigate within a hierarchy. This enables particularly flexible monitoring of cost center areas
- 46. OCM Reporting ABAP Listviewer Reporting CO Summarization Reporting Formatted Reporting with ReportWriter Drill Down Reporting Target/Actual Comparisons, Variances Support of the Planning Process Assessment Cycles, Target Costs Reconciliation Reports to look for Posting Anomalies Standardized / Flexible Cost Analysis of Cost Objects Check of Data Consistency R/3 Reporting for OCM Tool Offers Set of Generic Functions Without Programming Line Item Reports, Documents Analysis of Incorrect Postings, Corrections
- 47. OCM Reporting Menu Path …
- 48. OCM Sample Report Selection Criteria …
- 49. Roles SAP Overhead Cost Management
- 50. OCM Roles Master Data Management Master data role is assigned to an individual who is responsible for changes and maintenance of OCM master data. This role is to be centralized. OCM Master Data are: Cost Center and Groups Cost Elements and Groups Internal Orders Maintenance Internal order maintenance is assigned to an individual who is responsible for creation, changes and maintenance of internal order status
- 51. OCM Roles continued … Plan Settings Plan setting maintenance is assigned to senior individual who is responsible for redefinition of plan version, maintain distribution keys etc Primary Cost Planning Primary cost planning is assigned to an individual who is responsible for planning primary cost, copy from plan and actual, plan transfer from other modules and plan revaluation Secondary Cost Planning Secondary cost planning is assigned to an individual who is responsible for planning cost allocation Internal Order Budget Maintenance Order budget maintain is assigned to an individual who is responsible for the maintenance of new budget in-out, supplement. Transfer from other modules and plan revaluation
- 52. OCM Roles Actual Postings Actual posting is assigned to individual who is responsible for the actual SKF data entry, posting manual entries, direct/indirect activity allocation and reservations Allocation Settings Maintenance High level of individual who decide to Create or change allocation cycles in the system-Configuration process Period / Year End Closing Period-end closing is assigned to individual who is responsible for carry on necessary cost reposting, distribution, allocation, settlement, FI/CO reconciliation and period look Reporting Display Reporting is assigned to an individual who is trained to access, use, and interpret OCM reports
- 53. OCM Role to Process Mapping Process Role Master Data Planning Actual Posting Period End Closing Reporting Master Data Maintenance Internal Order Maintenance Plan Settings Primary Cost Planning Secondary Cost Planning Internal Order Budget Maintenance Actual Postings Allocation Setting Maintenance Period / Year End Reporting Reporting Display