5 SAP CO Level-1 Training

Copyright 2009 Tata Technologies. All rights reserved. All other trademarks are trademarks of their respective owners.

SAP Controlling Module
By:
Kishore Sunkara

FI and CO:

CO
FI
Internal Accounting
Cost Accounting
Managerial Accounting
Different Valuations
Flexibility
Tax
audit
External Accounting
Financial Statements
Legal Requirements
Standards
Controlling
3
CO Organizational Structure
Profit Center
(master data)
Profitability Segment
(master data)
A A
A
Operating Concern
Controlling Area (s)
Company Code
Sales organization
Focus on External Markets
Focus on Controlling and
Internal Accounting
Focus on External Accounting
Focus on Sales
Plant
Focus on Manufacturing
4
Company Code and Controlling Area
Company Code
Company Code
Controlling Area
Company Code
Controlling Area
Company Code
One to Many Relationship
One to One Relationship
5
Components of controlling

Cost element Accounting
Cost center Accounting
Profit center Accounting
Internal Orders
Product Costing
Profitability Analysis

How can we reduce our overhead?
Are the responsibility areas working
efficiently?
How high are the organizational activity
costs? Are they within their budgets?
How can we optimize our internal
business processes?
What costs occur within the organization?
CO
OM
What are the
Manufacturing
Costs of a product?
CO
PCA
Product
Cost
Controlling
How profitable are individual market segments?
P
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A
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How
Profitable are
Individual areas?
CO
PA
EC
PCA
Integration with Other Modules
Overhead Cost Controlling
Product Cost
Controlling
Cost Center Acc.
Overhead
Order
Accounting
Cost
Object
CO
Profitability
segments
Profitability
Analysis
FI AA
FI MM PP
HR
FI SD
SD
PP
Profit
Center
Acc.
Profit
Center
PrCtr PrCtr 1 1
PrCtr PrCtr 3 3
PrCtr 2
PrCtr PrCtr 4 4
PrCtr PrCtr 5 5
C
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8

Master Data in Controlling

Activity
Type
Statistical
Key
Figure
Cost
Center
Master Data in CCA
Cost
Element

Cost Elements

Cost element accounting

Cost element is the cost carrier.

Primary cost elements

All P&L accounts Will be created as primary cost elements. Its the Integration
between FI and CO

Secondary cost elements

Secondary cost elements will used for transferring cost from one cost object to
another cost object


Cost Centers

Cost center accounting
Cost center is the cost collector where actually incurred the
expenses

Cost centers can be created at any level either at department level,
location wise, division wise, functionality wise and product group
wise etc. or the combination of the above.
Cost Center Hierarchy

Cost Centers are Structured into Organizational and/or
Functional Hierarchical Groups .This is known as the Cost Center
Hierarchy.

The Hierarchy created for Operational Management is called the
Cost Center Standard Hierarchy

Multiple Alternate Hierarchies can be created for Functional
Management. These are simply called Cost Center Groups

14
Cost Center Hierarchy
Cont Area.
Corporate
1710
Marketing
Prodn 1 Prodn 2 Support
1300
Press Shop
1201
Auto
1502
R&D
1301
Quality
1202
Gears
1504
Projects
1330
Testing
1232
Maint - Mod
1520
Purchase
Plant 2
Plant 3
Assembly
9010
Sales
9000
Finance
Plant 1
15

The primary costs are posted from FI via the primary cost
element.
Examples:
FI - Posting of primary costs through FI entries.
Assignment to cost object at time of FI posting.
AA - Assignment of asset made to cost center. Post to
CC at time of depreciation or gain/loss calculation.
Two documents are created when primary costs are posted to
CO from FI:
The original document in FI.
A parallel document in CO that displays the data from a
cost accounting viewpoint.

Cost Center Actual Postings

Activity Types
Cost Center Cost Object
Activity Type
Activity types define functions or services performed by a cost center, and are used
to allocate that centers costs to other cost objects.(Prod order)

Ex. Machine , Labor and cleaning etc.

Activity Types are assigned to Production Cost Centers representing the activity performed there.

Activity types are frequently used in the allocation of overhead to production.
Allocation
Activity Types

Statistical Key Figures
Statistical key figure

Statistical key figures will be used as a base for allocation of cost
from one cost center to another cost center.

Ex:
No of employees
Square feet
Light points
No of telephone lines

Type 01: Telephone sets
Dept. 01 Dept. 02 Dept. 03
Type 02: No of employees
Dept. 01 Dept. 02 Dept. 03
50% 33% 17%
14% 28% 58%
Statistical Key Figures
Primary Cost:
Telephone Expense
G/L #467000
Common Cost Center:
#995000
Planned Telephone
Expense:
$12,000
Distribution Rule:
Cctr. #115000
40%
Cctr. #187000
25%
Cctr. #145000
20%
Cctr. #189000
15%
#467000
$4,800
#467000
$3,000
#467000
$2,400
#467000
$1,800
#115000 #187000 #145000 #189000 Cost Ctr:

Distribution
Distribution
Activity rate calculation

PRODUCTION COST CENTER 1010
Activity type LABOUR
Planed activity hours(per month) 1000 (hr)
Primary costs
Wages (In Rs.) 100000
Salaries (In Rs.) 200000
Total cost 300000
Activity rate per hour 300
Activity rate of Prod c.center =Total cost
/Total activity hours
Profit Center Accounting

Profit center accounting

Profit center is a management-oriented organizational unit used for
internal controlling purposes.

PCA lets you analyze internal profit and loss for profit centers. This
makes it possible for you to evaluate different areas or units within
your company. You can structure profit centers according to region
(branch offices, plants), function (production, sales), or product
(product groups).

Profit Center Accounting is a component of the "Enterprise
Controlling" module.


All the business transactions in the R/3 System which are relevant for
cost and profits are monitored in the profit centers at the same time
they are processed in the original module, and organized according to
cost and revenue elements. This transforms all the flows of goods and
services within the company into exchanges of goods and services
between profit centers.

It is also possible to treat a profit center as an investment center. In
addition to the flows of goods and services, you can transfer selected
balance sheet line items (fixed assets, payables and receivables,
material stocks, and work in process) to profit centers on a periodic
basis. This makes it possible to calculate such key figures as profit on
sales, return on investments and cash flow.

Responsibility Accounting
Master Data in Profit Center Accounting
Profit Centers

Profit Center Groups

Accounts P&L, Balance Sheet Items

Statistical key figures
28
Address /
Communications
Data
Basic data
Company Code
Assignment
Master Data Profit Center
Validity
Period
Profit
Center
29
Cost center
Internal order
Sales order
Material
Asset
Production order
Profit Profit
Center Center
Profit Center Assignments
Profit center
Flow of Actual values in Profit Center Accounting

Flow from Profit and Loss accounts
Flow from materials management
Flow from sales and distribution

Flow from Balance Sheet items Period end closing
Flow from Asset Management
Transfer of Material Stock
Transfer of Work In Process
Flow from Accounts payable and receivable

Flow from controlling Period end closing
Flow from Overhead Cost Management
Profit Center Document Entry
Assessment & Distribution

31

Internal Orders
Internal orders

Internal orders will be used to monitor the cost of specific jobs, events
or short terms activities.

Internal orders support planning ,collecting actual cost and allocation of
costs.

Ex: Official parties , Marketing exhibitions, Asset under construction etc.

Function of Orders
Planning Costs
Budgeting Costs
Posting Actual Costs
Settling Costs
Evaluating Costs
34
Internal Orders: Overview
Cost Accounting Functions
Internal Orders
Orders with
revenues
Investment orders
Overhead
orders
35
Timeframe of Orders
One-Time
Activity
Regular
Activity
Individual
Order
Standing
Order
Small
Recurring
Jobs
36
Account Assignment Logic:
1 True
Cost Object
( the rest are just
statistical)
37
REAL and Statistical Orders
Statistical Order
Real
Posting
Real orders
Document
Statistical
Posting
38

Product Costing
Product Cost Controlling - Benefits
Legal Requirements
l
Valuation of:
n Raw Materials
n Semi finished Goods
n Finished Goods
l
Work-in-Process
Management Requirements
l
Support cost reduction
concepts
l
Strategic Decision Support
n which products
n where or how to produce
l
Operating Decision Support
n pricing of products
n effectiveness of manufacturing
40
What can Cost Object Controlling do for me?
What actual costs did we incur in our area in
the current period?
What costs were we expecting based on the
quantities manufactured?
Are some product groups performing
significantly better than others?
What is causing these variances?
What are the scrap costs of our new line?
Did continuous improvements show cost
effects?
Overview Product Costing

Production Planning
RM Requisition to Stores
Procure material
RM issue to Production
Material available in stock
Process the Materials
Quality check of SFG /
FG Produced
Return to production
for reprocess
Delivery of SFG /FG to stores
Customer order Inventory
Despatch to Customer
No
No
No
Yes
Yes
Yes
Direct Material
Direct Labour
Direct Utilities
Procurement OHs
Storage OHs
Indirect Material
Indirect Labour
Indirect Mfg OHs
Selling & Distr OHs
Quality Overheads
RM = Raw Material
SFG = Semi Finished Goods
FG = Finished Goods
OH = Overhead
Direct cost
Overview : Flow of data for Valuating a Material
MM
PP
Raw Material rates
from Material Master
Raw Material Quantities
from Bill of Material
Activity units ( Hours / KWH)
from Routing specifying details of
work centers which are attached to
Cost center
CO
Activity unit Rate
from Activity rates for the period /
fiscal year specified cost center wise
Overhead Rates (% or Qty based
overheads basing on Direct costs)
from Costing sheet / Costing Variant
(A) Direct
Material
Cost
(B) Direct
Activities
Cost
(C) Indirect/
Overhead
Cost
(A)+(B)+(C)=COGM
MM
SD
Up Material
Master of SFG /
FG for issuing
SFG to PP and
FG to SD
modules
respectively
PP
Overview : Product Cost
Consumables

Maintenance

Labor

Depreciation

RAW MATERIALS

Electricity

COMMON/SERVICE
COST CENTER
BILLS
OF
MATERIAL
PRODUCTION
COST
CENTER

ACTIVITY TYPES
WORK CENTER /
RESOURCE
ROUTING

PRODUCTION
ORDER
UOM Qty/Usage units Rate(Rs.) Cost / Cost/
For a batch / lot size of 10 kgs Batch(Rs) Unit(Rs)
Material cost:
Raw material 1 Kg 200 * 5 = 1000 100
Raw Material 2 Lts 500 * 4 = 2000 200
Raw Material 3 KG 300 * 10 = 3000 300
Total Material Cost (A) 6000 600
Direct Utilities:
Activity 1 Eg: Mach HR 80 * 5 = 400 40
Activity 2 Eg. Labour HR 100 * 1 = 100 10
Total Activities Cost (B) 500 50
Overhead 1 Eg. Mat Overhead (as a % to Total Mat Cost = (A)*10%) 600 60
Overhead 2 Eg. Manufacturing Overhead (Rs. 400 per 10 Kgs ) 400 40
Total Overhead Cost (C) 1000 100
Total cost of Manufacturing (A)+(B)+(C) 7500 750

Overview : Flow of data for Valuating a Material
Stages of Production and the Flow of Costs
Raw Materials
Beg. Inventory
Add: Purchases
= Raw Materials
Available for
Production
Less: Raw Materials
Transferred to
Production
=
Ending Inventory
Work-In-Process
Beg. WIP Inventory
Add: Raw Materials
Transferred In
Direct Labor
Allocated
Manufacturing
Overhead
= Manufacturing
Costs for the Period
Less: Goods Completed
and Transferred to
Finished Goods
=
Ending WIP
Inventory
Finished Goods
Beg. Inventory
Add: Goods Completed
and Transferred from
WIP
= Goods Available for
Sale
Less: Cost of Goods Sold
=
Ending Inventory
CO-PA
Profitability Analysis (CO-PA) lets you analyze
the profitability of segments of your external
market. These segments can be defined
according to products, customers, countries,
and numerous other characteristics, as well as
your internal organizational units such as
company codes (i.e. 9100) or distribution
channels (I.e. direct, wholesale, e-Commerce).
It is a multi dimensional analysis.

Typical Questions in Profitability Analysis
customer
region
sales
division
product
Market Market
Company Company
u Who are the largest and fastest growing
customers ?
u How the sales and contribution margins have
changed in the last period for each product ?
u What are my worst and best performing
products in different regions ?
Billing
documents
49
Flows of Actual Values - Contents
Flows of Actual Values
Transferring Data from SD
Transferring Cost Center
Settling Orders
Direct Postings from FI

Sources of Value Fields
R
SD SD
CO-PC CO-PC
Cost Center
Order
Process
Cost Estimate
General Ledger Posting
Billing Document
FI FI
CO-OM CO-OM
PS PS
CO-PA CO-PA
WBS Element
Network Operation
Additional Costs
Quantity
Sales Revenues
Sales Deductions
Cost of Goods Sold
Variable Cost of Goods Mfd
Fixed Cost of Goods Mfd
Bonuses
Freight Costs
Sales and Administration Costs
Marketing Costs
Variances
Research & Development Costs
Cost Discounts
Cost Bonuses
1996
1997
1998
51
Transfer of Overhead - Overview
Process
Cost Center
Order
CO- CO-
PA PA
Assessment, Process Allocation
Order Settlement
Assessment, Process Allocation
52
PCA Vs COPA
Profitability Reporting:
Profitability Analysis (CO-PA) lets you analyze the profitability of segments of
your external market. These segments can be defined according to products,
customers, countries, and numerous other characteristics, as well as your
internal organizational units such as company codes (i.e. 9100) or
distribution channels (I.e. direct, wholesale, e-Commerce). It is a multi
dimensional analysis.

The aim is to provide your executive management, sales, marketing,
planning, and other groups in your organization with decision-support from a
market-oriented viewpoint.
Responsibility Reporting:

EC-PCA lets you analyze internal profit and loss for profit centers. This
makes it possible for you to evaluate different areas or units within your
company. You can structure profit centers according to region (branch
offices, plants), function (production, sales), or product (product groups).
Profit Center Accounting is a component of the "Enterprise Controlling"
module. It is a two dimensional analysis.

Basic Report of profitability analysis
Characteristic
Values
Key Figures
Revenue COGS
product
North
East
South
Region
You select the desired variables, characteristics, and key figures.
The selected characteristics form the dimensions
of a multidimensional "data cube".
54
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