SAP Implementation

Business Blueprint

S3-010 – Cost Controlling

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Table of Contents

Cost Controlling Controlling Area Cost Element Accounting Cost Element Master Cost Element Categories Cost Objects Business Transaction in CO Controlling (CO) Number Range Re-posting of Actual Cost Overhead Cost Allocation Cost Allocation Method Cost Planning

Cost Controlling

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Cost Controlling Area

Cost Controlling Area represents the cost accounting environment where costs and revenues are managed, and internal managerial reports are generated. OTEL will have one Controlling area 1000. This provides a standardize profitability analysis across company within the corporation. Also, profit centers can be share for company codes within this controlling area1000.

Cost Controlling

Cost Element Accounting

Cost Element Accounting is the area of cost accounting where you track and structure the costs incurred during a settlement period. It is thus not an accounting system as such, but rather a detailed recording of data that forms the basis for cost accounting.

Each business transaction that involves costs updates the CO component with detailed information on the cost element and on the account assignment object, e.g. cost center. Each external transaction for data flows directly through the G/L Account in Financial Accounting module ( = Cost Element in Cost Controlling module) to the corresponding account assignment object, e.g. cost center, internal order (Cost object in Cost Controlling module).

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Cost Controlling

Cost Element Master Data

A cost element describe the origin of costs. A primary cost element whose costs originate outside of CO and accrual costs that are used

only for controlling purposes. You must create the primary cost elements in Financial Accounting (FI) as G/L accounts

before you can create them in Management Accounting (CO). To be able to post to a primary cost element (such as freight costs and salary costs), you

require an object in Management Accounting (such as a cost center in Cost Controlling module) to identify the origin of the costs.

Secondary cost elements are used exclusively in Management Accounting to identify internal cost flows such as assessments or settlements.

Secondary cost elements do not have corresponding G/L accounts in Financial Accounting (FI) and are only defined in Management Accounting (CO).

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Cost Controlling

Cost Element Categories

A cost element category is the classification of cost elements according to their usage or origin. It determines whether you can post to a cost element directly or indirectly.

Direct posting: You post a fixed amount to an account by specifying the account number. You can post directly to all primary cost elements.

Indirect posting: The system determines the account automatically at the time of posting. You can not enter the account number with the posting transaction. You can only post indirectly to secondary cost elements.

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Cost Controlling

Cost ObjectsPost to a primary cost element from FI (Financial Accounting) to CO (Cost Controlling), you

requires an cost object in Management Accounting (Cost Controlling module) to identify the

origin of the costs. Cost Center and Internal Order are cost objects which to be used in OTEL.

Cost Center Cost centers are organizational units within a controlling area that represents the functional

department of cost incurrence.

Internal Order An internal order is used to monitor parts of the costs and revenues contributed by sales

teams.

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Order Type Description Number from Number To Nature

SAL Salesman A ZZZZZZZZZZ Statistical Order

CDHCorporate

Department HeadCDH0001 CDH9999

Statistical Order

LDHLocal Department

HeadLDH0001 LDH9999

Statistical Order

Cost Controlling

The main business transactions in Cost Controlling

Primary cost posting These are postings that occur in CO when expenses accounts are posted to the G/L in the FI

Module.

Actual Cost Allocations These are the distribution of postings from one cost center (the cost sender) to another or a

group of cost centers (the cost receiver).

Cost Center Planning (Budgeting) This is the process of entering budget figures for department expenses.

Plan Cost Allocations This is the same as the actual cost allocation but the figures being distributed are the budget

figures rather than the actual postings.

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Cost Controlling

Controlling (CO) Number Range

For every posting in CO the SAP System generates a numbered document. The document numbers are unique to each controlling area, since each number is assigned only once.

CO, there are no legal requirements for a continuous assignment of document numbers.

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Transaction Group From To

Primary Postings (e.g. Direct posting from FI) 1000000000 1999999999

Planning Transaction (e.g. Budgeting & planning for P/L) 2000000000 2999999999

Assessment , Distribution, Order Settlement (Internal) 3000000000 3999999999

Other Transactions (e.g. CO Reposting) 4000000000 4999999999

Remarks: Planning Transaction cannot be reversed. Number archiving is necessary if the document numbers are all used.

Cost Controlling

Re-posting Actual Cost and Revenues Manually

Incorrect posting of costs and revenues can be corrected with the re-posting function in cost center accounting. This enables users to amend specific line items from CO documents and provide management with a clear audit trail when reviewing adjusted CO postings.

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Cost Controlling

Overhead Cost Allocation

Costs are initially posted to a “common” or “shared” cost center during the month, and at the month end these costs are allocated to respective cost centers based on the allocation basis. Costs can be allocated against reposting or cost allocation cycle. Defining the cost allocation cycle, there are two major types of allocation method in SAP which are “Distribution” and “Assessment” respectively.

The following are defined in the allocation cycle: - Sender cost center Receiving cost center Allocation basic such as fixed percentage, statistical key figures, etc Sender primary cost element Receiving secondary cost element if using cost assessment allocation method

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Cost Controlling

Cost Allocation Method

Distribution “Distribution” is used to allocate the primary cost of a cost center. The original cost element

(that is, the primary cost element) is retained.

Assessment Assessment” is a method of allocating primary and secondary costs. The original cost

element are assigned cumulatively, or in groups, to assessment (secondary) cost elements.

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Cost Controlling

Statistical Key Figures

Statistical key figures serve as a basic for internal allocations and as reference in the key figures analysis framework. It can be defined as either fixed values or total values. Key figures defined as fixed values are valid as of the posting period, and in all subsequent posting periods of the fiscal year. Statistical key figures use as tracing factor (cost driver such as floor area, number of employee, etc) for the portion of costs for the individual receiver cost centers.

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Cost Controlling

Cost Planning Version

Cost Planning in OTEL involves entering plan figures for departmental cost, statistical key figures for a particular cost center of particular planning period. It will form the basis for measuring efficiency and also act a performance control indicator for cost control. This will enable monthly expense variance reports to be generated for management decision making.

Currently there have four planning versions will be defined in OTEL. The planning values will be manually keyed into the SAP by cost centers by cost element grouping through Excel interface.

Plan Version Description

Z01 Annual Budget

Z02 Forecast 1

Z03 Forecast 2

Z04 Forecast 3

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Cost Controlling

Cost Planning Layout

Planning Layout A planning layout is a user-defined planning screen. The planning layout

determines the header, lead column (e.g. cost element) and value column (e.g. actual cost) of the form. It will be defined in the realization stage of project.

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