Cost Center Accounting

Participant expectations
What are my
expectations
from this
course?
Training rules
 Safety requirements
 Do not smoke
 No Food or beverages allowed during
session
 Classroom etiquette
 No cell phone use
 No unscheduled breaks
 Single discussion always
 No personal emails or internet
 Participation
 Listen and understand concepts
 Participate in group discussions
 Questions
 No question is a stupid question, so do
not hesitate to ask questions
 Ask as we go
Objectives of this module
 At the end of this module you will be able to:
 Explain what Cost Center Accounting (CCA) is used for
 Understand how CCA relates to other components
 Understand Master Data for CCA
 Understand the value flows in CCA
 Understand the planning scope of CCA
 Explain the allocation methods within CCA
 Understand various cost drivers in CCA
 Understand the activity price calculation in CCA
 Understand the integration with other modules including product
costing
 Understand the actual value flows and month end activities
 Pre-requisites
 SAP basics
 Basic knowledge of SAP Financial modules
 Knowledge of FI organization structure
 2-3 years of SAP FICO implementation
experience
 Aware of basic implementation
methodology
 Phases of project life cycle
 Topics
 What is CCA used for?
 Benefits of CCA
 How does Cost Center Accounting relate to other modules?
 Cost Center Accounting Master Data
 Planning in CCA and integration with Product Costing
 Actual costs and periodic allocations within CCA
 Reporting in CCA
 Summary
What is CCA used for?
 Cost Centers are used for cost control and analysis within
responsibility accounting
 Cost Center Accounting lets you analyze the overhead costs
according to where they were incurred within the organization
 Cost Centers are cost collectors
 Cost Centers are cost objects, where cost can be collected and
settled to another cost object
 Cost Center Accounting (CO-OM-CCA) is often used in the first
phase of an R/3 implementation, together with the main areas
of Financial Accounting (General Ledger (FI-GL), Assets
Payable (FI-AP), Assets Receivable (FI-AR)) and Overhead
Orders (CO-OM-OPA).
 Benefits
 Benefits of Cost Center Accounting:
 Determines where costs are incurred in the
organization
 Cost Center Accounting lets you analyze the
overhead costs according to where they were
incurred within the organization
 You can check cost efficiency at the point where
costs are incurred
 Recording and assigning overhead costs allows
you to control costs and prepare information for
the subsequent areas of Cost Accounting
 Cost Center Accounting within Controlling
Profit & Loss View Comment Cost Element Type PA Segment Cost Center Order PCA

A Revenue Accounts 11 X X

B Sales Deduction Accounts 12 X X

C = A-B Net Revenue

D Cost of Goods Sold 12 X X

E = C-D Gross Margin

F Variances (PPV, POV, Inventroy 1 X X

write off etc.)

G = E-F Gross Profit

H Material Consumption accounts 1 X X

I Cost Center Overheads 1 X X X

(Manufacturing)

J Production output and Variance 1 X X

settlement

K = H + I + J Net Manufacturing in/out Should be ZERO

L Profit net of manufacturing Should be same as

Gross Profit

M Marketing Expenses 1 X X

N General Administration 1 X X

O = L-M-N Net Profit before interest and taxes

(PBIT)

P Interest NA X (3KEH)

Q = O-P Net Profit before taxes (PBT)

R Taxes NA NA

S = Q-S Profit after taxes (PAT)

Cost Center Accounting within Controlling
 Cost Center Accounting is generally designed
to analyze the overhead costs but is used as
well for other expenses like
 General Administration Expenses
 Sales and Marketing Expenses
 Distribution expenses
 Cost Centers are assigned to functional area
for classification of expenses in the correct
P&L bucket
 Cost Center Accounting can be subject to
budgetary control
 Planning and Actual comparison helps control
costs
How does Cost Center Accounting relate to
other modules?
 Cost Center Accounting is part of the
Controlling components within SAP
 Integration with:
o Product Cost
 Cost Centers are used for managing manufacturing
overheads and it’s absorption to Product Cost
 Cost Center costs are generally allocated to production
orders using activity type drivers
 Other means of allocation including costing sheets can
be used for product cost
 Variances in manufacturing cost centers can be allocated
to production orders using revaluation with actual
activity prices at period end
 Variances in manufacturing cost centers can be settled to
Material Ledger for distribution to products
 How does Cost Center Accounting relate to
other modules?
 Cost Center Accounting is part of the

Controlling components within SAP

 Integration with:
o Internal Orders
 Internal Orders can be cost collectors for particular Cost
event
 Costs from Cost Centers can be allocated to internal
orders (allocation between 2 cost objects)
 Costs from internal orders can be settled to cost centers
o Plant Maintenance Orders
 Plant Maintenance order is a type of internal order
 Maintenance Labor and overhead costs are allocated
from Maintenance cost centers to PM Orders
 Costs from PM orders are generally settled to Production
cost centers
 PM orders can also be use for capital projects and
settlement in this case is generally to AUC
Cost Center Accounting Master Data
 Types of Master Data used in Cost Center
Accounting:
 Standard hierarchy
 Cost Centers
 Cost Center Groups
 Statistical Key Figures
 Statistical Key Figures Groups
 Activity type
 Activity type Groups
 Cost Element:
 Primary
 Secondary
 Cost Element Groups
 Cost Center Master Data

 Cost Centers represent units in the organization where costs are

incurred
 Cost Centers are 'buckets' where costs are collected, tracked and
reported
 Cost Centers Identify where an expense was incurred and by
whom
 A cost is assigned to the Cost Center during financial postings
(original FI transaction)
 Cost Centers are assigned to the standard Cost Center hierarchy
 Cost Centers are linked to a Profit Center
 A given Cost Center can be assigned to only one profit center
 All transactions including secondary costs in CCA flow to PCA
and can be analyzed there
 Cost Center Accounting Master Data
Standard Hierarchy Example
S-TOPZ200
GEO Area I

S-FR
France

S-Z201COCO
S-208HEAD CompanyZ201 S-Z201-F S-Z201-D
Local Head Factories Distribution
H1110 Offices Centers

S-Z208CORP S-Z208OPUS S-Z203 S-Z204

Corporate Units Operational Factory Z203 Factory Z204
Units
S-Z202
H1300
Distribution
S-Z208TEMG S-Z208FBEV
Center
Senior Food
1200 &
Executive Cafeteria
Beverage Div
Management S-Z203MANF S-Z203TECH S-Z204MANF S-Z203
Manufacturing Tech Services Manufacturing Warehouse
Z20890108
S-Z208ADMIN Controll F&B
Administration
Cost Center Master Data elements

Validity
Period

Communication Basic Data

Control Data

Cost
CostCenter
Center

Address Data Indicators

Cost Elements
Costs
Management
Level
Primary Costs Secondary Costs

Predefined
Primary CElem category Secondary CElem category
by SAP

CO Master
Primary Cost Elements Secondary Cost Elements
Data Level

FI Master
FI G/L Account
Data Level

Chart of Accounts
 Primary Cost Elements
 Data elements of a Primary Cost Element
 Cost Element Category

 classification of cost elements according to their usage or

origin

 primary cost element categories used are:

01: Primary cost/cost reducing revenue

11: Revenue
12: Sales deduction
22: External settlement
90: Statistical cost element for balance sheet (fixed asset)
 Secondary Cost Elements
Secondary Cost Elements


 Secondary cost elements can only be created

and maintained in Cost Accounting (CO)

 They portray internal value flows such as:

 Assessments
 Activity Allocations

 Order and WBS Settlements

 Cost element summary
FI General Accounting CO Cost Accounting

Capital

Assets Primary CE (type 90)

Balance Sheet

Stocks
Accounts

Debtors/Creditors

Bank Accounts

Expenses Primary CE (type 01, 22)

Accounts
Profit &

Revenues Primary CE (type 11, 12)

Loss

Analytical Accounts Secondary CE (type 21, 31, 42, 43)

Cost Center Changes
 Certain data elements can be changed as often as required, such
as:
 Name, Description, Person Responsible

 For changes of organizational assignments such as Company Code

or Profit Center during the fiscal year:
 The currency of the old Company Code must correspond to the new
Company Code
 No currency conversions have been processed
 Only plan data is posted in the given fiscal year
 The Cost Center is not assigned to a Fixed Asset, Work Center or a HR
master record

 Changing Group Assignments

 You define the Standard Hierarchy assignment of a cost center for the
entire lifetime of the cost center. This means, you can also only change
the Standard Hierarchy assignment for the entire lifetime of the CC.
Cost Center Changes
 Cost Center Category

The change of the cost center category should be done

carefully, as the CC category is one of the main triggers
for the derivation of the functional area.

Recommendation:
Once transactional data has been posted to the CC,
change the CC category only for the beginning of a
period. This to avoid problems in the reconciliation
process.
 Cost Center Deletion
 Prerequisite:
 No transaction data for the cost center, neither plan nor actual
data in the affected fiscal years.
 No statistical key figures have been planned.
-> The corresponding checks are executed by the system, when
trying to delete

 Objects that you want to delete, must be in the selected time period.
However, it is sufficient for the validity period for the object to overlap
with the selected time period.

Recommendation:
Before you delete a Cost Center, you should check in a test
run whether the selected Cost Centers may be deleted
 Planning in CCA and
integration with Product
Costing
Cost Center Planning Objectives
 To plan the structure of the organization’s
future operations for a particular defined
period.
 To control business methods within the
current reporting period.
 To monitor efficiency after completion of the
reporting period using plan/actual or
target/actual comparisons.
 To provide a basis for the valuation of
organizational activities
 Cost Center Planning Scope
 Cost center planning is divided into the
following planning areas:
 Statistical key figures
 Allocation basis
 Activity type/price planning
 Activity quantity
 Activity prices
 Costs
 Primary costs (Direct Expenses)
 Secondary costs (Plan allocations)
 Manufacturing Cost Center Overhead Planning
SUPPORT COST MANUFACTURING APO
CENTER COST CENTER (manual for now)

Activity independent Activity dependent planning (budget LONG TERM

planning (budget dollars dollars by cost element) PLANNING
by cost element)
Variable
Fixed Load Demand (Volume
by Part Number)
Activity independent planning (budget
dollars by cost element)
Fixed Run MRP on Costing
BOMs and Routings

Allocated Costs from support Cost Centers Transfer Activity

Fixed Quantity to CO

Total Plan cost Plan Activity Quantity

Plan
PlanActivity
Activity
Price
Price
 Product Cost Planning
Inputs Process Output
Material Bill of Material
Master Materials Costs

Standard Product Costs

Product Cost Estimate
Routing

Mark and Release

Cost Center Activity
Activity
Work Quantity Costs Material
Center Master
Activity
Prices
Profitability Material
Analysis Ledger

Costing Freight
Sheet Surcharge
 Activity Quantity Planning

 Planned Independent requirements (Demand on each

Factory):
 Represents the factory output in terms of

finished goods and semi-finished goods quantities

 Used for production quantities for budget

 Planning timeframe is the fiscal year

 Quantities are planned in monthly buckets

 Uploaded from APO, but can also be entered

manually
 Semi-finished products manufactured for other

factories
 Running the long-term planning
 The output for this process are:
 Non active(simulative) planned orders

 The planned orders are used to

 Calculate the quantity of activities required

(machine hours, labour hours and energy)

 Calculate the quantity of overhead processes

required (common charges "conversion costs",

handling HUM, storage SUD, Quality Assurance
quantities, etc.)
 Calculate the mixing ratio of different production

versions
 Activity quantity from planned orders can be
transferred to Cost Centre Accounting
Long Term Planning Results – Finished Goods Example

Independent Requirement
for Finished Goods entered

Planned Orders in
increments of costing lot
size
Long Term Planning Results – Semi-Finished Goods
Example

Simulated Plan Orders for

Semi-finished Goods (Bottle)

Dependent Requirement
flowing from Finished Goods
 Long Term Planning Results – Activity Quantity

Material 1 Material 2 Material 3 Material 4

Simulated Simulated Simulated Simulated

Plan Plan Plan Plan
Orders Recipe Orders Orders Orders

Operation
Resource

Cost Center: Cost Center: Cost Center:

Process 3
Process1 Process 2
Activity type quantity Activity type quantity
Activity type quantity

Machine Hours Machine Hours Machine Hours

Labor Hours
Labor Hours Labor Hours Energy KWH
Energy KWH Energy KWH
Planning costs in Cost
Center Accounting
 Activity dependent cost

 Activity dependent costs are costs that are allocated

based on the volume of activity in the cost center

 These costs are considered to be fixed, variable or a

combination of both

 Examples include:
 Depreciation on machines
 Material handling costs
 Order entry costs
Activity dependent cost Planning
 Activity independent cost

Activity independent costs are costs that are not

allocated based on the volume of activity in the cost
center

These costs are considered to be fixed costs

Examples include:
 Insurance
 Rent
 Taxes
Activity independent cost Planning
 CCA & PCA Allocations: Overview
 Cost Center allocations
 When costs need to be moved between different cost
centers
 Primary driver is the “nature” of the costs of sender cost
center that needs to be allocated for absorption purposes
(e.g., maintenance cost center expenses to manufacturing
cost centers based on production volume)
 The allocation basis should not be driven by considerations
like Product Line
 Plants will use cost center allocations to move costs to
production cost centers to achieve full absorption costing
 All allocations can be setup to use a fixed percentage rate or
defined drivers (# of employees, manufacturing hours, floor
square feet, etc).
 In SAP, these drivers are known as Statistical Key Figures
 Allocation Methods: Assessment
 Assessment is a method of allocating primary and secondary costs in
Cost Center Accounting.
 The original cost elements can be assigned cumulatively as one total, or in
groups, to assessment (secondary) cost elements. The original cost
elements are not recorded on the receivers.
 Sender and receiver information (sender cost center, receiver cost center,
or business process) appears in the Controlling (CO) document.
 Allocation through assessment is useful when the composition of the
costs is unimportant for the receiver. For example, the assessment of
Facilities costs to a Production cost center.
 You can run multiple assessment cycles to first allocate some specific
account(s) from one cost center to other cost centers that may use one
particular basis (e.g., headcount), followed by a second cycle to allocate
all remaining support cost center costs to production cost centers using
another basis (e.g, production volume).
 A similar Assessment process can also be performed in Profit Center
Accounting for allocating primary and secondary costs between profit
centers.
 Assessment - Example
Cost
Centers
1060TBD
Cost Elem. Description 106048060 1060TBD01 1060TBD02 03

Maintenance Prod 1 Prod 2 Prod 3

6260000 Salaries $ 200,000 $150,000 $ 50,000 $ 30,000

$
6260001 Wages $ 100,000 $ - $ 20,000 -

6260020 Travel $ 50,000 $ 25,000 $ 20,000 $ 15,000

6260021 Entertainment $ 10,000 $ 2,000 $ 1,000 $ 500

Total Expenses $ 360,000 $177,000 $ 91,000 $ 45,500

916048060 Allocation of Maint costs $ (360,000) $171,429 $ 85,714 $102,857

Cost Center Balance $ - $348,429 $176,714 $148,357

 Assessment - SAP
 SAP Demo for Assessment

 Other items to address:

 Assessment cycle names are common across a Controlling
Area
 Naming convention recommendation for assessment cycles
is to have unique cycle names corresponding to the plant
locations
 Assessment segments are then created within the cycles,
and segment naming would thus be specific to and visible
beneath the cycle name. Plants could thus create their own
“custom segment” naming conventions, as they would be
the only one to see and use them.
 If we were to create cost element groups specifically for use
with assessment cycle allocations, we can use a suffix (e.g.,
“.asm”) to distinguish these cost elements.
 Allocation Methods: Distribution

 Business transaction
that allocates primary
costs.
 The original cost
element is retained in
the receiver cost center.
 Information about the
sender and the receiver
is documented in the
Controlling document
 Distribution - Example

Cost Centers

Cost
Elem. Description 106048020 1060TBD01 1060TBD02 1060TBD03

Energy Original
61700000 Expense $ 120,450 Expense entry

Energy Distributed
61700000 Expense $ (120,450) $ 40,000 $ 60,000 $ 20,450 amount

$ - $ 40,000 $ 60,000 $ 20,450 Net

 Allocation Process
CO-PA CCA
Cell
Category Legal Entity

P&L Lines
Marketing DIVISIONS CORPORATE
Cell Group
General
Expenses
(Cell Cat.
Liquid Drinks)
Marketing/
Cell Type Sales
Other General
Expenses
(sku/customer) General
SKU Corporate

Customer
 Cycle Sequence (1 of 2)
 Sequence in CCA allocation :
 Distribution cycle
 Assessment corporate to Plant
 Assessment intra and inter Plant
 Assessment Plant to corporate

 Sequencing of allocation cycles are very

important

 Generally, use non-iterative cycles

 Cycle Sequence (2 of 2)
 Each cycle is independent from the others.
This means not iteration cross-cycle possible
 Check that a cost center that is only partially
allocated, is executed in a cycle that is
performed before the allocation of the total of
the respective cost center.
 Perform cost centers with specific cost
elements first
 Perform cycles clearing totally cost centers
 Result in line with the designed allocation
structure
 Advice: use variants to perform the periodic
allocations
Reversing Allocation Cycles
 Reverse an allocation cycle :
 After running a cycle (not in test run) and the
results are not in line with the expectation
 You have wrongly executed an allocation cycle (for
example, if you execute an allocation cycle for the
wrong period)
 After reversing an allocation cycle the
situation will be exactly as it was before
running the cycle (need to be checked with
cost center reports)
Planning Overview Report
 Activity Types (1 of 4)
 Activity Types (AT):

 Activity types classify the activities produced in cost

centers

 Labor Activity
 Machine Hour (for OH)
 Specific activity types
“Steam” defines an Activity Type called "Energy - Steam"
which is measured in KG. A cost per KG is calculated for this
Activity Type and used for cost allocations
Activity Types (4 of 4)

1 Create Activity Type Labour

Default values

2
Plan price of Project
Activity Type on
Cost Center
Production Order:
Cost Center:
Labor
Production
Hrs X Price
Activity
document
3
Routing standard (Plan)

Production Order confirmation (Actual)

 Activity Type Groups
 Used to group Activity Types with similar
characteristics

 Activity Type Groups are used to process

multiple Activity Types in one transaction

 Used for Cost Center planning and allocation

purposes
 Splitting Structure
 Splits the activity-independent plan costs of a
cost center among the activity types of this
cost center
 Plan costs are split automatically during price

calculation
 Configurations of splitting basis done in

Splitting structure
 Splitting structures are assigned to Cost

centers
 Splitting Structure
 A splitting structure contains one or more
assignments in which you store splitting rules
for the corresponding cost element(s) or cost
element groups
 Cost Elements are assigned to activity types

 One Cost Elements can be more than one

activity types
 Splitting methods are assigned to the splitting

rules
 Splitting methods specify how the costs are

split
 Splitting Structure
 You can split plan costs according to the
following criteria:
Activity quantity


 Equivalence number

 Capacity

 Output

 Scheduled activity

 Statistical key figure (quantity)

 Statistical key figure (maximum quantity)

 No splitting is executed

 If no splitting structure assigned to cost center,

the system uses the ‘Equivalence number’ to
split the cost
Calculating the standard activity rate

Planned costs
Standard activity rate =
Planned quantities
 Cost Center/Work Center assignment

 Cost center layout is driven by cost control and

management considerations
 Must be able to plan and book actual payroll and
expenses at the cost center level
 Cost centers should be subject to responsibility
accounting
 Activity rates are loaded at the cost center level
 Work center layout is driven by manufacturing
considerations
 Capacity
 Production process
 Plant layout
 Etc.
 Cost Center/Work Center assignment, cont’d

 A work center must be assigned to one cost center

 One cost center may include several work centers
 Standard labor rates are derived by taking the planned
labor dollars in the cost center and dividing them by the
planned labor hours from the work centers
 Standard overhead rates are derived by taking the
planned overhead dollars in the cost center and dividing
them by the planned activity quantity from the work
centers
 SAP Activity Rates
4 Activity Types
 Direct Labor Production: variable rate
 Direct Labor Set-up: variable rate
 Overhead Production: variable and fixed rate
 Overhead Set-up: variable and fixed rate

T-code: KP26
 Used to view/change activity rates

Menu Path: Accounting>Controlling>Cost

Center Accounting>Planning>Activity
Output/Prices
Actual Costs
 Actual Costs
 Actual cost entry involves transferring primary
cost from upstream components to the
Controlling (CO) application component.
 In the CO component, this transfer occurs
real-time from the components
 Financial Accounting (FI),
 Asset Accounting (FI-AA),
 Materials Management (MM),
 Human resources (HR) through FI
 This is achieved by entering a cost center
during account assignment:
 Manually during the respective process (e.g.
within the FI-document or the purchase
requisition)
 automatically via the default account assignment
 Periodic Allocations within Cost Center
Accounting
 Periodic allocations are part of the
period-end-closing process carried out at
period-end throughout the entire
organization.
 Before closing a period, the data has to
be transferred from other applications,
and in particular, all postings in Financial
Accounting (FI) that are relevant to CCA
must have been carried out.
Types of Allocations used in the Closing
Process
 Distribution:
 A method of allocation primary costs
 Used to distribute costs by a predefined rule where the
Primary Cost Element remains visible in the receiving
Cost Center for detailed reporting purposes
 Assessment:
 A method of allocating primary and secondary costs
 Used, when the receiver does not need to know the
composition of the costs
Execute Actual Distribution Cycle
 Execute actual distribution cycle KSV5:
 Run at period end
 Run after having entered the statistical key figures
used in the cycles
 You can use variants to execute the assessment.
 Variants contain several cycles
 You can use variants to store regularly used combination
of cycles and be able to call them up easily
Execute Actual Assessment Cycle
 Execute actual assessment cycle KSU5:
 Run at period end
 You can use variants to execute the
assessment.
 Variants contain several cycles
 You can use variants to store regularly used
combination of cycles and be able to call them
up easily
 CCA – PCA value flows Cost Center 106048060 1060TBD03 1060TBD01 1060TBD02
Profit Center CPS01 CORIB CPS01 COSLT
Common End Prod Line Common End Prod Line
Cost Elem. Description Maintenance Ribbon Cable Cleanroom LT Cable Total
60050000 Salaries $ 200,000 $ 150,000 $ 50,000 $ 30,000 $ 430,000
60020000 Wages $ 100,000 $ - $ 20,000 $ - $ 120,000
62900000 Travel $ 50,000 $ 25,000 $ 20,000 $ 15,000 $ 110,000
63000000 Depreciation $ 10,000 $ 2,000 $ 1,000 $ 500 $ 13,500
Total Expenses $ 360,000 $ 177,000 $ 91,000 $ 45,500 $ 673,500
Cost Center Allocation:
906048060 Allocation of Maint costs $ (360,000) $ 171,429 $ 85,714 $ 102,857 $ -
Cost Center Balance $ - $ 348,429 $ 176,714 $ 148,357 $ 673,500

Stat Key Figure - "# of Machines" 10 5 6 $ 21

943006200 Labor activity allocation $ (150,000) $ (70,000) $ (30,000) $ (250,000)

943000200 Overhead activity allocation $ (198,429) $ (106,714) $ (118,357) $ (423,500)
$ - $ - $ - $ -
Maintenance cost center costs
allocated to production cost centers
based on # of machines in each Activity Allocation to Production Orders:
production cost center.
Production cost center costs and Prod Order 1 Prod Order 2 Prod Order 3 Prod Order 4 Total
variances are zeroed out and assigned Profit Center CORIB CBM01 COSLT CORIB
to production orders. Ribbon Cable Common Matl LT Cable Ribbon Cable
Labor $ 150,000 $ 45,000 $ 35,000 $ $ 20,000 250,000
Material being produced on production OH $ 176,200 $ 90,000 $ 123,400 $ $ 33,900 423,500
order is linked to a profit center. $ 673,500
Production orders are settled and Would then have a Profit Center Alloc from the Common Matl PC to the end Product Line Profit Centers
costs flow to profit centers (product • Cost center allocations should be based upon the relationship between the support/sender and
lines). production/receiver cost centers.
If Profit Center is “common”, it must be • The products/product lines being produced should not be a factor in determining the cost center
allocated to end product line profit allocation bases to the production cost centers.
centers.
• Production cost center costs and variances are assigned to profit centers/product lines via the
production orders.
Reporting in Cost Center Accounting

 The information system allows :

 to analyze cost flows in an organization.
 to analyze all costs online and trace them
right back to the original document.
 to execute all reports available online and
in background (background is advised for
large amounts of data).
 create separate reports for all hierarchy
nodes and individual objects.
What Reports are Available?
 R/3 Reports
examples:
 Cost Centers: Actual/Plan/Variance

 Cost Centers: Actual/Target/Variance

 Area: Statistical key figures

 Cost Centers: Current Period/Cumulative

 Line item reports

 Cost Center Groups and the Standard Hierarchy
 Cost Center Groups

 Logical grouping of Cost Centers

 Used to simplify data entry and reporting
 Cost Centers with the same allocation rule are grouped together to
facilitate the Allocation Cycle process (Distribution, Assessment)

 Types of grouping

 Cost Center Groups enable evaluations for decision making by

responsibility area or controlling area
 Support the planning and internal allocation processes
 Cost Center Groups and the Standard Hierarchy

 Standard Hierarchy

Cost Center Hierarchy is a tree-like structure combining

cost centers and cost center groups. There must be at
least one hierarchy containing all the cost centers and
representing the entire business organization. Such
hierarchy is called the Standard Hierarchy.

 Cost Center Hierarchy is a hierarchical structure that

combines several Cost Centers according to certain
criteria.
 Cost Center Standard Hierarchy
 Example:
S-TOP0025
Standard Top
Canada
 Cost Center Alternate Hierarchy

 Description of Data Object :

 A Cost Center Hierarchy is a hierarchical structure that
combines several cost centers according to certain
criteria.
 Cost Center Alternate Hierarchies are tree structures
grouping cost centers belonging to a controlling area
from various perspectives.
 Nestlé will adopt two kinds of Alternate Hierarchies:
Global and Local
 From a Nestle' Global point of view, there is only one
cost center Hierarchy: Benchmarking. From a Nestle'
Local point of view, there will be as many hierarchy as
each controlling area/market needs
 Cost Center Alternate Hierarchy
Standard Hierarchy Alternate Hierarchies

STANDARD GLOBAL LOCAL

HIERARCHY HIERARCHIES HIERARCHIES
S G L
Organisational Benchmarking LA-TOPxxxx = Allocation
S-TOPxxxx GB-TOPxxxx LP-TOPxxxx = Planning
Top Node = S-TOPxxxx where Top Node = GB-TOPxxxx LR-TOPxxxx = Reporting
xxxx is the controlling area where xxxx is the contr. area
• Each hierarchy node must • Each hierarchy node must Top Node = LX-TOPxxxx
begin with S begin with G where X represents the
purpose of that hierarchy and
xxxx is the contr. area
• Each hierarchy node must
begin with L
 Cost Center Alternate Hierarchy

Example: Benchmarking Hierarchy

Controlling Area
GB-TOP1001

GB Factories GB Distribution Centers

GB-CSM1001 GB-CSD1001

Plant 1236 Plant 1239 Plant 1256 Plant 1002

GB1236 GB1239 GB1256 GB1002

Costing Cost Costing Cost Costing Cost

Center Center Center
GB1256234 GB1256344 GB1256721
Configuration overview
Standard Hierarchy
 Cost Center Standard Hierarchy
 Defined in Controlling Area configuration
Activate Cost Center Accounting

 Cost Center accounting

 Activate in Controlling Area configuration
 Activate Components/Control Parameters
Cost Center Master Data

 Cost Center Master Data can be created

either as configuration or as master
data
 Cost Center Master Data can be
transported
Cost Center Category

 Cost Center Category is used to group together

cost centers that have same characteristics e.g.
Functional Area, Revenue Postings allowed,
Commitment, Activity Prices etc.
 Default Functional Area can be assigned to cost
center category, which is then defaulted to all
cost centers of that category
 Typically, cost centers by functions are grouped
together like, Manufacturing, Marketing, General
Administration
Time-Based Fields
 In this setting, you define fields in cost center master data
that are time relevant
 A time-based field controls whether an additional data
record is created for the respective master data if changes
have occurred in one of these fields within a given period
(fiscal year, posting period)
 Following time based parameters can be set:
 Not time-based
 Day-based
 Period-based
 (Fiscal) Year-based
Time-Based Fields
Planning
 User-Defined Planning Layouts
Planning Profiles
 Planning layouts are assigned to
Planning profiles
 Planning data can be entered with
reference to planning profiles
 Planning layout can be marked as excel-
interactive for planning to be loaded via
excel upload functionality
 Course Effectiveness

 Did the training meet your expectations ?

 What are your 3 key learning ?

 What areas do you need more training on ?

Questions?