Cost center
- 2. Objectives To gain understanding of key business processes of SAP Overhead Cost Management (OCM) Understand the Organizational unit in Controlling Determine the origin of posting in Cost center Accounting
- 3. SAP Overview SAP Overhead Cost Management
- 4. 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.
- 5. OCM Processes SAP Overhead Cost Management
- 6. OCM Process Overview PlanningPlanningMasterMaster DataData Cost CentreCost Centre AccountingAccounting ActualActual PostingPosting Period EndPeriod End ClosingClosing ReportingReporting ControllingControlling
- 7. PlanningPlanningMasterMaster DataData ActualActual PostingPosting Period EndPeriod End ClosingClosing ReportingReporting OCM Processes Planning preparation Cost Centre Planning Internal Order Planning Plan cost distribution Plan cost assessment Plan indirect activity allocation Plan settlement of overhead cost orders 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 Reposting Actual Cost distribution Actual Cost Assessment Cost Splitting Calculate Actual Activity Prices Settlement of Overhead Orders Manual Cost Allocation FICO Reconciliation
- 8. Master Data SAP Overhead Cost Management
- 9. Organizational 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 Telec ommu nicati on Inform ation techn ology Corporate common Profit Centers
- 10. 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
- 11. FinancialFinancial AccountingAccounting •General Ledger •Accounts Payable •Accounts Receivable •Fixed Assets •Treasury ControllingControlling •Cost Centre Accounting •Internal Orders •Product Costing •Profitability Analysis Cost Element vs GL Account ChartofAccountsChartofAccounts BalanceBalance SheetSheet AccountsAccounts AdjustmentAdjustment AccountsAccounts CostElementsCostElements SecondarySecondary CostCost ElementsElements IncomeIncome StatementStatement AccountsAccounts PrimaryPrimary CostCost ElementsElements No Balance No Balance Sheet Sheet Accounts in Accounts in Controlling Controlling All primary All primary cost elements cost elements linked to linked to Income Statement Income Statement Accounts Accounts No Secondary No Secondary Cost Elements Cost Elements In Financial In Financial Accounting Accounting
- 12. 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
- 13. Cost Centre Standard Hierarchy xx01xx01 -- ProductionProduction xx02xx02 -- MaintenanceMaintenance xx03xx03 -- UtilitiesUtilities xx04xx04 –– Engineering & ProjectsEngineering & Projects xx05xx05 –– Quality AssuranceQuality Assurance xx06xx06 –– Production PlanningProduction Planning xx07xx07 –– Production HandlingProduction Handling xx08xx08 ––Warehousing & StorageWarehousing & Storage xx09xx09 ––Executive OfficeExecutive Office xx10xx10 -- FinanceFinance xx11xx11 –– Human ResourcesHuman Resources xx12xx12 –– Information TechnologyInformation Technology xx13xx13 -- PurchasingPurchasing xx14xx14 –– General ServicesGeneral Services xx15xx15 –– Safety & SecuritySafety & Security xx16xx16 –– Sales & MarketingSales & Marketing xx17xx17 –– Research & TechnologyResearch & Technology xx18xx18 –– Company GeneralCompany General A groupA group StandardStandard HierarchyHierarchy A LtdA Ltd 91009100 A1 LtdA1 Ltd 92009200 A11 LtdA11 Ltd 93009300 A111 LtdA111 Ltd 94009400 91010009101000 –– Production CommonProduction Common 91010119101011 –– EGEG-- 1 Plant1 Plant 91100009110000 –– FinanceFinance 91110009111000 –– Human ResourcesHuman Resources 91110019111001 –– Housing ServicesHousing Services 91110029111002 –– Training CentreTraining Centre Functional AreaCompanyEnterprise Cost Center Nodes Nodes Cost Objects Cost Objects
- 14. 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
- 15. 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
- 16. 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).
- 17. 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
- 18. Planning SAP Overhead Cost Management
- 20. Cost center planning Cost Element Planning Cost Element PlanningCost Element Planning Year 2001 Periods 1 to 12 Cost center 30100 FI/CO consulting Cost element Name Salaries Travel costs 1 1 VersionPlanned costs Cost center Senior consulting Cost center FI/CO consulting Junior consulting Planned costs on the cost center 900000 500000 430000 474100 Input
- 21. Plan cost Distribution Company GeneralCompany General MaterialsMaterials 100100 Staff SalariesStaff Salaries 200200 Rent & RatesRent & Rates Light & HeatingLight & Heating VehiclesVehicles RepairsRepairs TravellingTravelling 2020 HotelsHotels 3030 TotalTotal 00 AdministrationAdministration MaterialsMaterials 6060 Staff SalariesStaff Salaries 120120 Rent & RatesRent & Rates Light & HeatingLight & Heating VehiclesVehicles RepairsRepairs TravellingTravelling 1212 HotelsHotels 1818 TotalTotal 210210 Production SupportProduction Support MaterialsMaterials 4040 Staff SalariesStaff Salaries 8080 Rent & RatesRent & Rates Light & HeatingLight & Heating VehiclesVehicles RepairsRepairs TravellingTravelling 88 HotelsHotels 1212 TotalTotal 140140 Allocation through original cost elementAllocation through original cost elementAllocation through original cost element
- 22. Plan Cost Assessment Company GeneralCompany General MaterialsMaterials 100100 Staff SalariesStaff Salaries 200200 Rent & RatesRent & Rates Light & HeatingLight & Heating VehiclesVehicles RepairsRepairs TravellingTravelling 2020 HotelsHotels 3030 Company General CostsCompany General Costs --350350 TotalTotal 00 AdministrationAdministration MaterialsMaterials Staff SalariesStaff Salaries Rent & RatesRent & Rates Light & HeatingLight & Heating VehiclesVehicles RepairsRepairs TravellingTravelling HotelsHotels Company General CostsCompany General Costs 210210 TotalTotal 210210 Production SupportProduction Support MaterialsMaterials Staff SalariesStaff Salaries Rent & RatesRent & Rates Light & HeatingLight & Heating VehiclesVehicles RepairsRepairs TravellingTravelling HotelsHotels Company General CostsCompany General Costs 140140 TotalTotal 140140 Allocation through secondary cost elementAllocation through secondary cost elementAllocation through secondary cost element
- 23. Actual Posting SAP Overhead Cost Management
- 24. 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
- 25. Manual Entries Primary postings include the following transactions Payroll Material Usage Travel Goods Receipt / Invoice Journal entry Depreciation
- 26. Statistical Key Figure Entry Statistical Key Figures 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 Statistical Key Figures 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 Indirect Activity Allocation is a method of allocating actual and plan costs using activity quantities as the basis. It 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 reposting, 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. 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
- 33. Distribution Company GeneralCompany General MaterialsMaterials 100100 Staff SalariesStaff Salaries 200200 Rent & RatesRent & Rates Light & HeatingLight & Heating VehiclesVehicles RepairsRepairs TravellingTravelling 2020 HotelsHotels 3030 TotalTotal 00 AdministrationAdministration MaterialsMaterials 6060 Staff SalariesStaff Salaries 120120 Rent & RatesRent & Rates Light & HeatingLight & Heating VehiclesVehicles RepairsRepairs TravellingTravelling 1212 HotelsHotels 1818 TotalTotal 210210 Production SupportProduction Support MaterialsMaterials 4040 Staff SalariesStaff Salaries 8080 Rent & RatesRent & Rates Light & HeatingLight & Heating VehiclesVehicles RepairsRepairs TravellingTravelling 88 HotelsHotels 1212 TotalTotal 140140 Allocation through original cost elementAllocation through original cost elementAllocation through original cost element
- 34. Assessment Company GeneralCompany General MaterialsMaterials 100100 Staff SalariesStaff Salaries 200200 Rent & RatesRent & Rates Light & HeatingLight & Heating VehiclesVehicles RepairsRepairs TravellingTravelling 2020 HotelsHotels 3030 Company General CostsCompany General Costs --350350 TotalTotal 00 AdministrationAdministration MaterialsMaterials Staff SalariesStaff Salaries Rent & RatesRent & Rates Light & HeatingLight & Heating VehiclesVehicles RepairsRepairs TravellingTravelling HotelsHotels Company General CostsCompany General Costs 210210 TotalTotal 210210 Production SupportProduction Support MaterialsMaterials Staff SalariesStaff Salaries Rent & RatesRent & Rates Light & HeatingLight & Heating VehiclesVehicles RepairsRepairs TravellingTravelling HotelsHotels Company General CostsCompany General Costs 140140 TotalTotal 140140 Allocation through secondary cost elementAllocation through secondary cost elementAllocation through secondary cost element
- 35. 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.
- 36. 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.
- 37. 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
- 38. Fixed AssetFixed Asset Settlement of Overhead Cost Orders Overhead Cost OrderOverhead Cost Order MaterialsMaterials 100100 Staff SalariesStaff Salaries 200200 Rent & RatesRent & Rates VehiclesVehicles RepairsRepairs TravellingTravelling 2020 HotelsHotels 3030 Company General CostsCompany General Costs --150150 CapitalisationCapitalisation --200200 TotalTotal 00 Cost Object BCost Object B MaterialsMaterials Staff SalariesStaff Salaries Rent & RatesRent & Rates Light & HeatingLight & Heating VehiclesVehicles RepairsRepairs TravellingTravelling HotelsHotels Company General CostsCompany General Costs 150150 TotalTotal 150150 Allocation through original cost account or settlement cost element Allocation through original cost accountAllocation through original cost account or settlement cost elementor settlement cost element
- 39. 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.
- 40. 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
- 41. 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 6Simultaneous Costing * Logistics 5
- 42. 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
- 43. Reporting SAP Overhead Cost Management
- 44. OCM Reporting Comprehensive, flexible information system to analyze cost flows Carry out standard recurring evaluations Construct special reports for unique situations Analyze 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
- 45. OCM Reporting Menu Path …
- 46. OCM Sample Report Selection Criteria …