Cost Centers

In this section I cover Cost Center Accounting (CO-CCA), I will cover how to setup
the cost center master data, cost center planning, cost center budgeting , actual
postings processes such as assessments, distributions and cost center variances. CO-
CCA is used to classify and segregate costs in accounting and reporting by
departments or functional areas and by types. Functional areas can be defined by
production processes or major equipment to capture process cost information in
manufacturing or by departments to segregate costs by the person responsible in other
area's, for example costs types could be production, distribution, sales and
administration.

First we must activate CO-CCA in SAP using transaction code OKKP, this is
activated within the controlling area, you are first asked to specify the starting year
and then you change the cost centers drop down list

component active - this is the default settings and indicates that CO-CCA is
not active

component not active - the CO-CCA subcomponent is activated without

restriction

component active for validations - the CO-CCA subcomponent is not active,

you can use the cost objects but the CO component will not be updated, this is
useful only to check and validate postings

component active for existence checks - he CO-CCA subcomponent is not

active and is only used to validate, in this case the system will check only if the
cost center master data exists or not.
Master Data

Master Data defines how you can use your Co-CCA subcomponent, the master data
and how you choose to organize the structures will also affect the way that
management information will be available in reporting on these areas. Normally
business management will discuss and create a structure that fits the companies
organization, plus what they would want to see from a reporting aspect. The Co-CCA
master data structures are divided into four important areas

Cost Center

Activity types

Statistical key figures

Resources

We will start with cost centers master data, however we will take a look at the cost
center categories which define the the type of activity performed by the cost center
such as production, administration, etc. SAP already supply a standard set but you can
add to them if you wish. Cost center categories also define default values for the cost
center, you can define a default functional area and also activate or deactivate the
following default values, you can set this values when you define the cost center or
change them later

Lock primary postings

 Lock secondary postings

Lock revenue postings and revenue planning

Lock commitment planning

Lock primary cost planning

Lock secondary cost planning

Lock consumption quantities

Using transaction code OKA2, you create or change the default settings, I have added
a few and I may come back to change some once the DCC is up and running.

Next we must define a standard hierarchy for the controlling area, it is basically a cost
center group with all the cost centers in a controlling area assigned on it. The standard
hierarchy consists of two structural elements

End nodes where you assign the cost centers

Summarization nodes, which are not cost centers but summarize the cost
centers in the nodes attached to them.

You cannot assign the same cost center to two different nodes and each cost center can
be assigned to only one node at a time. An example of a standard can be seen in the
diagram below, you can also set a period of validity for the cost center
You can use transactions OKEON to create a standard hierarchy, I have created one
for the DCC company, I have kept it very simple, you can also view the whole cost
center, business area, functional area configuration for my DCC company.

Basically you are trying to group related types together based on the nature of their
function for example decision making, monitoring, administration, etc. In the screen
below you can create the cost center group and the cost center themselves.
You can also use the below transactions to manage cost center groups and cost centers

KS01 - create

KS02 - change
Cost Center
KS03 - display

KS13 - display all cost centers

KSH1 - create

Cost Centers Groups KSH2 - change

KSH3 - display
You can then use a common controlling report S_ALR_87013611, I don't have any
data in DCC at then moment but below is an example from the IDES system, you see
the cost center groups to the right and the cost elements on the left-hand side, here to
can clearly see what area costs are, this is an excellent report for managers as they can
see the mostly costly areas and perhaps streamline them to reduce costs.

We mentioned time-based fields in our cost element section, cost center also permits
some fields that are time-based, remember that time-based fields do create large
amounts of data, you can use transaction code OKEG, it is the same as before you can
either turn on or turn off, they work the same way as the cost element time-based
fields work.
Next we will look at activity types, which classify a specific activity performed by
one or more cost centers, I will be creating the below and using the secondary cost
elements I created in the cost elements section, I will probably extend this as I start to
use the DCC company, but this will get us started.

You can use the below transaction codes

Activity Types
KL01 - Create

KL02 - Change
 KL03 - Display

KL04 - Delete

KL13 - Display all types

There are a number of fields that need to be completed, also the allocation cost
element should be type 43, which is what we created in the cost elementsection,

Name and Description - self explaining

Activity Unit - the measurement in which the activity will be measured in, for
example hours, minutes, liters, cubic feet

CCtr categories - defines what cost centers can be used with this activity type,
this help you restrict specific activity types, * means all cost center categories

ATyp category - is used in both planning and actual transactions, (see below
for more information)

Allocation cost elem - you use a cost element of type 43, which we have
already created in the cost element section

Price Indicator - select how the system will calculate the planned and actual
activity price (see below)

Actual qty set - sets the actual activity quantity must be posted manually

Average price - indicates whether the activity prices for the cost center and
activity type combination remain constant for the entire fiscal year, this field is
also year time dependent and can be changed each year if desired

Plan quantity set - indicates that the planned activity cannot be changed by the
planning reconciliation

PreDistriFixedCosts - allows this activity type to be used in fixed cost

predistribution.

ATyp category
1: Manual Entry, Manual Activities in this category are used for manual planning and allocation, the planning amount of the activ
 sender cost center is made using the planning function of the activity type. The planning will consist of a
Allocation
(allocation of measurable activities; actual quantity times planned price)
2: Indirect Determination, This category is used when the calculation of the quantities is impossible or extremely tedious, the calcu
Indirect Allocation amounts is made through the indirect activity allocation using a relationship defined between the sende
You can use the category when you manually plan the sender cost center through a special function with
3: Manual Entry, Indirect
object. The system based on the relationship established between the sender and receiver will calculate
Allocation
allocated to each receiver. After allocation of indirect activities, the activities will be fully reconciled
4: Manual Entry, No Select this category if you are doing manual planning to the sender cost center and you want the cost to
Allocation category for internal cost center activities.
5: Target = Actual This is a special kind of indirect allocation that determines the actual values from the needs of planned
Allocation (Actual only) index. This category can only be used for actual allocation
Price Indicator

the system calculates the price automatically based on the planned activity and the planned costs

1: Plan Price, Fixed Price = Fixed planned costs / planned activity

Automatically based on
Activity Variable Price = Variable planned costs / planned activity

Total price = fixed price / variable price

the fixed portion of the activity will be calculated based on the cost center capacity, this method will of
absorption in the cost center because the cost center can receive more or less activity than its capacity

2: Plan Price, Fixed Price = Fixed planned costs / capacity

Automatically based on
Capacity
Variable Price = Variable planned costs / capacity

Total price = fixed price / variable price

3: Determined Manually you set the price of the activity type manually
5: Actual price,
Automatically based on you want the system to calculate the actual price based on the actual activity and actual costs.
Activity
6: Actual Price,
Automatically based on similar to above but the system will use the capacity to calculate the activity rate
Capacity
7: Manually determined for
you set the activity price manually
actual Allocation

Below is an example of one of the activity types for internal transport (left hand
screenshot), the definition in the version maintenance (transaction codeOKEQ) for
the price calculation method will impact how SAP calculates the price.
lastly regarding activity types you can group them which can be very useful for
reporting and customizing, they work the same way as cost elements and cost center
grouping, below is an example of grouping the activity types, I may move and add to
these later once I get using the DCC company.

KLH1 - create

Activity Type Groups KLH2 - change

KLH3 - display
Next we move on to statistical key figures which are numerical measures that assist in
the allocation of costs between cost centers, internal orders and profit centers. You can
use statistic figures for periodic cost allocation (distributions and assessments), they
can also be defined for a particular type of activity performed by a cost center (for
example the number of employees in a cost center or the amount of power in Kilowatt
hours used in a cost center), they can be used in reporting for both planned and actual.

There are two categories for statistical key figures

01: Fixed Values - means that its values remain constant over the periods, the
quantity is measured once and applies to all periods

02: Total Values - corresponds to values accumulated over the period, these
need to periodically need updating.

You can use the below transaction codes to create, change or display

KK01 - create

Statistical Key Figures KK02 - change

KK03 - display
 KBH1 - create

Statistical Key Figures groups KBH2 - change

KBH3 - display

SAP has some statistical key figures already defined and I will use these for the time
being, I will come back here once my experience grows and create some that
are DCC specific and I also will group these at a later date.

Lastly we cover resources which are goods and services purchased for the execution
of a particular business activity, in CO-OM (overhead cost controlling) you can use
resources for planning purposes only. You can plan resources during the cost
centers/activity type planning. By associating more than one resource to a cost
element you can reduce the chart of accounts without losing details relevant to cost
analysis. There are three types that are available

Type R - exists only in CO-OM and their prices are stored directly in the price
tables

Type M - refers to a material and their price is stored in the material master, in
MM the resources together with the item category describe what the item
represents as an estimate of costs (material, activity type, purchasing info
records or overhead)

Type B - refers to a base planning object and considers the price of the base
planning object to value the resource consumption.
Planning

Cost center planning is part of the company budget and generally will be incorporated
into the overall planning process. Planning can be done for primary costs, secondary
costs, activity type quantities consumed and statistical key figures. Planning is usually
done for the fiscal year. Using cost center groups and cost element groups you can
streamline the planning procedure.

First we will look at exchange rate types, you can define an optional exchange rate
type for cost center planning, this then should be updated in the version using the
version maintenance. The exchange rate type stores exchange rates for different
purposes for example planning, buying rate, selling rate and average rate. SAP already
supplies a standard exchange rate type "P", we will copy this to P1 for the DCC
company using transaction code OB07 (left-hand screenshot), then we will define the
exchange rates to be stored in this type using transaction code OB08 (right-hand
screenshot), we ill enter the currency rate for USD into EURO's

Now we can update our version using transaction code OKEQ, as you can see we are
now using P1 which we created above, also I have removed the value date, the system
will use the exchange rate for the first day of the period for each planning month. If
there are two rates in period the system for example on on 01.01.2014 (1st Jan) and
one on 05.01.2014 (5th Jan) the system will use the rate on the 01.01.2014.
Now we can test the above, first we will use transaction KP06 to create the planning
we will enter a $10,000 per month for a total of $120,000, using cost center
FINANCIAL, the DCC company uses USD as the currency

Running the report S_ALR_87013611 we see the below results our $10,000 over the
12 periods (left-hand screenshot), however perhaps we wish to see this in EURO's, we
can use transaction code RPC0 to select our exchange rate type P1 we created a
moment ago (middle screenshot), when we rerun the report we get the results in
EURO's (right-hand screenshot) and if you notice that the values are different based
on the exchange rate we entered
Manual planning covers the following areas

Statistical key figures planning

Activity type planning

Primary cost planning

Secondary cost planning

Budget Planning

Detailed planning

You can either use standard planning profiles that come with the SAP system our
create your own (using a copy of a SAP supplied one), planning is done via
predefined screens containing only the fields that should be updated by the planner
and associated to planner profiles, these screen are known as planning layouts. There
are three kinds of planning layouts

Planning layouts for cost element planning

Planning layouts for cost element planning

Planning layouts for statistical key figure planning

An advantage of the planning layouts is that you can change the currency, the standard
layout uses the controlling area currency as a planning currency. Using transaction
code KP65, we can create our own planning layout that will use the object currency,
we basically copy the existing planning layout 1-101

In the editor screen we change the column plan fixed cost from plan fixed costs in CO
area currency to plan fixed costs in object currency, this will allow us to view the
correct currency for that specific object instead of the controlling area currency. You
need to repeat the same process with the plan variable cost

When you go save you may see this error, you need to make sure that both plan fixed
costs and plan variable costs have been updated, also you need to remove
both dist columns and recreate them, from the main menu select edit -> columns ->
append add. fields do this for both columns, then save.
Now we create our own planner profile, again we will copy and exist planner
profile sapall to zsapall and use the above planner layout, using transaction
code KP34

Highlight the new planner profile drill down until the layouts for controlling, then
replace the 1-101 with our new planner Z1-101, the overwrite flag controls whether
users can change the proposed values for the distribution key when planning and
the integrated excel flag means that SAP will open Microsoft Excel to perform the
planning.
After you have saved the above we can use transaction code KP04 so that we can set
the planner profile

Now when you use transaction code KP06 you will be using the layout we created
above and the currency will be determined by the object currency and not the
controlling area currency. This example now give you the knowledge to create your
own custom layouts.

There are a number of tools that SAP supply to help in the planning process which I
will briefly discuss below, such as copying planning, deleting planning, revaluating
and transferring planning from other components.

The copy function allows you to copy planning data from another version, referencing
either planning or actual postings, you can define the specific periods, fiscal years,
versions and cost centers. You can also limit to a data type of planning and a currency
type. You can use the below transaction codes

KP97 - Copy planning for cost centers

KP98 - Copy actual to plan for cost centers

KP90 - Delete cost element planned costs

 KP91 - Delete cost centers planned costs

Another tools is revaluation by which you revalue the planning values using a defined
percentage, it is possible to create the revaluation by period and with the cost element
restricted, this is only valid for cost center planning. Using transaction code KPU1

Now we run the revaluation using transaction code KSPU, first I will perform a test
run then the actual run

Then we will rerun the report S_ALR_87013611 and we can see that the values have
indeed increased by 10%
You can import planning data from other components such as depreciation data from
Asset Accounting (AA), human resources costs from HCM, statistical key figures
from LIS and production activity from Production Planning (PP). For example to
enable a import from PP you need to do the following

1. Create the cost center planning cost center/activity type for which PP can create
the necessary activity. This can be done using transaction codeKP26 or by
copying another planning or from actual values.

2. Create the production planning using Sales and Operation Planning (SOP),
Materials Resource Planning (MRP) or Long-Term Planning (LTP)

3. Run the plan reconciliation using KPSI

You need to customize the reconciliation planning using transaction code OMIK, as i
mentioned you need to have setup some configuration on the specific transfer activity
that you wish to transfer. Once I get DCC up and running and will data entered into
the system I will revisit this. The advantage to using this allows you to create planning
scenarios to allocate different planning versions in Controlling (CO) simplifying the
planning process. You should work with the various production teams as they will
determine if the planning should be based on SOP, MRP or LTP.
Allocations are used to send a cost or group of costs from one cost object to another,
for example you can split the energy costs from the overhead cost center to the
production cost centers. There are four type of periodic allocations available, however
you need to define cycles first, the cycle contains the allocation definition such as
senders and receivers as well as other rules for the allocation. You need to define
which cost elements are to be allocated and the activity type quantities and the criteria
that would be used to establish the allocation either directly or indirectly.

The four periodic allocations are

Periodic reposting

Distribution

Assessment

Indirect activity allocation

You have to create at least one cycle for each kind of allocation, you cannot use a
cycle for distribution, also separate cycles must be defined for planned and actual
values. In planning a cycle must be created for each version for distribution,
assessments and periodic reposting the following values are assessed

Total planned or actual

Fixed planned or actual

Fixed rate or activity type

For indirect activity allocation, the following values are assessed

 Total planned or actual

Fixed planned or actual

inversely determined quantity

Cycle processing can be hierarchical or iterative as per the diagram below

Hierarchical method - this method is used when there is no recursive link

between the cost centers or the cost center will receive no cost from one of its
receptors directly or indirectly, this method can also be used when the sender
cost object is part of the receiver and must have a part of the cost allocated

Iterative method - is used in repetitive processing, as in the example diagram

cost center A must have its costs allocated to cost centers A, B and C and part of
the cost from cost center C must return to cost center A to be allocated again.

Periodic repostings reduces the number of postings made in FI and the planning time
as well, for example you can post all planned electricity costs to one cost center or
internal order and then run the periodic repostings to settle these costs to other cost
object following a predefined customized rule. This is similar to distribution process
(which we will see in a moment), in periodic posting you cannot see the credit posting
in the total reports, also you cannot use an internal order as a sender cost object where
as in periodic posting you can. Using transaction code KSW7 to create (KSW8 -
change, KSW9 to display) a periodic reporting cycle, you fill in the cycle name and a
start date

then we customize the cycle header

start date - define the end date of the cycle as we have already defined the start
date
 text - the cycle description

indicators - iterative field will define the cycle to iterative

field groups - define what will be allocated consumption, object currency and
transaction currency, the allocation will always be made in the controlling area
currency plus the currency selected in this section

present selection criteria - define the cycle version that you are going to use to
perform the cycle.

Once we have created the cycle header we can attach the segments using the attach
segment button, you can attach multiple segments, just keep adding, the segment
header tab is filled in as follows

segment name - description of the specific segment

lock indicator - when processing cycles locked segments will be ignored

sender rule - specify how the system will distribute the values between the
sender and the receiver

o posted amounts - consider the values posted in the planning

o fixed amounts - consider fixed values on the sender values tab

o fixed rates - on the senders values tab, the fixed prices defined for the
sender are multiplied by the receiving tracing factors and the results
allocated to the receivers

share in % - percentage of the sender costs that will be allocated

 act vals or plan vals - define the reference type value used for the sender, you
can only choose one.

receiver rule - define how the values are going to be allocated in the receiver

o variable portions - the system will use values already recorded in the
database to determine the amount for each receiver. also see var.portion
type below

o fixed amounts - considers fixed values determined in the sender

values tab to determine the values that each receiver will receive, the
sender will be credited by the sum of those values

o fixed percentages - considers the fixed percentages determined by

the sender values tab by applying the percentage in the sender values, in
this case if the sum of the percentages set is less 100% a residual balance
will remain on the sender.

o fixed portions - same as above but rather than percentage a value is set.
The system will add up all the protions and divided by the portion of
each receiver to find the percentage assigned to the receiver, the entire
balance of the cost center is allocated unless you set a percentage less
than 100% for the sender.

var.portion type - determine which object cost will be used as reference for the
allocation

o plan costs - considers the planning values for the version and cost
element selected on the receivers tracing factor tab, the system will add
up the total planned costs for the costs in the receivers and divided the
total of each receiver by the grand total to determine the percentage that
each receiver will receive. The sender values will be defined by the
combination entered in the sender/receivers tab.

o actual costs - same as above but the system will consider the actual costs
as reference for the allocation

o plan/actual consumption - same as above but except they consider the

consumption quantity and not the cost values
 o plan/actual statistic key figures - same as above but the system will use
the planning or actual statistical key figures defined on the receiver
tracing factor tab

o plan/actual activity - as as statistical key figures but uses the planning or

actual activity type to create the receiver percentage.

o statistical plan cost - same as above but only considers statistical

planning values for internal orders or cost centers. A cost center receives
statistical values when real planning is posted to an internal order
assigned to this cost center and the order receives the real planning. An
internal order gets a statistical planning value when the internal order
master data is defined as a statistic. he cost center assigned to this
internal order will receiver the real planning.

scale Neg. Tracing factors - define how the system will manage negative
values in the allocations

o no scaling - the system uses negative tracing factor in the calculations

o standard scaling - scaling depends on the sum of the receiver tracing

factors

o absolute value - the tracing factor negative sign is reversed, all tracing
factors will be positive

o negative tracing factors to zero - the negative tracing factors will be set
to zero, nothing will be allocated to this receiver

o smallest negative tracing factor to zero - the largest negative tracing

factor is set to zero, the other tracing factors are increased accordingly,
the previous receiver with zero tracing factors will now receive a
positive tracing factor

o smallest negative tracing factor to zero but zero = zero - the largest
negative tracing factor in terms of amount is set to zero, the other tracing
factors are increased accordingly, the previous receiver with zero tracing
factor will remain with a zero as a tracing factor
In the senders/receivers tab we detail both the senders and receivers and the cost
elements, as you can can below you can setup single values, ranges or groups. You
can also check the segment to make sure you have not made any mistakes using
the check button, any errors will be highlighted.

Another allocation is distributions which are similar to periodic reporting, they use
cycles to define the allocation but in distributions only cost centers or Activity-Based
Costing (CO-ABC) processes can be considered senders, it is also possible to see the
credit values on the total records.

The differences between distribution and periodic reposting are below

Distribution
sender can be cost center or CO-ABC process
total values are saved, so its possible to see the
credit on the sender side
it does not allocate activity-dependent costs
Periodic Reposting
senders can be a cost center, Co-ABC process, internal
order or another cost object
total values are not saved, making it impossible to see the
credit on the sender side
it can allocate activity-dependent costs

To customize distribution you can use transaction code KSV7 (KSV8 change
and KSV9 display), the screens are the same as the periodic reposting.

An assessment uses cycles to transfer primary and secondary costs from the sender to
the receiver, the sender and receiver can be a cost center, ABC process, an internal
order or cost objects. The difference between assessments and distribution and
periodic processing is that assessments summarizes all of the costs in the sender and
uses a secondary cost element with a category of 42 (Assessment) to create both the
credit in the sender and the debit in the receiver. Periodic reposting and distributions
both use the same (primary) cost element rather than allocating costs in the secondary
cost elements.

Additionally in assessments, allocation structures can be used to allow for the creation
of group of accounts that will be settling to a secondary cost element category 42
(assessment), using the IMG we can define the allocation structures

From the initial screen select New Entries, I have created Z1 for the DCC company,
then highlight Z1 and select assignments which is used to define groups of sender cost
elements, you can create as many groups as you wish,
When yo create the groups you will notice that the overlay icon is yellow which
means that no cost elements have yet been assigned, once you have assigned cost
elements it will turn green as per the labor assignment below, if you get a red icon it
means that cost elements have overlapped which must be corrected.

The labor assignment has a cost element 614020 assigned, you can also use groups of
cost elements if you have configured this.

In the assessment cost folder you add the appropriate cost element, this can only be a
category 42 (assessment), Use transaction KA06 if you need to create a secondary
cost element of category 42.
Once you have configured the allocation structure you can view it in another view,
highlight the allocation structure you want to view then select extras ->
overviewlist (see left-hand screenshot), the hierarchical structure will be displayed
(right-hand screenshot)

You can use transaction code KSU7 to create assessments

(KSU8 change, KSU9 display) again this is the same as the above cycle creations, so i
won't go into detail here.

Indirect activity allocations can be used for activity type categories 02 (indirect
determination, indirect allocation) and type category 03 (manual entry, indirect
allocation)

Category type 02 refers to a situation where the costs cannot be defined at the sender
and instead the system needs information from the receivers to allocate the costs. For
example using a maintenance order and based on the hours of production in each
production cost center a relationship between the production hours and the
maintenance hours can be established and through indirect activity allocation the
maintenance cost center is defined as the sender and the production cost center is
defined as the receiver using the production hours as the reference for the allocation.

Category type 03 is used when the sender quantity is entered manually in the sender
and the system uses the rule defined in the cycle to distribute the activity type
quantities to the receivers. Again the cycle definition is the same as we have used
before except that you transaction code KSC7 to create
(KSC8 change, KSC9 display).

Before I move on to splitting lets see an example for above, I will use periodic
reposting to demonstrate, I won't post but explain how to use the periodic cycle, first a
quick look at the periodic reposting cycle, I will only use 50% of the original value,
again i am demonstrating the various possible ways, then in the sender/receivers tab I
enter the sender and receivers and the cost element

In the receiver tracing factor tab I can then allocate the portion/percentage of costs to
the receivers, again this in only demonstrating what can be done and not much
business though has gone on to this, once I have the DCC company up and running I
will revisit to make it more meaningful
Now using transaction code KSWB we can execute the periodic reposting plan (in
test mode), select the cycle we just viewed above

If all goes to plan you will see the number of senders (one in our case which is
FINANCIAL) and receivers (two in our case OTHER and HR), you may get an error
to run an report called RK811XST (transaction code SE38) to create the basic sets for
the allocation processor, just run as requested.
Using the sender and receiver buttons we can see the values, we can see that the
senders value are 50% and then the 50% is split between OTHER and HR cost
centers.

Sender (FINANCIAL) Receivers (OTHER and HR)

You can also view previous cycle runs using KSWC, as I did not post then nothing
can be seen in the below, I suggest you have a play around and create different cycles
to see what different outcomes you can create.

Below is a summary table for all the transaction codes for the above

PLAN
Create Change Display Delete Execute Overview
Periodic Reposting KSW7 KSW8 KSW9 KSWA KSWB KSWC
Distribution KSV7 KSV8 KSV9 KSVA KSVB KSVC
Assessment KSU7 KSU8 KSU9 KSUA KSUB KSUC
indirect activity KSC7 KSC8 KSC9 KSCA KSCB KSCB
ACTUAL
Periodic Reposting KSW1 KSW2 KSW3 KSW4 KSW5 KSW6
Distribution KSV1 KSV2 KSV3 KSV4 KSV5 KSV6
Assessment KSU1 KSU2 KSU3 KSU4 KSU5 KSU6
indirect activity KSC1 KSC2 KSC3 KSC4 KSC5 KSC6

At the end of the planning process or for actual posting at the end of the period you
can recalculate the activity price (actual and plan) using the planned values and
activity quantities planned to create a new price.

Before activity price calculation can be done then you need to run the plan or actual
cost splitting, this will split the planning or actual costs on the cost elements between
activity types planned in the cost center,then you can divide the values for each
activity type in a cost center by the quantity of this activity, creating the activity price.
You can customize the cost splitting using transaction codeOKES, select the new
entries button and create the splitting structure
We then create the splitting rules, select the splitting structure and double-click on
splitting rules, then select the new entries button and add the below rules (left-hand
screenshot), to assign the rule to the version simply double-click on the rule and add
the version field and value (right-hand screenshot) SAP already comes with some
predefined rules, the Wt column to the far right allows when splitting the costs
between activity types with different units of measure, the system will then use the
equivalence number of defined in the planning transaction to convert both activity
type units to a common unit of measure.

Next we create the assignments for the splitting structure, go back to the splitting
structure and then double-click on assignments (left-hand screenshot) , then using
the new entries button add the assignments as below, again I will return here once I
have the DCC company fully running and will probably add additional assignments.
We add the rule to the assignment which is the one we used for the version above.
Then we need to assign a combination of cost element and activity type, simply select
an assignment and then select selection for assignment, the right-hand screenshot
should be displayed, add the cost element and the activity type that I created in
the cost elements section or you have created groups then use these.

So lets see an example of cost splitting, to how to use it, the planned values from four
cost elements can be split based on two activity types to calculate two activity rates,
you can see how the system will calculate the portion of the planned costs from each
cost element to use in the planned activity rate calculation. The calculation amounts
shown for each activity type will then be divided by the planned activity quantity to
determine the planned activity rates

Cost Element Planned Costs

414300 - Electric Power $25,000
414202 - Maintenance/Repairs $12,000
421101 - Salaries and fee $17,000
422450 - Depreciation/Amortization $7,000
Activity Type Quantity Planned
PH - Production Hours 300
Deprec - Depreciation 100
Cost Element Depreciation Depreciation Splitting PH PH
414300 100/400 25,000 * 0.25 = $6,250 300/400 25
414202 100/400 12,000 * 0.25 = $3,000 300/400 12
421101 100/400 17,000 * 0.25 = $4,250 300/400 17
422450 100/400 7,000 * 0.25 = $1,750 300/400 7,
After creating the splitting structure the final piece is to assign the structure to the cost
centers that will send or receive the activity types. We will use transaction
code OKEW, you can restrict by using the specific cost centers, cost center groups,
all cost cost centers and customize for one or all CO versions.

Simply select the cost center that you wish to assign to the splitting structure,
highlight the splitting structure and then select the assign button (right-hand
screenshot), once they have been assigned you should see something looking like in
the right-hand screenshot.

Budget Management
Instead of using primary and secondary cost planning the budget can be set by cost
center rather than cost elements, first we must create budget profile which will contain
the following

Budgeting time frame

Decimal places

Scaling factor

Distribution keys

Fiscal year or period values

We start by using transaction code OKF1 to create the budget profile, make sure you
understand the past, future and start time frames

Past - specifies how far in the past you can plan/budget for, the start year is the
reference point, so for example if the year is 2014 and we have 1 in this field
you including the years up to 2013

Future - specifies how far into the future you can plan/budget for again the
start year is the reference point, so for example if the year is 2014 and we have
3 in this filed you can include up to 2017

Start - determines the start year for planning and budgeting using the current
fiscal year as a reference, so for example if the year is 2014 and we have a 1 in
this field then the start year for past and future will be 2015

You can then use transaction code KPZ2 to create your budget for the cost center
(left-hand screenshot), you can then user report S_ALR_87013648 to view your
budget (right-hand screenshot)
You may run into problem when using transaction code KPZ2 and receive the
informational message at the bottom of the screen

To get more details select extras -> error log from the main menu (left-hand
screenshot), here you can see the details of the error, in this case we have miss match
of dates between the budget profile and the cost center

You can get the the profiles years by simply, selecting on the drop down list, you will
see all the budget profiles also detailing their timeframe's, now compare this to what
you have for the cost center as long as the time is not less than what is created in the
budget profile then you should be ok, as you can see in the case below the budget
profile is expecting years 2014-2018 but we have only 2014-2017 in the cost center,
so you need to change either one of them to get this to work.
Commitments and Funds Commitments

Commitments are payments that are not entered into the accounts but can lead to
actual costs at a future date, it has its origin in the purchase requisition and purchase
order. If you enter a CO object in the purchase requisition it will show as a
commitment on CO reports. If you use the purchase requisition to create the purchase
order the system will transfer the commitments to the purchase order automatically
and when you goods receipt and invoice this purchase order the system transfers the
commitment to actual values. You need to activate commitments in the controlling
area using transaction codeOKKP

Additionally the cost center master data must not be locked as we can see below in the
FINANCIAL cost center.
Actual Postings

Actual postings means transferring cost amounts to CO from other components such
as FI, PP, HCM and also from transactions performed within the CO components such
as assessments, distributions and others.

You can define automatic accounting assignment for controlling posting, which means
that by default you can set cost centers, profit centers or orders to be used when
posting occurs in a specific cost element and company code, using transaction
code OKB9, first I want to cover the 8th column acct assignment detail this
determines what folders you can use on the left-hand side other you will get a
message at the bottom of the screen stating change the rule for that detailed account
assignment first the three options are below

1 (valuation area) allows you to use the business area folder

2 (business area) allows you to use the business area folder

3 (profit center) allows you to use the profit center folder

Select one of the three above allows you to create one or more break down using the
business area or the profit center folders (right-hand screenshot), this example cost
element 416400 will use cost center SERVICES and valuation 1000 as the default
assignment, this will be useful if you need to ensure that all postings to an account are
reflected in a certain cost center. You could for instance allocate all electric power
utility costs to one cost center then us distribution to allocate them to other cost
centers based on electric power consumption during the period-end processing.

Period-End Closing

Period-end closing allows you to make changes to controlling so that the data is ready
for the users, you can create manual postings to reclassify amounts posted in CO and
run accrual calculations, allocations and activity prices.

What we are talking about here is actual values, basically you follow the steps below
which we have already discussed above for planning

Periodic repostings

Distribution

Assessments

Activity allocation

Accrual calculation

You can use the below table for the transaction codes but instead you will use the
actual transaction codes, the only difference with the planning and the actual is that
you don't use the version however you will need to go through the process of creating
the cycles, etc.

PLAN
Create Change Display Delete Execute Overview
Periodic Reposting KSW7 KSW8 KSW9 KSWA KSWB KSWC
Distribution KSV7 KSV8 KSV9 KSVA KSVB KSVC
Assessment KSU7 KSU8 KSU9 KSUA KSUB KSUC
indirect activity KSC7 KSC8 KSC9 KSCA KSCB KSCB
ACTUAL
Periodic Reposting KSW1 KSW2 KSW3 KSW4 KSW5 KSW6
Distribution KSV1 KSV2 KSV3 KSV4 KSV5 KSV6
Assessment KSU1 KSU2 KSU3 KSU4 KSU5 KSU6
indirect activity KSC1 KSC2 KSC3 KSC4 KSC5 KSC6

Variances

Variance will happen then you get differences between planning and actual costs
(over-absorption/under-absorption), which helps you to measure the efficiency and
productivity of a company or production line. There are two kinds of variances input
variances and output variances

Input price variance - this is caused by a change in price of the material component or the price o
planned hours were priced at $10 but actually they were priced at $12, the same amount of hours

Input quantity variance - this is caused if the plan quantity differs from the actual quantity consum
hours were used but the price of the hours remained the same.
Input Variances
Resource usage variance - no actual or target costs exist for a cost center, for example the planni
different, the system cannot assign the difference to the input price or input quantity variances so
usage variance

Remaining input variance - you choose not to calculate the input quantity, input price or resource
cannot assign to any of the above variances

Output price variance - when a activity price (such as cost per labor hour) was entered manually
output price variance = (planned price - actual price) X accrual activity

Output Variances Output quantity variance - when a quantity was posted manually for the activity type
output quantity variance = (actual quantity - manually entered actual quantity) X accrual pri

Fixed cost variance - the difference between fixed costs and planned costs

You can use transaction code OKA8 to calculate and post the input price variances for
primary postings, basically the below will post 100% of the input variance to the cost
element 465000 for all periods.
After defining the cost element for primary variances you define which kind of
variance the system will calculate for the controlling area and the version, you can use
transaction OKVF, simply tick or untick which ones you require, you can use
the minor difference field to determine a threshold, any variances under this threshold
will be assigned to the relevant categories (such as input variance output, input
quantity output, etc)

Lastly you can assign the variance variant to the version and controlling area using
transaction OKV5

The process to calculate the variances are as follows

 1. Calculate target costs

2. Perform cost splitting

3. Calculate variances

Information System

Now we have setup all the costing configuration we finally get to see the results, there
are a large number of reports relating to costing and I will only cover a few here

As I don't have any data in my DCC company yet I will use the IDES system data, we
have already seen report S_ALR_87013611
Other report is to view the activity types using transaction code KSBT, there are a
number of filters that you can to reduce the size of the report
I suggest that you have a look at the reports and see if there is one that the
management would like, you can also create new reports using the report painter or
report writer, there additional reports using transaction code GRR3, you can use
transaction code OKD3 to import them and then transaction code OKB6 to generate
them.

Lastly if you are a technical person you will mainly be driven from the business
regarding chart of accounts, cost elements, activity types, etc, however it is good to
understand why a business what's the reports in a specific manor and how
they decide to categorize groups, elements etc.