Controlling

CO Component Short
Description
HELP.CACOMPCO
Release 4.6B
™
CO Component Short Description SAP AG
Controlling
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2 December 1999
SAP AG CO Component Short Description
Controlling
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December 1999 3
Controlling
Contents
CO Component Short Description.....................................................................6

Controlling...................................................................................................................................... 7
Overhead Cost Controlling ........................................................................................................... 9
Cost Element Accounting ......................................................................................................... 11
Cost Elements ..................................................................................................................... 12
The Reconciliation Ledger .................................................................................................. 14
Activity Types ........................................................................................................................... 15
Statistical Key Figures .............................................................................................................. 16
Cost Center Accounting............................................................................................................ 18
Master Data in Cost Center Accounting.............................................................................. 21
Cost Center Planning .......................................................................................................... 23
Planning Closing ................................................................................................................. 24
Cost Center Budgeting ........................................................................................................ 25
Funds Commitments (Cost Centers, Internal Orders, Projects) ......................................... 26
Period-End Closing ............................................................................................................. 28
Cost Center Summarizations .............................................................................................. 31
Internal Orders.......................................................................................................................... 33
Master data in internal orders ............................................................................................. 35
Planning in Internal Orders ................................................................................................. 36
Manual Internal Order Planning ..................................................................................... 39
Periodic Reposting in Planning ...................................................................................... 40
Overheads...................................................................................................................... 41
Settlement ...................................................................................................................... 42
Budget Management ........................................................................................................... 43
Commitments Management ................................................................................................ 45
Period-End Closing in Internal Orders ................................................................................ 47
Periodic Repostings ....................................................................................................... 48
Overheads...................................................................................................................... 50
Internal Order Settlement............................................................................................... 51
Summarization .................................................................................................................... 52
PS Project System.................................................................................................................... 54
Master Data......................................................................................................................... 55
Standard WBS ............................................................................................................... 56
WBS Maintenance ......................................................................................................... 57
PS Text Management .................................................................................................... 58
Cost Planning ...................................................................................................................... 59
Manual Cost Planning in the Work Breakdown Structure.............................................. 60
Overheads...................................................................................................................... 62
Orders for Projects ......................................................................................................... 63
Budget Management ........................................................................................................... 64
Allocating the Original Budget........................................................................................ 66
Updating the Budget ...................................................................................................... 67
4 December 1999
Controlling
Releasing the Budget..................................................................................................... 69

Availability Control.......................................................................................................... 71
Actual Costs ........................................................................................................................ 72
Periodic Project Closing ...................................................................................................... 73
Periodic Transfer............................................................................................................ 74
Overhead Surcharges .................................................................................................... 75
Interest Calculation ........................................................................................................ 76
Project Settlement.......................................................................................................... 77
Cost Information System ..................................................................................................... 78
Information System................................................................................................................... 79
Information System ............................................................................................................. 80
Important Standard Reports in Cost Center Accounting..................................................... 81
Information system For Internal Orders .............................................................................. 82
Business Process Reports .................................................................................................. 83
Report Definition.................................................................................................................. 84
Activity-Based Costing.............................................................................................................. 86
Process Costs: Actual Postings .......................................................................................... 88
Master Data in the Activity-Based Costing Component ...................................................... 89
Business Process Planning................................................................................................. 91
Product Cost Controlling ............................................................................................................ 92
Product Cost Planning.............................................................................................................. 94
Material Cost Estimate with Quantity Structure................................................................... 99
Material Cost Estimate Without Quantity Structure........................................................... 100
Reference and Simulation Costing.................................................................................... 102
Price Update...................................................................................................................... 104
Cost Object Controlling........................................................................................................... 106
Product Cost by Period ..................................................................................................... 109
Product Cost by Order....................................................................................................... 113
Product Cost by Sales Order ............................................................................................ 116
Costs for Intangible Goods and Services.......................................................................... 120
Actual Costing / Material Ledger ............................................................................................ 122
Single-Level Material Price Determination ........................................................................ 123
Costing Run: Multilevel Actual Costing ............................................................................. 125
Price changes.................................................................................................................... 126
Multiple Currencies and Valuations for Materials.............................................................. 129
Product Cost Controlling Information System ........................................................................ 131
December 1999 5
Controlling
CO Component Short Description
6 December 1999
Controlling
Controlling
Purpose
Controlling provides you with information for management decision-making. It facilitates
coordination, monitoring and optimization of all processes in an organization. This involves
recording both the consumption of production factors and the services provided by an
organization.
As well as documenting actual events, the main task of controlling is planning. You can
determine variances [Ext.] by comparing actual data with plan data. These variance calculations
enable you to control business flows.
Income statements such as, contribution margin accounting, are used to control the cost
efficiency of individual areas of an organization, as well as the entire organization.
Integration
Controlling (CO) and Financial Accounting (FI) are independent components in the SAP system.
The data flow between the two components takes place on a regular basis.
Therefore, all data relevant to cost flows automatically to Controlling from Financial Accounting.
At the same time, the system assigns the costs and revenues to different CO account
assignment objects, such as cost centers, business processes, projects or orders. The relevant
accounts in Financial Accounting are managed in Controlling as cost elements [Ext.] or revenue
elements [Ext.]. This enables you to compare and reconcile the values from Controlling and
Financial Accounting.
Features
Cost and Revenue Element Accounting (CO-CEL)
Cost and Revenue Element Accounting provides you with an overview of the costs and revenues
that occur in an organization. Most of the values are moved automatically from Financial
Accounting to Controlling. Cost and Revenue Element Accounting only calculates costs which
either do not have another expense or only one expense in Financial Accounting.
If needed, reconciliation [Ext.] of the values in Financial Accounting and Controlling takes place in
Cost and Revenue Element Accounting.
For more information, see Cost and Revenue Element Accounting [Page 11].
Cost Center Accounting (CO-OM-CCA)

You use Cost Center Accounting for controlling purposes within your organization. It is useful for
a source-related assignment of overhead costs [Ext.] to the location in which they occurred.
For more information, see Cost Center Accounting [Page 18].
Activity-Based-Accounting (CO-OM-ABC)
Activity-Based Costing analyzes cross-departmental business processes. The goals of the whole
organization and the optimization of business flows are prioritized.
For more information, see Activity-Based Costing [Page 86].
December 1999 7
Controlling
Internal Orders (CO-OM-OPA)

You use internal orders to collect and control according to the job that incurred them. You can
assign budgets for these jobs, which the system monitors, to ensure that they are not exceeded.
For more information, see Internal Orders [Page 33].
Product Cost Controlling (CO-PC)

Product Cost Controlling calculates the costs that occur during manufacture of a product, or
provision of a service. It enables you to calculate the minimum price at which a product can be
profitably marketed.
For more information, see Product Cost Controlling [Page 94].
Profitability Analysis (CO-PA)

Profitability Analysis analyzes the profit or loss of an organization by individual market segments.
The system allocates the corresponding costs to the revenues for each market segment.
Profitability Analysis provides a basis for decision-making, for example, for price determination,
customer selection, conditioning, and for choosing the distribution channel.
For more information, see Profitability Analysis [Ext.].
Profit Center Accounting (EC-PCA)

Profit Center Accounting evaluates the profit or loss of individual, independent areas within an
organization. These areas are responsible for their costs and revenues.
Profit Center Accounting is a statistical accounting component in the SAP system. This means
that it takes place on a statistical basis at the same time as true accounting. In addition to costs
and revenues, you can display key figures, such as, Return on investment, working capital or
cash flow on a profit center.
For more information, see Profit Center Accounting [Ext.].
8 December 1999
Overhead Cost Controlling

Purpose
Overhead Cost Controlling component enables you to plan, allocate, control, and monitor
overhead costs. It is an important preparation for a strong profitability analysis, as well as for a
precise product costing.
By planning in the overhead area, you can specify standards that enable you to control costs and
evaluate internal activities.
All overhead costs are assigned to the cost centers where they were incurred, or to the jobs that
triggered them. The SAP system provides numerous methods for overhead allocation. Using
these methods you can allocate the overhead costs true to their origins. Some of the overhead
can be assigned to cost objects with minimum effort, and converted to direct costs.
At the end of a posting period, when all allocations have been made, the plan (target) costs are
compared with the corresponding actual costs, based on the operating rate. You can make a
source-based analysis of the resulting target/actual variances, and use the analyses for further
managerial accounting measures within Controlling.
Along with time-saving automatic allocations, the integration of Overhead Cost Controlling in the
SAP system environment minimizes entry of actual data and reduces the work involved in
planning.
Features
Overhead Cost Controlling is divided into the following areas.
Cost and Revenue Element Accounting

Cost and Revenue Element Accounting details which costs and revenues have been incurred.
Accrual is calculated here for valuation differences and additional costs. Cost Accounting and
Financial Accounting are also reconciled in Cost Element Accounting. This means that the tasks
of Cost and Revenue Element Accounting stretch beyond the bounds of Overhead Cost
Controlling.
Cost Center Accounting

Cost Center Accounting determines where costs are incurred in the organization. To achieve this
aim, costs are assigned to the subareas of the organization where they have the most influence.
By creating and assigning cost elements to cost centers, you not only make cost controlling
possible, but also provide data for other application components in Controlling, such as Cost
Object Controlling. You can also use a variety of allocation methods for allocating the collected
costs of the given cost center/s to other controlling objects.
Internal orders
Overhead Orders are internal orders used either to monitor overhead costs for a limited period,
or overhead incurred by executing a job, or for the long-term monitoring of specific parts of the
overhead. Independently of the cost center structure, internal orders collect the plan and actual
costs incurred, enabling you to control the costs continuously. You can also use internal orders to
control a cost center in more detail. You can assign budgets to jobs. These budgets are then
monitored automatically by the SAP system to ensure that they are kept to.
December 1999 9
Activity-Based Costing
In contrast to the responsibility and function-oriented basis of Cost Center Accounting, Activity-
Based Costing provides a transaction-based and cross-functional approach for activity output in
which several cost centers are involved. The emphasis is not on cost optimization in individual
departments, but the entire organization.
By allocating process quantities based on cost drivers, rather than using overhead calculation,
cost allocation along the value chain is more source-based. Activity-Based Costing enables you
to cost products more accurately in the overhead areas.
10 December 1999
Cost Element Accounting
Cost Element Accounting

Purpose
Cost Element Accounting [Ext.] is that part of cost accounting involved in the recording and
classification of the costs incurred during a given settlement period. It is thus not an accounting
system as such, but rather a detailed recording of data that forms the basis for cost accounting.
Integration
In an integrated accounting system such as the SAP System, you do not need to carry out
complicated entry of cost data. This is because each business transaction relevant to cost
accounting provides the (CO) component with detailed information concerning both the cost
element [Ext.] and the account assignment object itself. Each consumption transaction in Material
Management (MM), each billing in Sales and Distribution (SD) (= revenue), and each external
transaction for invoice verification flows directly through the G/L account [Ext.] (= cost element) to
the corresponding account assignment object.
Features
You can restrict the entry of cost data to a part of the Outlay Costs [Ext.] and Additional Costs
[Ext.]. While, for example, you can transfer depreciation costs from Asset Accounting for the
depreciation of fixed assets, you must use accrual calculation in cost accounting for management
income.
The Controlling (CO) component also has the task of identifying which costs occurred in what
subareas of an organization, and which the cost flows took place. The system provides a
complete display of the costs for all types of account assignment objects (such as cost centers,
orders, projects, and so on).
For cross-company-code or cross-business-area cost accounting, the cost flow within Controlling
may require reconciliation between internal and external accounting. The necessary
reconciliation is also one of the tasks of Cost Element Accounting.
December 1999 11
Cost Elements
Cost Elements
Definition
Cost elements classify an organization’s valuated consumption of production factors within a
controlling area [Ext.]. A cost element corresponds to a cost-relevant item in the chart of
accounts [Ext.].
Structure
We distinguish between primary cost [Ext.] and revenue elements [Ext.] and secondary cost
elements [Ext.].
Primary Cost/Revenue Elements

A primary cost or revenue element is a cost or revenue-relevant item in the chart of accounts, for
which a corresponding general ledger (G/L) account exists in Financial Accounting (FI). You can
only create the cost or revenue element if you have first defined it as a G/L account in the chart
of accounts and created it as an account in Financial Accounting. The SAP System checks
whether a corresponding account exists in Financial Accounting.
Examples of primary cost elements include:

• Material costs
• Personnel costs
• Energy costs
Secondary Cost Elements

Secondary cost elements can only be created and administrated in cost accounting (CO). They
portray internal value flows, such as those found in internal activity allocation, overhead
calculations and settlement transactions.
When you create a secondary cost element, the SAP System checks whether a corresponding
account already exists in Financial Accounting. If one exists, you can not create the secondary
cost element in cost accounting.
Examples of secondary cost elements include:

• Assessment [Ext.] cost elements
• Cost elements for Internal Activity Allocation [Ext.]
• Cost elements for Order Settlement [Ext.]
Integration
Cost elements in Controlling (CO) are closely related to the general ledger accounts used in
Financial Accounting (FI). This is because the SAP System is structured as an Integrated
Accounting System [Ext.]:
12 December 1999
Cost Elements
Cost elements document which costs (differentiated by category) are incurred within a settlement
period, and in which amount. They provide information concerning the value flow and the value
consumption within the organization. Cost Element Accounting and Cost Center
Accounting/Internal Orders are closely linked in the SAP System. Each posting to an account that
is also a cost element, is assigned either to a cost center or order. This ensures that at period-
end the data is subdivided by cost elements and cost centers/internal orders for analysis
purposes. The following section describes how you can subdivide and characterize cost
elements in the SAP System.
Cost element characteristics depend on the controlling area and the allocation
methods used in your organization.
December 1999 13
The Reconciliation Ledger
The Reconciliation Ledger

Definition
The reconciliation ledger represents a summarized display of data, which is represented in more
detailed form in the CO transaction figures.
Use
The reconciliation ledger has the following tasks:
• It reconciles Controlling with Financial Accounting.
− It provides reports with which you can control the CO/FI reconciliation for each
account.
− It can determine and display value flows that were posted in Controlling across
company code, functional area or business area borders.
− You can this value flow in Financial Accounting as the basis for summarized clearing
entries. Clearing entries represent value flows within Controlling that have an effect
on the legal closing of an organization (balance sheet, profit and loss account). You
can either enter the clearing entries using the values determined or let the system
execute them automatically.
• It provides an overview of all the costs incurred.
− The reconciliation ledger reports provide a suitable starting point for the analysis of
the costs incurred. For example, in the reconciliation ledger reports you can
investigate an item of the Profit and Loss Account, which is displayed in the Financial
Information System (FIS), with regard to the costs assigned. For a more detailed
analysis, you can use the reconciliation ledger reports to call up reports from other
CO components.
14 December 1999
Activity Types
Activity Types
Definition
Activity types classify the activities produced in the cost centers within a controlling area [Ext.].
Use
To plan and allocate the activities, the system records quantities, which are measured in activity
units. Activity quantities are valuated using a price (allocation price).
In Overhead Cost Controlling, costs based on the activity quantity of an activity type are posted
separately in fixed and variable portions. When you divide the activities of a cost center into
activity types, you should consider whether the costs can be allocated effectively to the activity
types.
The prices of the activity types of a cost center can be either entered manually, or calculated by
the system based on the costs allocated to the activities. Prices can be calculated either on the
basis of plan costs or actual costs.
You can plan, allocate, and control costs either at the activity type level of a cost center, or at the
cost center level. You can only enter actual costs at the cost center level. Costs entered at the
cost center level are assigned using actual cost splitting [Ext.].
When the activities produced by a cost center are used by other cost centers, orders, processes,
and so on, this means that the resources of the sending cost center are being used by the other
objects.
Integration
You can assign one activity type, multiple activity types, or no activity types to a cost center.
Typical examples of activity types for cost centers are machine hours, administrator
hours, CPU minutes or units produced.
December 1999 15
Statistical Key Figures

Definition
Figure representing
• Cost Centers [Ext.]
• Activity Types [Ext.]
• Orders [Ext.]
• Business Processes [Ext.]
• Profit Centers [Ext.]
• Real Estate Objects [Ext.]
You can use them as the basis for internal allocations, such as Distribution [Ext.] and
Assessment [Ext.].
You assess the costs for the cafeteria to the individual cost centers, based on the
number of employees in each cost center. To do this, you need to enter the number
of employees in each cost center as a statistical key figure.
Structure
You can define statistical key figures as either:
• Fixed values
• Totals values
Key figures defined as fixed values are valid as of the posting period, and in all subsequent
posting periods of the fiscal year.
The statistical key figure Employees is defined as a fixed value. In period 1 of the
fiscal year, you post 10 Employees on cost center 4100. The system then
automatically posts 10 employees in periods 2 through 12.
In period 6, the number of employees is increased to 15. This means that in period 6,
you post 15 Employees on the cost center. The system automatically posts 15
employees in periods 6 through 12.
Key figures defined as Totals values are valid only in the posting period in which they are
entered.
You define the statistical key figure Telephone units as a totals value. In period 1 of
the fiscal year, you post 1000 Telephone units on cost center 4100. The system
posts 1000 telephone units in period 01 only.
16 December 1999
Integration
As well as entering statistical key figures manually, you can also transfer them automatically from
the information systems of other SAP System application components. To do this, statistical key
figure maintenance includes an interface that enables you to link the statistical key figures in
Controlling with those in the Logistics Information System (LIS). You transfer plan and actual key
figures from the LIS separately.
December 1999 17

Purpose
You use Cost Center Accounting for controlling purposes within your organization. The costs
incurred by your organization should be transparent. This enables you to check the profitability of
individual functional areas and provide decision-making data for management. This requires that
all costs be assigned according to their source. However, source-related assignment is especially
difficult for overhead costs. Cost Center Accounting lets you analyze the overhead costs
according to where they were incurred within the organization.
Depending on the level of decision-making powers assigned to the manager of an organizational

unit, you can distinguish between various types of responsibility areas within an organization:
Cost center Recording costs with reference to plan values

Profit centers Calculating operating results
Investment centers Calculating Return On Investment
In the SAP System you can create an investment center in the
Profit Center Accounting component (EC-PCA). You do this by
assigning balance sheet items to a profit center.
Dividing an organization into cost centers allows you to follow several goals, depending on the
cost accounting method.
• Assigning costs to cost centers lets you determine where costs are incurred within the
organization.
• If you plan costs at cost center level, you can check cost efficiency at the point where costs
are incurred.
• If you want to assign overhead costs accurately to individual products, services, or market
segments, you need to further allocate the costs to those cost centers directly involved in the
creation of the products or services. From these cost centers you can then use different
methods to assign the activities and costs to the relevant products, services, and market
segments.
This enables you to valuate semi-finished and finished products in Product Cost
Controlling (CO-PC), and to calculate contribution margins in Profitability Analysis (CO-
PA).
The “activities” of cost centers represent “internal resources” for business processes in
Activity-Based Costing.
Implementation
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).
You can also implement Cost Center Accounting without Financial Accounting. Some settings,
however, such as chart of accounts, company code, must be made in Financial Accounting.
18 December 1999
Integration
The costs of each cost-accounting-relevant business transaction portrayed in the R/3 System
through can be assigned through Cost and Revenue Element Accounting (CO-OM-CEL) to an
account assignment object in the Controlling component (CO). For overhead costs this can be
cost centers, internal orders, business processes, or overhead projects.
Recording and assigning overhead costs allows you to control costs and prepare information for
the subsequent areas of Cost Accounting.
You can use the methods of activity allocation, assessment or distribution to further allocate
costs, for example, to internal orders (CO-OM-OPA), projects (PS), cost objects (CO-PC) or
market segments (CO-PA).
Features
Entering actual costs
Primary costs can be transferred to Cost Accounting from other components, for example,
Materials Management (MM), Asset Accounting (AA), Payroll Accounting (PY).
Additional costs and outlay costs are recorded using the accrual method.
Allocating actual costs

You can use various methods to further allocate the actual costs you have recorded, according to
their source. The R/3 System distinguishes between transaction-based allocations, which occur
within one period, and period-based allocations, which occur at period end.
Planning activities and costs

You can use planning to define organizational targets and carry out regular cost-effectiveness
checks. Variances can be calculated by comparing the actual costs and activities with the plan
values. These variances serve as a control signal, which helps you to correct business
processes, when required.
You can plan costs and activities to determine allocation (activity) prices.
Allocating plan costs

All actual allocations that occur for cost centers can also be planned (for example, distribution,
assessment, indirect activity allocation).
Entering plan and actual statistical key figures

Statistical key figures are used as the basis for the indirect allocation methods, as well as for
evaluations in the information system (for example, employees, telephones).
Activity Accounting
Activity Accounting uses the activity produced by a cost center as the tracing factor for the costs.
You can use activities to measure the operating rate or the rate of capacity utilization for a cost
center. The target costs of the cost center refer to the activity output.
Depending on the source of the costs, the activities of a cost center are divided into various
activity types (for example, for the Work center cost center: Repair hours or Assembly hours.
December 1999 19
Information system
The information system provides tools with which you can analyze the cost flows that have
occurred in your organization. You can carry out standard recurring evaluations; and create
special reports for unique tasks or situations.
Constraints
Note that you can only post revenues statistically on cost centers. The true posting must
occur on a revenue-carrying object. This could be, for example, a revenue-carrying order (see:
Account Assignment for Controlling Objects [Ext.]).
20 December 1999
Master Data in Cost Center Accounting

Purpose
Master data determines the structure of the given application component in the SAP System and
remains essentially unchanged in a live system, that is, in the current settlement periods.
The cost center structure can reflect the structure of your organization. It generally
remains constant over long periods. You can execute cost center planning to reflect
your cost center structure and generate periodic cost center and area reports, which
can be passed on to the person responsible for analysis. These reports help identify
economic weaknesses and planning errors in individual cost centers. In order to
compare results effectively, you should not make changes to this data.
You generally maintain master data once, before the start-up of Cost Center Accounting. You
can do this manually or by transferring data from non-SAP systems using the appropriate user-
defined interface programs.
Master data for Cost Center Accounting is stored in master data tables.
Integration
In the SAP System we distinguish between:
• Master data
• Transaction data
Transaction data can be subdivided into:
• Totals data
• Line items
Transaction data is business transaction-oriented data that you can continuously create or
change in a live system.
You store transaction data for Cost Center Accounting in line item tables and totals tables.
The R/3 System saves the results of individual postings and business transactions in line item
tables. These include postings from external accounting systems, which are found both in
Financial Accounting (FI) and in the line item table for primary costs. The following postings are
recorded in this way:
• Postings of primary costs in the Financial Accounting (FI)
• Material withdrawals from Materials Management (MM)
• Postings generated during distribution
In these cases, the data is held redundantly in the system. This is necessary, however, as
external and internal accounting evaluate the data from different perspectives. External
accounting (Financial Accounting) requires the complete document for evaluations, whereas
internal accounting (Controlling) differentiates between primary and secondary costs.
Transaction data also includes postings within Controlling (CO). These postings are made either:
December 1999 21
• Using the original cost element (reposting, distribution) or

• Using a secondary cost element (assessment, internal activity allocation).
All postings are stored in the line item table for secondary data.
The sum of the line items for each cost element is updated in the totals tables, which are also
split into primary and secondary postings. Totals tables represent a summarization of the line
items tables. You can access these tables in the information system during cost center/cost
element analysis, as well as in line item reports.
22 December 1999
Cost Center Planning
Cost Center Planning

Purpose
Cost center planning involves entering plan figures for costs [Ext.], activities [Ext.], prices [Ext.] or
statistical key figures for a particular cost center and a particular planning period. You can then
determine the variances from these figures when you come to compare these plan values with
the costs actually incurred. These variances (see: Variance Calculation [Ext.]) serve as a signal
to make the necessary changes to your business processes.
Cost center planning forms part of the overall business planning process, and is a prerequisite for
standard costing. The main characteristic of standard costing is that values and quantities are
planned for specified timeframes, independently of the actual values from previous periods.
You can take plan costs and plan activity quantities to determine the (activity) prices. These
prices can be used to valuate internal activities during the ongoing period, that is, before the
actual costs are known.
Cost center planning has the following objectives:
• To plan the structure of the organization’s future operations for a clearly defined time period.
You should define performance targets and target achievement grades. You must
consider the internal and external (market) factors affecting your organization.
• To control business methods within the current settlement period.
This ensures that you keep as closely as possible to the plan. Iterative planning lets you
adapt the target performance to reflect any changes in the organizational environment.
• To monitor efficiency after completion of the settlement period using plan/actual or target/actual
comparisons.
• To provide a basis for the valuation of organizational activities, independent of random
fluctuations.
For more information, see:
Short-Term Organizational Planning [Ext.]
Reconciliation of Cost Center Planning With Other Applications [Ext.]
December 1999 23
Planning Closing
Planning Closing
Definition
After the end of the period halts plan postings for the corresponding period, “planning closing”
encompasses the execution of period-based business transactions, such as
• Distribution
• Assessment
• Imputed cost calculation
• Indirect activity allocation
• Activity price calculation
24 December 1999
Cost Center Budgeting
Cost Center Budgeting

Definition
"Cost center budgeting” constructs a cost frame for a cost center or cost center group within a
specific period. Budgeting differs from cost planning in its compulsory nature: Whereas, in the
planning phase, costs must be guessed at as accurately as possible, funding is set in the
approval phase in the form of a budget.
Selection criteria
Cost center budgeting is a further planning instrument along with primary and secondary cost
planning, allowing the option of comparing the sum of actual postings with the budgets as
planned. Budget overruns can be identified and availability controls undertaken via the
information system. Budget planning is made for an individual cost center or for a larger cost
center group. A budget report illustrates the comparison of plan, commitment, and actual data
(taken from actual postings) in addition to the requisitioned and available amounts.
December 1999 25
Funds Commitments (Cost Centers, Internal Orders, Projects)
Funds Commitments (Cost Centers, Internal Orders,

Projects)
Use
You can use the funds commitment function to enter expected costs or revenues at times when
you know that they will arise, but do not know what will cause them. This means you can reserve
parts of the budget in advance.
You can assign funds commitments to internal orders, cost centers, or projects.
Integration
Funds commitments assigned to WBS elements, networks, or internal orders are subject to
active budget availability control. The funds commitment checks whether the available budget is
still sufficient. Account is taken of tolerance limits defined above and below the budget.
For more information, read Availability Control [Ext.] .
The funds commitment appears as a commitment in the information system for the account
assignment object. For more information, see CO Commitment Management [Page 45].
You can archive the funds commitment documents. See CA - Archiving Application Data [Ext.].for
details.
Prerequisites
To process funds commitments, you need the appropriate authorization from authorization object
K_KMOB_DCT for each document type.
Features
Funds commitments involve the following individual activities:
• Create funds commitment [Ext.]
You enter the funds commitment as a reservation document. The reservation document
contains the following:
− The reservation document header contains data that applies to the whole document.
− At least one funds commitment item which contains the actual funds commitment
information.
• Change funds commitment [Ext.]
You can change the existing reservation amount and add more items to the funds
commitment.
• Reduce funds commitment [Ext.]
When you reduce the funds commitment manually, you enter the reduction amount for a
funds commitment item. You determine the reduction amount based on the amount still
open. This is calculated by determining the difference between the reservation amount
and the total of the partial amounts already reduced. You may not reduce the reservation
by more than the amount still open.
26 December 1999
Funds Commitments (Cost Centers, Internal Orders, Projects)
− Reducing Funds Commitments Individually

You can reduce the items in one funds commitment by specifying the number of the
relevant document.
− Reducing Several Funds Commitments at Once
You can select the funds commitment items you want to reduce from a list.
• Call up reduction history [Ext.]
− Reduction reference
In the reduction history, you can specify reduction references to an existing
commitment reduction (a document, such as an order or purchase order, which has
brought about costs or will bring them about).
• To enter reduction references for reduction documents already entered, go to the
reduction history and choose Edit → Reduction references.
• To enter reduction references for the current reduction document, choose Extras →
Reduction references in the list screen or detail screen.
− Canceling reduction postings
You can cancel individual reduction postings. Select the relevant reduction document
and choose Cancel. The document is then flagged as canceled in the CAN column.
• Evaluating Funds Commitment Documents in the Information System [Ext.]
December 1999 27
Period-End Closing
Period-End Closing
Purpose
Period-end closing in Overhead Cost Controlling is part of the work carried out at period-end
throughout the entire organization.
The tasks required at period-end, and the sequence in which they must be carried out, depend on
what system functions you use and which cost accounting method. This topic describes the basic
elements of period-end closing. The explanations assume that you are using all the features
available.
Implementation Considerations
Before you can close a period in Overhead Cost Controlling, the data transferred to this
component from other application SAP System components must be complete. In particular, all
postings in Financial Accounting (FI) that are relevant to Cost Accounting must have been carried
out.
This means, for example, that:
• Payroll accounting must have taken place in Personnel Management (PA).
• In Sales and Distribution (SD), all the invoices have been created and passed on to Financial
Accounting.
• The vendor and customer accounts have been locked against postings in the period to be
closed.
You are not allowed to lock all accounts, as period-end closing in Overhead Cost
Controlling sometimes requires postings to be made Financial Accounting.
Features
Transferring of Statistical Key Figures from the LIS
To ensure that all primary costs and revenues from other components have been posted to
Overhead Cost Controlling, it is advisable to start by updating the statistical key figures.
Statistical key figures are used as the basis for allocations. This update can occur, for example,
through a transfer of the key figures from the Logistics Information System (LIS).
Periodic Repostings/Accrual Calculation

After this, you use repostings [Ext.] to adjust any values that are incorrect or had been posted to
allocation cost centers for reasons of simplification. Then the primary costs are distributed
according to their source. The primary costs can now be used as the basis for the accrual
calculation [Ext.] of valuation differences and additional costs.
28 December 1999
Period-End Closing
Periodic Allocations
Secondary allocations then occur. Using the appropriate allocation or settlement method, the costs
are allocated between the business objects of Overhead Cost Accounting and to the cost objects of
Product Cost Controlling (CO-PC).
Splitting
When all the costs have finally been assigned to the cost centers, you use splitting [Ext.] to
assign the activity types to the cost centers. This is the basis for calculating the prices of the
activity types based on actual costs. Using the actual prices, you can perform an actual price
valuation of the activity produced by the cost centers.
Variances
After splitting you can analyze the variances [Ext.] of the actual costs from the target costs.
These variances lead to cost center under- or over-absorption. The variances of the production
cost centers and the costs of the sales and distribution and the administration cost centers are
transferred to Profitability Analysis (CO-PA). In CO-PA, the overhead costs can be assigned to
any level of the contribution margin scheme. This is the final step in actual cost accounting. You
should now lock the period against all postings.
Reconciliation with Financial Accounting

If there is a need for reconciliation between Controlling and Financial Accounting, the relevant
allocations are made in FI using the reconciliation posting [Ext.].
The system then lists the period-end closing tasks in a logical sequence:
1. Transfer of statistical key figures from the Logistics Information System (LIS)
2. Periodic reposting of costs from allocation cost centers
3. Distribution [Ext.] of primary costs
4. Accrual calculation of accrued costs
5. Indirect internal activity allocation [Ext.]
6. Allocation of process costs.
7. Overhead Calculation [Ext.]
8. Settlement of overhead orders and projects
9. Assessment [Ext.] of primary and secondary costs
10. Balance-effective settlement of orders to fixed assets, material stock or the balance sheet
account
11. Assignment of actual costs to the activity types by means of splitting
12. Calculating prices of cost centers activities or business processes, based on the actual costs
13. Calculation and analysis of the variances between target and actual costs
14. Assessment to Profitability Analysis of the under or over-absorption for the cost centers or
business processes
15. Locking the period for all cost accounting business transactions
16. Generating reconciliation postings in Financial Accounting
December 1999 29
Period-End Closing
Follow-up costs can be dealt with by repeating the processing for the given period.
30 December 1999
Cost Center Summarizations

Purpose
Cost center summarization [Ext.] enables you to condense transaction data [Ext.] on the cost
center group level in the Cost Center Accounting component (CO-OM-CCA). The R/3 System
updates the summarized data of a cost center group in its own data record in the summarization
table.
You can access this data in the information system. This improves performance in the
Information system.
When you execute summarization, the R/3 System progresses from the lowest hierarchy area in
a cost center group to the highest. For technical reasons, every node in a cost center group must
have a representative cost center assigned during master data maintenance (see:
Representative Cost Centers [Ext.]).
Summarization makes totals records available for Report-Painter [Ext.] reports. This has the
advantage of making the report runtime significantly shorter, depending on the degree of
summarization, than with use of the totals records from the subordinate cost centers.
To evaluate the summarization data, you must create custom reports. The R/3 System includes
sample reports in the 1RU library [Ext.]
You should consider carefully whether to generate an extract [Ext.] of the report data or execute
a summarization. Summarizations generate a far more data than extract generation does (see:
Executing Report-Painter Report [Ext.]).
• If you only need a few reports, we recommend you periodically save the reports in the
background for the entire cost center hierarchy and access the extracts afterwards online
(see: Variation [Ext.]). This spares you the repeated definition of new summarization
reports.
• You use summarization if you wish to access a large number of reports (including those
defined spontaneously) within the entire the cost center hierarchy.
Features
You create summarizations during Customizing in the Implementation Guide (IMG) for the
highest group node of a cost center group. This can be the highest group node of:
• The standard hierarchy
• An alternative hierarchy
Summarization carried out within the application framework can also be used:
• For as many subareas of the hierarchy as desired
• For individual periods
In both cases, note during the evaluations afterward that data with differing degrees of relevance
is included within a summarization.
Several forms of summarization are possible:
December 1999 31
• Normal summarization applies to the object information, meaning the R/3 System
replaces the cost center in the totals records with the representative cost center given for
the cost center group. The degree of summarization depends on the data constellation,
in particular that of the secondary allocations.
• You can achieve a much higher degree of summarization by ignoring selected data. If,
for example, you wish to generate the cost structure for the entire corporation in strategic
reporting, you can leave out information on partner updating. This results in far faster
runtimes for the evaluations.
32 December 1999
Internal Orders
Internal Orders
Purpose
Internal orders are normally used to plan, collect, and settle the costs of internal jobs and tasks.
The SAP system enables you to monitor your internal orders throughout their entire life-cycle;
from initial creation, through the planning and posting of all the actual costs, to the final
settlement and archiving:
Order management within a company usually differentiates between sales-oriented orders, and
internal orders. Sales-oriented orders (production or sales orders) are intended mainly for the
logistical control of input factors and sales activities. Internal orders are categorized as either:
• Orders used only for monitoring objects in Cost Accounting (such as, advertising or trade fair
orders)
• Productive orders that are value-added, that is, orders that can be capitalized (such as in-
house construction of an assembly line).
Internal order management is the most detailed operational level of cost and activity accounting.
It can be used for:
• Cost monitoring, for example, where costs need to be looked at from object-related
aspects, unlike in Cost Element Accounting or Cost Center Accounting
• Assisting decision-making, when you need to decide between in-house production and
external procurement
An enterprise’s internal orders can be used for different controlling purposes. For more
information, see Classified by Controlling Objectives [Ext.].
Features
• You can use master data [Page 35] to assign certain characteristics to your internal orders,
which enables you to control which business transactions can be used with the internal order.
• Internal order planning [Page 36] enables you to roughly estimate the costs of a job before
the order starts and to make an exact calculation at a later date. You can choose between
various planning approaches to compare the effectiveness of different methods.
• You can assign and manage budgets [Ext.] for internal orders.
• You apply the actual costs incurred by a job to your internal orders using actual postings
[Ext.]. In Financial Accounting, you can assign primary cost postings (such as the
procurement of external activities and external deliveries) directly to internal orders.
• In period-end closing [Page 47] you can use various different allocation methods (for
example, overhead costing) to allocate costs between different areas of Cost Accounting.
Order settlement [Page 51] enables you to transfer the costs incurred by an order to the
appropriate receivers.
• The information system for internal orders [Page 82] enables you to track planned and
assigned costs on your orders in each stage of the order life-cycle.
December 1999 33
Internal Orders
• You can archive internal orders that you no longer require. See Archiving [Ext.].
34 December 1999
Master data in internal orders
Master data in internal orders

Purpose
Master data [Ext.] is partly used for system-technical purposes, and partly for business purposes.
It either does not change at all, or only insignificantly during the life of an internal order.
You use the master data to define the attributes of an internal order, such as:
• Its purpose (using the Order Type [Ext.])
• The processing possibilities (using Status Management [Ext.] and the allowed or prohibited
Business Transactions [Ext.] per status)
Features
For more information on the classification of order master data, see Structuring the Order Layout
[Ext.].
You can print master data for internal orders, using forms adaptable to your needs. For more
information, see the implementation guide (IMG), under Controlling →=Internal Orders →==Order
Master Data=→=Prepare for Order Printing [Ext.].
See also:
Creating an Internal Order [Ext.]
December 1999 35
Planning in Internal Orders

Purpose
During internal order planning, you enter costs, activities and business processes that you expect
to incur during the life cycle of an order. Using internal order planning, you can compare plan and
actual costs, and carry out a differentiated variance analysis.
You can plan individual internal orders and groups of orders with the same order type (see also:
Order Groups [Ext.].
Unlike cost center planning, you can plan overhead rates on internal orders (except
for statistical orders) as well as overheads.
Cost planning is performed mostly on internal orders with long durations. You do not usually plan
internal orders that only exist for a very short period (such as, internal orders for unexpected
small repairs). You can plan order costs in more than one version and using various planning
forms, depending on when you are planning and the information available.
Integration
You can manage the approved cost framework for an internal order or an order group using
Budget Management [Ext.].
Features
The SAP system provides you with a range of planning functions for the processing of internal
orders covering the different levels of planning detail required at different stages of order
execution:
Integrated Planning
Integrated Planning for Internal Orders [Ext.] allows you to settle internal order plan data to cost
centers or business processes. You can then transfer them to Profit Center Accounting and the
General Ledger. To do this, you should note the difference between:
• Plan-Integrated Internal Orders
Plan-integrated internal orders enable you to plan cost elements and activity inputs
integrated with cost centers and business processes in a plan version. The system
updates plan allocations directly to the cost center or the business process. You can
settle plan integrated internal orders to cost centers and business processes in the plan.
You then transfer the plan data to Profit Center Accounting and the Extended General
Ledger.
• Non-Plan-Integrated Internal Orders
You can only plan costs and activities locally on non-plan-integrated internal orders.
There is no scheduling on the performing cost centers or business processes. You
cannot execute a plan settlement of these orders to cost centers and business
36 December 1999
processes. Neither can you transfer the data to Profit Center Accounting or the General
Ledger.
Planning in More Than One Plan Version

Information on an internal order changes constantly during the planning phase. This means it
may be necessary to plan an internal order in more than one version. This corresponds to the
planning process in normal business practice. You can plan internal orders in as many versions
as you wish.
These individual plan versions can be:
• Stored separately in the system
• Changed
• Copying (see also: Copy Versions [Ext.])
• Compared using the reports available in the information system (for example, plan/plan
comparisons, comparisons between actual costs and the various plan versions). So for
example, you can use this to compare best and worst-case planning scenarios.
Types of Planning
• Manual Internal Order Planning [Page 39]
Activity-dependent or activity independent planning of both primary and secondary costs,
which occur as a result of activity input.
• Overall Planning for Internal Orders [Ext.]
• Unit Costing [Ext.]
• Primary Cost and Revenue Planning [Ext.]
• Planning Activity Input [Ext.]
• Planning Statistical Key Figures [Ext.]
• Planning Allocations [Ext.]
Automatic internal order planning of the allocations made at period-end closing.
• Periodic Reposting in Planning [Page 40]
• Planning Overhead Rates [Ext.]
• Planned Settlement for Internal Orders [Ext.]
• Allocations from Cost Centers [Ext.]
Planning of allocations that occur during period-end closing from cost centers to orders.
Period-End Closing
In period-end closing, you can debit an order in version 0 using overhead, assessments or
distribution. You can also execute a periodic reposting of plan-integrated internal orders. You do
this by debiting or settling indirect activity allocation.
Planning Documentation
You can record changes to internal order planning in planning documents. You normally do so for
changes in a plan that has already been approved. You use the Write plan line items activity,
December 1999 37
which you allow by setting an appropriate user status (see also: Status Management for Internal
Orders [Ext.]) to define whether and from which status planning documents are written.
38 December 1999
Manual Internal Order Planning
Manual Internal Order Planning

Purpose
Activity-dependent or activity independent planning of both primary and secondary costs, which
occur as a result of activity input.
Integration
The various types of planning are only possible if the relevant business transactions are
permitted.
Features
These planning types are not mutually exclusive, but you can also use them in a combination.
Depending on the information status, you use one or more of the planning types listed below.
This means that for certain parts of an internal order, you can use unit costing or cost element
planning, while roughly estimating the costs of the other parts of the order using overall planning.
Function Use See also:
Overall planning Overall planning is the simplest way of planning Overall Planning
costs on internal orders. This type of planning does [Ext.]
not depend on cost elements. You can use it to
plan overall and annual values for an internal order.
Unit costing If you have access to more information on sources Unit Costing [Ext.]
planning of supply, quantities and prices, you can perform
unit costing taken from the overall planning.
Cost/revenue You use these types of planning when you have Primary Cost and
element and detailed information on costs. Each planning type is Revenue Planning
activity input carried out for one year and covers cost-element- [Ext.]
planning related planning of primary costs, revenues and
Planning Activity
activity inputs.
Input [Ext.]
If more than one currency is permitted within your
controlling area, the system will propose a value
date each time you use cost element planning. You
can overwrite this date if required.
Planning You can plan statistical key figures in order to Planning Statistical
statistical key calculate the business-related key figures in orders. Key Figures [Ext.]
figures
December 1999 39
Periodic Reposting in Planning
Periodic Reposting in Planning

Use
Periodic reposting enables you to correct internal orders. Periodic reposting affects the plan costs
at the period end.
Features
At the period end, the costs (first collected on a costs collector, such as an order, or cost center)
are reposted to the corresponding receivers, using keys (internal order, cost center). The
following data remains unchanged:
• The original cost element (primary cost element or revenue cost element)
• The accounting proof of origin
For more information on this subject, see Periodic Reposting [Page 48] in cost center planning.
You can execute periodic repostings of costs on internal orders, regardless of the version
in the plan, if you activated integrated planning of internal orders with Cost Center
Accounting (see also Indicator for Integrated Planning in the Version [Ext.]).
40 December 1999
Overheads
Overheads
Purpose
You use overhead costing to allocate overhead through percentage-based or quantity-based
overhead rates. The basis for the allocation are the primary cost elements that you post as
overhead costs. In the manufacturing industry, for example, these are usually the labor and
material costs.
Integration
To make an overhead costing, you need to define control data in customizing for the
corresponding application, and include this in a Costing sheet [Ext.].
Features
You can apply overhead to both plan and actual costs, or on the basis of commitment data.
Business processes do not use commitments.

If you debit a cost center with overhead rates, then they also apply to all the activity
types in this cost center.
You can make an overhead costing:
• For one or several objects
• Without updating the calculated overheads, for test and forecasting purposes
Constraints
You start Overhead Calculation [Ext.] using its own transaction. This means that you cannot carry
out transaction-based overhead calculation.
December 1999 41
Settlement
Settlement
Purpose
The SAP components all handle settlement of business objects using the same settlement logic.
During settlement, some or all of the plan or actual costs incurred on an object are allocated to
one or more receivers. The system automatically generates offsetting entries to credit the sender
object. The debit postings assigned once to a sender object remain in place, even after
settlement to a receiver (and can therefore be displayed). The costs settled are updated on the
corresponding receiver object and displayed in reporting.
Settlement occurs in parallel in all valuations, with the exception of settlement to

fixed assets and profitability segments. For the settlement to fixed assets, the system
takes the amount used in legal valuation. The system moves back the operational
valuation for the settlement to the profitability segment. The following graphic shows
how the system debits the order with this amount in all valuations:
IM Settlement AA
to fixed asset
Investment order
Valuation areas
L 50.- Curr. type Area
K (40.-) 50.- 01 01
P (60.-) 50.- 11 31
50.- 21 32
A line item settlement to a fixed asset is only possible, if the legal valuation is the
operational valuation.
For more information on settlement of investment measures, see IM - Investment Management
[Ext.] in the Investment Measures (Orders/Projects), Settlement functions, Settlement sections.
42 December 1999
Budget Management
Budget Management
The budget is the approved cost structure for a project.
It differs from project cost planning in that it is binding. While you must estimate costs as
accurately as possible during the planning phase, it is in the approval phase that you prescribe
your project funds, in the form of a budget. The budget is the device by which the management
approves the expected development of project costs over a given timeframe.
Budget Allocation
Submitted Approved
budget budget
Cost planning Budgeting
Budget
Total planned costs
Top-down
Bottom-up distribution
summation
The Project System recognizes the following different budget types:
• Original budget
The original budget is the budget originally allocated - that is, the budget before any updates
were carried out. From a point in time which you stipulate, it can only be amended by means
of budget updates.
• Budget updates
Unforeseen events, additional requirements, prices rises, and so on, may mean that you
need to correct the original budget - that is, budget updates are necessary. These take the
form of:
– Supplements
– Returns
– Transfers
• Current budget
The current budget is calculated as follows:
Original budget
+ Supplements
- Returns
December 1999 43
Budget Management
+/- Transfers
= Current budget
• Releases
In many businesses, budget distribution is not the same as releasing the funds. For this
reason, the Project System includes a separate funds release facility, which you can use to
make successive budget releases. The release is based on the current budget - that is, the
original budget as amended by budget updates.
This section describes:
• The prerequisites for budget allocation [Ext.]
• How you allocate the original budget [Page 66] in a project
• How you can carry out budget updates [Page 67] in the form of supplements, returns,
and transfers
• How you release the budget [Page 69]
44 December 1999
Commitments Management
Purpose
CO Commitments Management enables you to enter and analyze commitments [Ext.] at an early
stage, and thus to account for them in controlling.
Purchase orders or purchase requisitions lead to financial commitments with varying degrees of
obligation (See also: Commitments Management Flow [Ext.]). Commitments reserve funds for
costs that will be incurred at a future date. Therefore, commitments must be included in funds
monitoring.
For more information on funds commitment, see Funds Commitment [Page 26].
Integration
In Commitments Management, data from the following SAP components is processed integrally:
• Controlling (CO)
In Controlling you can perform tasks such as planning, checking and controlling costs.
Commitments management is a part of the cost monitoring process. Commitments are
displayed either on internal orders, cost centers, or projects.
• Materials Management (MM)
This covers tasks such as material requirements planning, purchasing, goods receipt,
inventory management, and invoice verification. Commitments are created through purchase
requisitions and purchase orders. Commitments are reduced by various business
transactions such goods receipt. The commitments data is transferred to Controlling.
Features
• Creation of Commitments
For example, specific goods are ordered for an internal order, a cost center, or a project.
A purchase order commitment is created that is equivalent to the purchase order value.
• Commitments Display
Commitments are always displayed with a value and, if required, a quantity for the cost
element, the fiscal year, and the period when the costs are expected to be incurred (See
also: Commitments Information System [Ext.]).
• Commitments Currency
The system executes all commitments in the currency used, in the original business
transaction (for example in the ordering transaction). It then translates the amount into
the controlling area currency, company code currency and the object currency. The PO
currency exchange rate is used for currency translation.
• Reducing the Commitment:
The commitment is reduced by business transactions (such as goods receipts) and
actual costs are incurred by the corresponding account assignment object. This
continues until, for example, the business transaction "Purchase order" is closed and the
purchase order commitment is reduced to zero.
December 1999 45
• Carrying Forward Commitments at Year-End-Closing

At year-end closing, you can carry the open commitment values from purchase
requisitions, purchase orders and fund commitments forward to the first period of the
next fiscal year. You can select by account assignment object (order, cost center or
project). You can also process individual documents if required.
Commitments are carried forward for each controlling area.
46 December 1999
Period-End Closing in Internal Orders
Period-End Closing in Internal Orders

Purpose
In period-end closing, period-related business transactions are executed after the period end.
Features
The following belong to periodic actual postings:
• Revaluation at Actual Prices [Ext.]
• Calculating Overhead [Page 62]
• Periodic Reposting [Page 48]
• Actual Template Allocation [Ext.]
For more information, see Template [Ext.].
• Internal Order Settlement [Page 51]
• Assessment and Distribution Methods
December 1999 47
Periodic Repostings
Periodic Repostings
Use
Periodic Repostings [Ext.] enable you to adjust postings made to your cost centers, business
processes, internal orders, or WBS elements. They lead to the same result as transaction-based
repostings. The results of transaction-based repostings have a direct effect on the actual costs of
the sender and the receiver, whereas periodic repostings have a one-time effect on actual costs
at period-end closing.
Postings relevant to Controlling (CO) such as telephone costs, postal charges, insurance, and so
on are entered in Financial Accounting (FI) and posted to an allocation cost center or a business
process. These are used exclusively for cost collection. This minimizes the number of different
account assignments you have to make when entering data in FI. At the end of the period, the
collected costs are reposted to the cost centers or business processes which incurred the costs
by of means user-defined keys (fixed values or dynamic tracing factors). The following
information is passed on to the receivers:
• The original cost element (that is, the primary cost element [Ext.]) is retained.
During periodic repostings, you can allocate activity-dependent plan costs to receiver
objects of the category “Cost center” (sender activity type is retained) or "business
process".
You can allocate activity-independent costs to all receiver object categories, for
example, cost centers, business processes, or orders.
• The allocation cost center is not important for the receiver cost centers (neither is the sender
business process for the receiver processes). The SAP System therefore stores data records
for periodic reposting in a way that uses less memory than for, say, distribution [Ext.]. For this
reason, the sender cost center or sender process is not updated with this method. You can
only analyze from which cost center or from which business process the costs originate from
the line items, and not from the totals records.
48 December 1999
Periodic Repostings
Telephone Mail room

06/1998
Telephone 06/1998
Allocation
Allocation rule
rule
such
such as,
as, meter
meter readings
readings
. . .Administration Administration
...
Telephone Primary
Primary cost
cost element
element Telephone
06/1998 06/1998
- Posting aid
- without sender-receiver information
If you are working with Transfer Prices [Ext.] (parallel value flows) the periodic
reposting is executed in parallel in all valuations. The costs to be allocated are taken
from the corresponding valuation. The tracing factor is always taken from the
operational valuation. The values allocated may differ in the different valuation
methods.
Senders and receivers are displayed in the results list, differentiated according to the
parallel actual versions of the various valuations.
For more information about transfer prices, see the SAP Library under AC
Accounting → Enterprise Controlling → Profit Center Accounting → Transfer Prices
(see: Transfer Prices [Ext.]) and under Parallel Valuations [Ext.].
See also:
Defining Periodic Repostings or Periodic Allocations [Ext.]
Creating or Changing Cycles [Ext.]
Executing Periodic Repostings or Periodic Allocations Online [Ext.]
Displaying the Cycle Overview [Ext.]
December 1999 49
Overheads
Overheads
Purpose
material costs.
Integration
Features

Constraints
50 December 1999
Internal Order Settlement
Internal Order Settlement

Purpose
An internal order is usually used as an interim collector of costs and an aid to the planning,
monitoring, and controlling processes needed. When the job has been completed, you settle the
costs to one or more receivers (cost center, fixed asset, profitability segment, and so on).
Features
To be able to settle an order, you must have saved a settlement rule in each of the senders. This
settlement rule determines where the costs are to be settled to. You can achieve this in two
ways:
• Settlement to One Receiver
You use this basic form of order settlement to completely settle the costs collected on the
internal order. This is either to a cost center, or a G/L account under a settlement cost
element. The system generates the appropriate settlement rule from the information
contained in the internal order master data.
For more information on order settlement to one receiver, see Order Settlement To One
Receiver [Ext.].
• Comprehensive Settlement
Definition of a comprehensive settlement rule gives you more settlement possibilities, for
example, you can:
• Settle costs to a wide range of receivers (project, sales order, profitability segment, and so
on).
• Specify how the costs are to be distributed between receivers.
• Define the cost elements under which the sender is to be credited and the receivers debited.
For more information on comprehensive settlement, see Settlement [Page 42].
Constraints
You can only use one of these settlement methods at a time: For example, if you defined
settlement to one cost center in the master data for an internal order, then you can only define a
more comprehensive settlement rule once you have deleted the first rule.
December 1999 51
Summarization
Summarization
Use
You need more than a cost structure analysis of individual internal orders (Internal Orders [Ext.],
Production Orders [Ext.], Projects) to ensure efficient controlling. You need to be able to group
together account assignment objects with common attributes and analyze them collectively. This
provides a much greater degree of cost transparency within your organization.
You can, for example, summarize and analyze the costs of all your orders according
to the following criteria:
• Order type [Ext.]
• Responsible cost center
• Plant [Ext.]
Integration
You can summarize internal orders, production orders and projects collectively.
For more information on project summarization, see Project Summarization [Ext.].
Features
For reporting purposes, summarization collects account assignment objects with common
attributes.
You can use summarization initially to obtain an overview of a large number of orders. It is also
useful for processing order groups containing large variances. You can then analyze relevant
account assignment objects individually, using the cost element reports. This means that you do
not have to analyze each account assignment object individually.
Summarization hierarchy
You use characteristics to define the individual levels of the summarization hierarchy. These
characteristics refer to the fields in the master data for the account assignment object.
The controlling area is always the top node in the summarization hierarchy. To summarize
account assignment objects, you need to differentiate between those and the others in the same
controlling area. You do this by using a characteristic in the corresponding hierarchy
identification.
For more information on summarization hierarchies, see Summarization Hierarchies [Ext.] or the
IMG for the relevant summarization object.
For more information on classification and order summarization, see Cost Object Controlling
[Ext.].
Summarization Reports
The following standard summarization reports are available:
• Summarization objects: Actual/plan/variance
52 December 1999
Summarization
Compares the plan and actual costs for the selected subhierarchy.
• Summarization objects: Actual/plan/commitment
Compares the costs already assigned and those still available. The value in the Assigned
column is calculated by adding actual cost and commitment values. The difference
between the plan costs and the assigned costs is displayed in the last column as
available costs.
• Summarization objects: Curr. Period/Cum./Total
Compares the plan and actual costs for a selected period, the entire fiscal year, and
cumulated.
December 1999 53
PS Project System
PS Project System
Purpose
Both large scale projects, such as building a factory, and small-scale projects, such as organizing
a trade fair, require precise planning of the many detailed activities involved. The project
manager has the job of ensuring that the project is executed efficiently, on time, and within
budget - which he or she achieves by ensuring that the required resources and funds are
available as and when needed.
Projects are generally part of the internal processes of a company. To be able to control all tasks
in project execution, you need an organizational form that is specific to the project and which is
shared by all departments involved. Before you can carry out a project in its entirety, the project
goals must be precisely described and the project activities to be carried out must be structured.
A clear, unambiguous project structure is the basis for successful project planning, monitoring,
and control.
You structure your project per the following points of view:
• By structures, using a work breakdown structure (WBS)
• By process, using individual activities (work packages)
Project managers usually distinguish between two types of project:
• Externally financed projects
− Customer projects
• Internally financed projects
− Overhead cost projects
− Capital investment projects
For further information on capital investment projects, see Investment Management [Ext.].
Integration
The high degree of integration between the Project System (PS) and other R/3 application
components means that you can plan, execute, and account for projects as part of your normal
commercial procedures. This means the Project System has constant access to data in all the
departments involved in the project.
Features
The R/3 Project System guarantees close and constant monitoring of all aspects of your project.
This includes both technical and commercial aspects of the project.
54 December 1999
Master Data
Master Data
Definition
You can use the master data to define the structure of your overhead cost project, and enter
neutral settings on a cross-project basis.
December 1999 55
Standard WBS
Standard WBS
Definition
A template that can be used several times to create work breakdown structures. Standard work
breakdown structures are not specific to a project.
Selection criteria
If you choose this component, you can copy standard work breakdown structures to create new
work breakdown structures. In addition, you must select this component if you use the Sales and
Distribution component (SD) and you want to create a customer project from a customer inquiry,
quotation or sales order within assembly processing.
56 December 1999
WBS Maintenance
WBS Maintenance
Definition
“WBS maintenance” includes creating or changing control parameters, standard values and other
data in work breakdown structures.
December 1999 57
PS Text Management
PS Text Management
Definition
“PS Text Management” is a word processing program for project-specific texts and documents,
such as functional specifications, logs, or notes required for a project.
Selection criteria
If you choose this component, you can create and manage documents with SAP’s own word
processing program SAPScript. In addition, with this component you can upload and download
texts created with external word processing programs.
58 December 1999
Cost Planning
Cost Planning
Purpose
Cost planning deals with the costs you expect to incur in connection with your project as it is
executed.
Cost planning has different aims at different stages of the project:
• At the concept and rough planning stage, cost planning acts as the base for an initial cost
estimate.
• At the approval stage, it forms the basis for the budget allocation.
• During project execution, you use cost planning to monitor and control cost variances.
Cost planning in the Project System is effected by means of the WBS and networks.
In the network, the emphasis is on planning not costs, but dates, human resources, and
operating resources. The costs are calculated automatically on the basis of an existing
price/quantity structure. You always use cost planning by means of networks if you are using
complex project processing - that is, if dates and resources, as well as costs, are relevant to you.
If planning and monitoring of costs is most important, as in, say, capital investment projects or
overhead cost projects, you should plan your costs using manual cost planning in the WBS.
Integration with Controlling and Financial Accounting is effected by means of the WBS.
Features
• Manual Cost Planning in the Work Breakdown Structure [Page 60]
• Planning Costs in Networks [Ext.] , based on price and quantity structures
• Planned costs from assigned orders recorded in the project.
• Cost forecast for calculated plan costs, based on variances during project execution.
December 1999 59
Manual Cost Planning in the Work Breakdown Structure

Purpose
You use this component if cost planning and controlling are the elements of project processing
which are most important to you.
You enter cost, activities, and business processes which you expect to occur as the project is
executed. You can use cost planning to compare plan and actual costs and analyze variances.
Depending on when you plan and the information then available, you can enter different versions
and forms of project cost planning.
Integration
You use budget management [Page 64] to manage the approved cost framework for a project.
The graphic below shows how cost planning and budgeting complement each other.
Cost Planning
Budget Budget
applied for approved
Budget
Overall plan
Top down-
Bottom up- distribution
Summation
Features
Various ways of planning costs in the WBS are available, as are functions which cover the
various degrees of detail at the various stages of project execution.
Plan Integration
Within the framework of integrated project planning, you can settle plan data or business
processes, and pass them on to profit centers and the general ledger.
Plan integration in projects is the same as plan integration in internal orders.
See also Plan Integration for Internal Orders [Ext.] .
60 December 1999
Plan-Integrated Projects
Plan-integrated projects offer integrated planning of cost elements and activity inputs with cost
centers and business processes in one plan version. The system updates allocations directly in
the cost center or business process.
Non-Plan-Integrated Projects
In projects which are not plan-integrated, you can only plan costs and activities locally. No
planning takes place in the performing cost centers or business processes.
Planning in More Than One Plan Version

The information available on a project changes as the planning phase progresses. This
sometimes makes cost planning in more than one version a good idea. This also how planning
usually proceeds in everyday business. You can plan CO versions as you wish in the system.
See Plan Versions [Ext.].
Planning Methods
The WBS includes various planning methods in the WBS element, from which you can choose
depending on the state of the project and the degree of detail you need.
• Hierarchy Planning in the WBS
• Cost Element Planning and Activity Input Planning [Ext.]
• See Unit Costings [Ext.]

Unit costing is used if information is available on sources of supply, quantities, and
prices. You can use it to calculate overall and annual costs.
For more information on the unit costing, read Product Cost Planning.
December 1999 61
Overheads
Overheads
Purpose
material costs.
Integration
Features

Constraints
62 December 1999
Orders for Projects
Orders for Projects

Use
You can assign various types of orders to a WBS element provided the WBS element is an
account assignment element.
The assignment means that the order is managed along with the project. The plan costs for the
orders are recorded in the project in summarized form.
In the SAP System, you can use orders for different purposes. You can assign the following
orders to a project:
• Internal orders
Internal orders are used at the level of cost and service accounting - for example, to
monitor costs
• Plant maintenance orders

You use plant maintenance orders to plan plant-maintenance measures, and to enter
and settle the resulting costs.
• Production orders
Production orders are used in the manufacture of goods.
• Sales orders
Sales orders are contractual agreements between a sales organization and a sold-to
party concerning the supply of materials or the rendering of services at defined prices
and times, and in defined quantities.
You can assign sales order items or customer quotation items to a WBS element (billing
element). If you do, revenue and cost controlling takes place wholly within the project.
The quotation/order does not bear either costs or revenues.
In the following, the term “orders for the project” covers networks and activities too. You cannot
enter a budget for orders for networks.
December 1999 63
Budget Management
Budget Management
The budget is the approved cost structure for a project.
It differs from project cost planning in that it is binding. While you must estimate costs as
accurately as possible during the planning phase, it is in the approval phase that you prescribe
your project funds, in the form of a budget. The budget is the device by which the management
approves the expected development of project costs over a given timeframe.
Budget Allocation
Submitted Approved
budget budget
Budget
Total planned costs
Top-down
Bottom-up distribution
summation
The Project System recognizes the following different budget types:
• Original budget
The original budget is the budget originally allocated - that is, the budget before any updates
were carried out. From a point in time which you stipulate, it can only be amended by means
of budget updates.
• Budget updates
Unforeseen events, additional requirements, prices rises, and so on, may mean that you
need to correct the original budget - that is, budget updates are necessary. These take the
form of:
– Supplements
– Returns
– Transfers
• Current budget
The current budget is calculated as follows:
Original budget
+ Supplements
- Returns
64 December 1999
Budget Management
+/- Transfers
= Current budget
• Releases
In many businesses, budget distribution is not the same as releasing the funds. For this
reason, the Project System includes a separate funds release facility, which you can use to
make successive budget releases. The release is based on the current budget - that is, the
original budget as amended by budget updates.
This section describes:
• The prerequisites for budget allocation [Ext.]
• How you allocate the original budget [Page 66] in a project
• How you can carry out budget updates [Page 67] in the form of supplements, returns,
and transfers
• How you release the budget [Page 69]
December 1999 65
Allocating the Original Budget
Allocating the Original Budget

On conclusion of the planning phase, the project will be approved by a decision-making body,
and a budget will be assigned to it. As project manager, you will distribute the budget to the
individual work breakdown structure (WBS) elements.
You can create a budget for a project by:
• Adopting the values from cost planning as your budget, or
• Entering budget values directly into the WBS elements

See also:
• Taking Over Values from Cost Planning as Budget [Ext.]
• Distributing The Budget Manually [Ext.]
• System Status “Budgeted” [Ext.]
• Totaling Up Budget Values [Ext.]
• Adjusting Budget Values [Ext.]
• Entering Budget Texts [Ext.]
• Budget Value Display [Ext.]
• Copying Views [Ext.]
• Checking Your Budget [Ext.]
• Saving Without Checking [Ext.]
• Distributing Annual Budgets [Ext.]
• Budget Line Items [Ext.]
• Graphical Representation [Ext.]
66 December 1999
Updating the Budget
Updating the Budget

Statusverwaltung [Ext.]
Verfügbarkeitskontrolle [Ext.]
Unforeseen events, additions to your plans, vendor price increases, and so on may make budget
updates necessary.
There are three types of budget update:
• Supplements
• Returns
• Transfers
You can also make budget updates using the change function. The system logs the
changes as line items. The time at which you “freeze” the original budget and enter
budget update depends on when you want to log proofs of origin - that is, sender-
receiver relations - for your budget updates. You thus use the budget updates, when
you want to record where supplements, returns, and transfers came from and where
they went to.
You use status management to control this. For example, the business transaction
Budgeting is allowed in the Created system status. You then create a system status
that forbids this transaction, but allows budget supplements, returns and transfers.
Having defined your original budget, you set this user status, so that budget updates
are only possible using supplements, returns, and transfers. For more information,
read the status management section.
If availability control is active for a project, each budget update is subject to
availability control. For more information, read the section on Availability Control
The current
budget is
calculated as
follows:
Original budget
+ Supplements
- Returns
+/- Transfers
= Current budget
The following topics contain information on:
December 1999 67
Updating the Budget
• Budget Supplements [Ext.]
• Budget Returns [Ext.]
• Budget Transfers [Ext.]
• Budget Updates in the Information System [Ext.]
68 December 1999
Releasing the Budget

In many businesses, distributing a budget is not the same as releasing the funds. For this reason,
the Project System includes a separate funds release facility, which you can use to make
successive budget releases. The release is based on the current budget - that is, the original
budget as amended by budget updates.
1. Choose Logistics or Accounting → Project System → Financials → Budgeting → Release →
Change.
This brings you to the initial screen for releasing the budget.
2. Enter the relevant data and choose Release.
You can release the budget of a project or for a single WBS element. Simply enter
the appropriate WBS element.
This brings you to the screen Change Release: WBS Element Overview.
The further procedure for releasing the budget is the same as that for allocating the original
budget. You can make releases at overall and/or annual level (as defined in the budget profile).
All the budget allocation functions, such as copying views are available for releasing budget.
See also: Allocating Original Budget [Page 66]
Checking Releases
As in budget allocation, you can access a checking function at any time. The system checks
releases automatically when you post them. If availability control is not active, you can save your
budget releases without any check taking place. If, however, availability control is active, this is
no longer possible. The system will then only permit the budget release if there are no errors in it.
• Project structure
Within the project structure, the system ensures that the funds released in lower-level WBS
elements (distributed values) do not exceed those in the higher-level elements. The check is
in controlling area currency, but includes budget line items entered in other currencies.
• Time
In each WBS element, the system checks that the total of annual releases (accumulated
releases) does not exceed the overall release. This check is made in the current currency.
Budget line items entered in other currencies are not checked.
• Release - current budget

Here, the system checks that:
– The overall release does not exceed the overall budget
– The annual releases do not exceed the current annual budget
The check is in controlling area currency, but includes budget line items entered in other
currencies.
• If availability control is active In Project System configuration, you can define whether
availability control checks activities against the overall budget, annual budget, overall
December 1999 69
release, or annual releases. If availability control is active, the following checks are also
made:
– Availability control against overall releases
In this case, the system checks whether assigned values (actual + commitment)
exceed the overall release.
– Availability control against annual releases
In this case, the system checks whether values assigned in a year exceed the
budget released for that year.
The check is in controlling area currency, but includes budget line items entered in other
currencies.
For more information on how to activate availability control, see Activating Availability
Control [Ext.].
70 December 1999
Availability Control
Availability Control
Availability Control [Ext.]
Principle of Availability Control [Ext.]
Configuring Availability Control [Ext.]
Basic Settings for Availability Control in the Budget Profile [Ext.]
Defining Tolerance Limits [Ext.]
Availability Control Actions [Ext.]
Transactions Groups [Ext.]
Activating Availability Control [Ext.]
With Budget Allocation [Ext.]
Background Activation [Ext.]
Online [Ext.]
How to See Whether Availability Control is Active? [Ext.]
Deactivating Availability Control [Ext.]
Defining Exempt Cost Elements [Ext.]
Excluding WBS Elements from Availability Control [Ext.]
Referencing Availability Control [Ext.]
Reconstructing Availability Control [Ext.]
Notes on Problems Commonly Encountered in Availability Control [Ext.]
December 1999 71
Actual Costs
Actual Costs
Definition
“Actual costs” are the costs incurred as the project is executed. You enter actual costs when you
enter commercial activities, such as goods receipts of confirmations, in WBS elements.
72 December 1999
Periodic Project Closing
Periodic Project Closing

Definition
The term “period project closing” is used to describe period-related commercial activities carried
out at the end of a fiscal period - that is, on conclusion of the primary postings for the relevant
period.
December 1999 73
Periodic Transfer
Periodic Transfer
Definition
The “periodic transfer” is a posting tool which you can use to allocate the primary costs collected
in a clearing cost center to WBS element, using a key you have defined and retaining the original
cost element (the cost element in the sender cost center).
74 December 1999
Overhead Surcharges
Overhead Surcharges
Definition
Flat-rate, percentage, or fixed amount added to direct costs, which enables overhead costs to be
allocated accurately to the individual cost objects where they were originally incurred.
Selection criteria
You need to select overhead surcharges if you want to include them in cost planning.
December 1999 75
Interest Calculation
Interest Calculation
Definition
The interest calculation is based on the payment, down payment and internal activity documents.
In projects, only the balance interest calculation on a daily basis is available.
Selection criteria
If you select this component, you must also select the Cash Budget Management component in
Treasury.
76 December 1999
Project Settlement
Project Settlement
Definition
The actual costs arising in a WBS element, network order or network activity are settled, in whole
or in part, to one or more receivers.
Selection criteria
You need to select project settlement if you want to transfer the costs determined in results
analysis periodically to Profitability Analysis, Financial Accounting and Profit Center Accounting.
December 1999 77
Cost Information System
Cost Information System

Definition
The cost information system is used for analyzing the project. It enables you to view flexible
online evaluations of the project data.
Selection criteria
The cost information system can supply evaluations at any time, in differing degrees of detail and
summarization, showing cost, budget and actual values from the overhead cost project.
78 December 1999
Information System
Information System
Purpose
The R/3 System offers a comprehensive, flexible information system to analyze cost flows in an
organization. With the information system functions, you can carry out standard recurring
evaluations; you can also construct special reports for unique situations. Following their entry into
the SAP System, you can analyze all costs online and in real-time, and trace them right back to
the original document. You can execute all reports available online in background runs as well.
This is especially 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.
Features
The information system includes functions:
• For report callup
• For report processing
• For defining reports using Report Painter [Ext.] and Report Writer [Ext.]
See also:
Report Callup with Extract Management [Ext.]
Creating a Report Painter Report [Ext.]
December 1999 79
Information System
Information System
Use
The information system supports speedy evaluations across all system application components.
You can use the reports supplied by SAP or define your own reports to suit your individual
requirements.
80 December 1999
Important Standard Reports in Cost Center Accounting
Important Standard Reports in Cost Center Accounting

Use
You will find a description below of some important reports for Cost Center Accounting (CO-OM-
CCA) supplied in the SAP R/3 System. Additional information for other reports not described here
can be found in the documentation for those reports. Choose Extras → Documentation from the
report in question.
Standard reports are organized into four different libraries.
• The 1VK Library contains reports for cost accounting systems based on full costs [Ext.].
• The 1GK Library contains reports for cost accounting systems based on marginal costs
[Ext.]. These can be used alongside those in the 1VK Library.
• The 1AB library contains reports for variance [Ext.] analyses.
• The 1RU library contains summarization [Ext.] reports.
The following reports occupy a special position, since they are not Report Painter reports.
Planning Overview [Ext.]
Price Report [Ext.]
Line Item Report [Ext.]
Document Display [Ext.]
Calling Up the Master Data Index [Ext.]
December 1999 81
Information system For Internal Orders
Information system For Internal Orders

Purpose
Reporting is the tool used to analyze internal orders. It provides information on the status of your
internal orders and enables you to control them effectively.
There are several predefined standard reports available for the Internal Orders component (CO-
OM-OPA). You can also use the Report Painter to define your own reports.
Features
Report/Report Interface
Most reports allow you to mark given rows and then, using the Report call function, to branch to
another report containing detailed information.
You can branch from a total cost report to a cost element report, from where you can
start a line item report.
Defining Your Own Reports

When defining your own reports for internal orders, you should note the following technical
details:
Report Type Table Library
Overall cost and cost element reports CCSS 601
Overall plan and budget reports using Report Painter RWCOOM 602
Summarization reports for Internal Orders KKBC 701
For more information on defining your own reports, see Report Painter [Ext.]
For more information on the Internal Orders information system, see Internal Orders Report
Types [Ext.].
For more information on reporting in the Controlling component (CO), see Information System
[Page 79].
82 December 1999
Business Process Reports
Business Process Reports

Definition
In "Business process reports", a hierarchical structure of the available valuations in Activity
Based Costing (CO-ABC) can be found. Individual CO-ABC reports can be executed through the
report choice function.
Selection criteria
The standard reports can be divided roughly into the following areas, where multiple reports exist
for each area:
• Cost center reports
• Business process reports
• Cost object reports
• Master data directories
• Line item reports
December 1999 83
Report Definition
Report Definition
Use
The CO information system has the task of formatting the postings created in the application
component according to various criteria. However, it is not possible to cover all user
requirements through the information system. Minor adjustments to the reports are often required
or new reports have to be created.
Features
Report Painter
The central tool for defining reports within the information system is the Report Painter [Ext.].
With Report Painter you can define reports quickly and easily across rows and columns. During
the definition process, the system displays the report as it will appear when it is displayed on the
screen.
For minor modifications to the standard report delivered by SAP you can use this as a model.
The R/3 System also provides a variety of row and column models as modules for your own
report definition. These models enable you to create reports simply and flexibly.
You do not need to create sets [Ext.] when working with Report Painter. You can enter
characteristic values directly. Reports can be divided into sections and column blocks during
definition.
To access the Report Painter menu from Cost Center Accounting, choose Information system →
Tools → Report Painter.
For more information about Report Painter, see the R/3 Library, under FI Financial Accounting
→==FI Special Purpose Ledger →=Report Writer Reports. (see: Report Painter Reports [Ext.]).
Report Writer
If you want to define a report that differs from the standard, you can use the Report Writer [Ext.]
report definition.
Report Writer lets you define reports that are structures on the basis of sets. A set is an arranged
quantity of similar elements, such as cost centers, cost elements and posting periods. The
modules available for use in the reports are summarized by the R/3 System in a report table. This
allows you to use the sets in any reports of a report table.
Working with Report Writer involves a longer learning process than Report Painter. Since Report
Painter covers the majority of the functions of Report Writer, but is easier to use, you should
generate as many of your reports as possible through Report Painter.
To access the Report Writer menu from Cost Center Accounting, choose Information system →
Tools → Report Painter → Report Writer.
For more information about Report Painter, see the R/3 Library, under FI Financial Accounting
→==FI Special Purpose Ledger →=Report Writer Reports. (see: Report Writer Reports [Ext.]).
84 December 1999
Report Definition
December 1999 85
Purpose
You can use the Activity-Based Costing component (CO-OM-ABC) to provide a process-oriented,
cross-functional view of overhead in addition to the traditional, location-oriented view provided by
the Cost Center Accounting component (CO-OM-CCA). The Activity-Based Costing component
thus enhances the Cost Center Accounting component.
The Activity-Based Costing component allocates process quantities based on resource and
process drivers , allowing you to define cost allocation more exactly along the Value Added
Chain [Ext.] that is possible with overhead rates. Activity-Based Costing (ABC) likewise
enhances product costing by assigning the sources of costs to their originating business
processes. Cost center resources can allocate to business processes based on their true
utilization of activities.
Activity-Based Costing in the R/3 System
Processes Processes Processes
CO-OM-
ABC
Product Families
Products ABC Customers
Distribution Channels
CO
...
-P
-PC
CO
By including ABC in profitability analysis, you create more realistic views of your revenue
position.
The primary goal is not just improving individual aspects of processes, but rather the optimization
of entire process chains. Other goals of ABC include shortening lead times and improving quality.
86 December 1999
Features
As of R/3 System Release 4.0, you can use the Activity-Based Costing component parallel to the
existing traditional cost accounting system, or you can use it as an operational component
integrated with product costing and profitability analysis in the Controlling component (CO).
See also:
Parallel Activity-Based Costing [Ext.]
Integrated Activity-Based Costing [Ext.]
December 1999 87
Process Costs: Actual Postings
Process Costs: Actual Postings

Definition
In “Business process costs: Actual postings”, period-based transactions post the actual resource
inputs to business processes as well as consumption by cost objects, cost centers, or other
business processes. You should distinguish between:
• Allocation from cost centers to processes
• Allocation from processes to other cost carriers (cost objects, cost centers, processes)
Possible allocations are:
• Cost center to process
− Distribution
− Assessment
− Activity allocation (direct, indirect)
• Process to process, cost center, cost object
− Assessment
88 December 1999
Master Data in the Activity-Based Costing Component

Purpose
Master data determines the underlying structure of the R/3 System and undergoes minor
changes, if any, in an active system for ongoing settlement periods.
You can use the relationships between business processes to mirror the flows and
allocation structure of your organization on a process-oriented basis. These
structures, as a rule, remain constant over long periods. Based on the business
process structure, you can carry out business process planning and create period-
based reports for business processes and areas, to be used by the responsible
manager for analysis. You can use these reports to locate unprofitable areas and
mistakes in planning for the individual business processes. In order to be able to
compare results, you should not change the master data they are based upon.
You generally maintain master data once before activating the Activity-Based Costing component
(CO-OM-ABC). You can enter master data manually, or you can use interface programs to
transfer data from non-SAP systems.
The master data for Activity-Based Costing is stored in master data tables.
When you transport master data (between clients, for example), you must use
additional master data tables not described in this section.
Integration
The concept of the R/3 System distinguishes between:
• Master data
• Transaction Data
Transaction Data
Transaction data is the information based on business transactions that the current R/3 System
continually accepts or changes during processing.
Transaction data for the Activity-Based Costing component (CO-OM-ABC) is found in line item and totals tables
where you can access the information as part of business process analysis and line item reports.
Line item tables receive the results of the following individual posting transactions:
• Financial Accounting component (FI) postings
December 1999 89
The financial accounting bookings are saved in the FI component and the line item
booking tables of the CO component, generating redundancies. However, this is
necessary due to the different evaluations in both areas. Financial Accounting
component evaluations are based on the connections between documents, whereas
Controlling component evaluations differentiate between primary and secondary
costs.
• Controlling postings in actual:
− Distribution
− Assessment
− Internal activity allocation
• Controlling postings in plan:
− Manual planning
− Price calculation
Actual postings generally update line items; updates are optional in plan.
For more information, see Line Items and Integrated Planning [Ext.]
Total tables receive the totals of all line items by cost element and serve as a summarization of
the line item tables.
90 December 1999
Business Process Planning
Business Process Planning

Business process planning is handled differently in almost every organization. The type of
industry, organizational structures, and responsibilities are factors affecting planning.
In the Activity-Based Costing component (CO-OM-ABC), you can perform the entire planning
process on-line. On-line planning provides immediate, real-time results that you can analyze
with the information system. The following planning tools in the Activity-Based Costing
component support interactive business process planning:
• Planning is based on pre-defined planning layouts in the standard R/3 System (see Support
Techniques for Manual Process Planning [Ext.]), and saved under planner profiles (see
Planner Profiles [Ext.] and the Implementation Guide (IMG) under Activity-Based Costing →
Planning → Manual Planning → Maintaining User Defined Planner Profiles [Ext.]). Planning
layouts are data entry screens for plan transactions. The layouts are divided into planning
areas such as cost element or activity type planning. You can create your own planning
layouts using Report Painter if the standard layouts do not meet your requirements. For more
information, see the Implementation Guide (IMG) under Activity-Based Costing → Planning
→ Manual Planning ® Creating User Defined Planning Layouts [Ext.].
• The planning process is not a one-time event, but an iterative process that usually goes
through several cycles. This is reflected in plan data storage: The R/3 System allows parallel
storage of alternate versions.
December 1999 91
Product Cost Controlling

Definition
Area within Controlling that includes the following:
• Product cost planning
Product cost planning involves cost object controlling of the costs for a material or object
of cost controlling. This is unrelated to any order.
It is a tool for planning costs and setting prices for materials, and calculates the cost of
goods manufactured and the cost of goods sold for each product unit.
• Product Cost Controlling
This enables you to enter preliminary costings, simultaneous costings and final costings
to cost objects. Product cost controlling settles the costs incurred in your organization to
your activity units (in other words, the cost objects).
Cost objects in the R/3 system include manufacturing orders, product cost collectors or
sales document items and so on.
The application component in Cost Object Controlling you decide to use, depends on the
following:
– Your organization’s cost accounting objectives
For example, you can perform a lot-related analysis in Order-Related Product
Controlling. Alternatively, you can make a periodical analysis in Periodic Product
Controlling.
– Your product structure
For example, costs of materials produced to customer specifications are analyzed in
Sales Order Controlling. Mass produced materials on the other hand, are analyzed in
Order Related Product Controlling or in Periodic Product Controlling. The Controlling
for Intangible Goods and Services application component is available to you, for
intangible goods and services.
You can analyze plan, target, and actual values on a cost object or aggregate basis
(such as by plant). You can do this using the Information system in Product Cost
Controlling. You can also compare the data entered in Cost Object Controlling with the
data determined by Product Cost Planning.
For example, you can pass data from Cost Object Controlling on to the following
application components:
– Financial Accounting
– Profit Center Accounting
– Profitability Analysis
– Actual Costing/Material Ledger
• Actual Costing/Material Ledger
This is an alternative to Standard Cost Accounting, where you can assign costs (incurred
in the period) directly to the materials.
92 December 1999
In the R/3 system, actual costing refers to materials, which are calculated using a
preliminary standard price. They are recalculated using the price variation of the actual
costs.
The system collects the preliminary standard price and its variances (such as price or
exchange variances) internally for every business transaction related to valuation (such
as goods receipt, invoice receipt or production order settlement). At the end of the
period, you can settle these variances to material stocks and consumption from the
previous period. This takes place at several manufacturing levels. This is how you
achieve a material valuation, which is based upon time-related actual values.
• Product Cost Controlling Information System
An efficient report range for the Product Cost Planning, Cost Object Controlling and
Actual Costing/Material Ledger areas is available in the information system in Product
Cost Controlling. You can evaluate data created in these components using standard
and special reports.
Selection Criteria
These components provide basic information for the following business functions:
• Price determination and price policy
• Inventory valuation
• Manufactured Goods Controlling
• Profitability Analysis
• Profit Center Accounting
December 1999 93
Product Cost Planning

Purpose
Product Cost Planning (CO-PC-PCP) is an area within Product Cost Controlling (CO-PC) in
which you can plan the non-order-related costs of, and determine prices for, materials and other
cost accounting objects.
You can use Product Cost Planning to break down the costs of your company’s products, such
as
• Manufactured materials
• Services
• Other intangible goods
for analysis purposes. You can analyze the costs in various ways, for example:
− What is the amount of value added of a particular step in the production process?
− What portion of the value added can be attributed to a particular organizational unit?
− How are the primary costs and transfer prices broken down?
− How much are the material, production and overhead costs?
− How can production and/or construction be rationalized?
− Can the product be produced for a competitive price?
Product Cost Planning comprises the following:
Cost Estimate with Quantity Costing materials that have a quantity structure in PP
Structure [Page 99]
Cost Estimate without Quantity Costing materials without a quantity structure in PP
Structure [Page 100]
Reference and Simulation Costing Planning new products and services using base planning
[Page 102] objects
Price Update [Page 104] Transferring the results of material cost estimates to the
material master
For further information, see the following:
• Purpose of Product Cost Planning [Ext.]
• Costing Sequence [Ext.]
Costing must be performed at the plant level. The following figure provides an overview of the
organizational structures required for costing:
94 December 1999
Client
Client
Controlling
Controlling area
area 11 Controlling
Controlling area
area 22
Company
Company code
code Company
Company code
code Company
Company code
code
11 22 33
Valuation
Valuation area
area Valuation
Valuation area
area Valuation
Valuation area
area
11 22 33
Plant
Plant 11 Plant
Plant 22 Plant
Plant 33
Materials are always valuated at the level of the valuation area. You define whether the material
valuation is to be carried out plant level or at company code level in the step Define valuation
level in Customizing under Enterprise Structure → Definition → Logistics - General.
If, for example, you want to use the Product Cost Planning (CO-PC-PCP) component to access
the costing results for material valuation purposes, you must first define in Customizing that
valuation is to be carried out at plant level. This ensures that each plant has its own valuation
area, which is especially important from the costing point of view because all the costing data is
saved with reference to a particular plant.
Integration
In order to carry out costing, Product Cost Planning accesses master data in other SAP
components, such as BOMs, routings, and work centers from Production Planning, and cost
centers, activity types, and business processes from Overhead Cost Controlling. After costing,
you can use the cost estimate results to update the data in other components, such as by
transferring the results to the material master as the standard price and use this price to valuate
the material(s).
For more information, see Information for Other R/3 Applications [Ext.].
Because of this high integration of data, SAP recommends that you make a thorough check to
make sure that the correct data is accessed for the quantity and value structures before starting
Product Cost Planning, in order to ensure that the costing results are reliable.
For more information about integration, see Origin of Quantities, Prices, and Dates [Ext.].
Features
The following table gives you an overview of the menu and functions of Product Cost Planning:
December 1999 95
Menu option Type of cost estimate Cost estimate

Cost estimate for Is used to process mass data and is
Material Costing →
multiple materials [Ext.] created automatically using Production
Edit Costing Run
with BOM and routing Planning data (product cost estimate)
Cost estimate for a
Material Costing → Is created automatically using the
material [Ext.] with
Cost Estimate with Production Planning data (product cost
BOM and routing or
Quantity Structure estimate)
master recipe
Material Cost
Estimate with Additive cost estimate Is created using data that you enter
Quantity Structure → [Ext.] manually (unit costing)
Additive Costs
Material Costing →
Cost Estimate Cost estimate for a Is created using data you entered
Without Quantity material without BOM manually (unit costing) or transferred
Structure or routing [Page 100] from a non-SAP system
Reference and Base object cost Is created using data that you enter
Simulation Costing estimate [Page 102] manually (unit costing)
Menu option Function

Material Costing → Transfer of cost estimate results to the material master record
Price Update [Page 104]
Material Costing → Definition of procurement alternatives and mixing ratios for mixed
Master Data for cost estimate [Ext.]
Mixed Cost Estimate
Menu option Functions accessible Examples

Information System The various reports for • Lists of existing material and base
Product Cost Planning object cost estimates
[Ext.]
• Detailed reports
• Comparative reports
Environment Further Product Cost • Archiving [Ext.] and deletion [Ext.] of
Planning functions costing data
• Distribution of cost component splits
[Ext.] (ALE)
96 December 1999
You use the costing tools provided by Product Cost Planning according to the availability of data
in Production Planning (PP and/or PP-PI) and to the type of reference object that you want to
cost (see graphic below) :
Method Automatic Manual (unit cost Manual (multilevel

(product cost estimate) unit cost estimate)
estimate) M ...
E ...
Reference
object Σ ...
Material Material cost est. Material cost est.

(MM) with qty structure w/o qty structure Material cost est.
w/o qty structure
Costing run Additive cost est.
X
Base
planning
object (PCP) Reference and Reference and
Simulation Costing Simulation Costing
• Automatic Cost Estimate (Also Known As Product Costing)

You calculate the costs for a material (material cost estimate with quantity structure,
including costing run). The system determines the quantity structure (BOMs and routings
or master recipe) and valuates it automatically for the cost estimate using data from
Production Planning (PP and/or PP-PI). For more information, see Working with the Cost
Estimate with Quantity Structure [Ext.] and Cost Estimate with Quantity Structure:
Process Flow [Ext.].
• Unit Cost Estimate
You calculate the costs for the following:
− A material (for example, additive costs for a material cost estimate with quantity
structure, material cost estimate without quantity structure)
− A base planning object
without accessing BOMs and routings in Production Planning. You enter the costing
items manually. When doing this, you can access R/3 data such as materials, business
processes, cost centers and activity types. For further information, see the following:
• Unit Costing [Ext.]
• Additive Costs [Ext.]
• Working with the Cost Estimate Without Quantity Structure [Ext.]
• Working with Reference and Simulation Costing [Ext.]
• Multilevel Unit Costing
You calculate the costs for the following:
− A material (material cost estimate without quantity structure)
December 1999 97
− Or for a base planning object

without accessing BOMs and routings in Production Planning. You enter the costing
items manually. When doing this, you can access R/3 data such as materials, business
processes, cost centers and activity types. You can also display the costing structure
hierarchically and, using a worklist, access frequently used data. For more information,
see Multilevel Unit Costing [Ext.].
Activities
You can access the functions of Product Cost Planning from either the Accounting menu or the
Logistics menu:
• Accounting → Controlling → Product Cost Controlling → Product Cost Planning
• Logistics → Production → Product Cost Planning
• Logistics → Production - process → Product Cost Planning
You make all the settings for Product Cost Planning in Customizing for Product Cost Controlling.
For more information, see Preparing for Costing: Customizing [Ext.] and the Implementation
Guide (IMG) for Product Cost Controlling.
98 December 1999
Material Cost Estimate with Quantity Structure
Material Cost Estimate with Quantity Structure

Purpose
The cost estimate with quantity structure is a tool for planning non-order-related costs and
establishing prices for materials. It is used to calculate the cost of goods manufactured and cost
of goods sold [Ext.] for each product unit. You can use the results of the standard cost estimate
for material valuation for standard prices.
The cost estimate with quantity structure presupposes that a bill of materials and routing (PP) or
a master recipe (PP-PI) exist for the material to be costed . For more information about this, see
Master Data for the Cost Estimate with Quantity Structure [Ext.].
Features
The cost estimate with quantity structure [Ext.] uses the PP or PP-PI master data to determine
the material consumption and internal activities required to produce the product. The cost
estimate is created automatically using this data.
You can use the costing run [Ext.] to process mass data.
There are a number of reports in the cost estimate itself and in the information system for
Product Cost Controlling [Page 131] that you can use to display the costing results together with
the relevant quantity structure:
• Costed multilevel BOM [Ext.]
• Itemization [Ext.]
In addition to the PP-oriented displays of the costing results mentioned above, there is a cost
component split for each material that divides the costs into cost components [Ext.]:
• Cost component split for the cost of goods manufactured [Ext.]
• Primary cost component split [Ext.]
• Partner cost component split [Ext.]
See also:
Purpose of Product Cost Planning [Ext.]
Calculation of Cost of Goods Manufactured and Cost of Goods Sold [Ext.]
December 1999 99
Material Cost Estimate Without Quantity Structure

Purpose
The cost estimate without quantity structure is a tool for planning costs and establishing prices for
materials without reference to quantity structure data from Production Planning (PP and PP-PI). It
is intended for materials with insufficient or no quantity structure data.
Material costing without a quantity structure enables you to:
• Plan costs for raw materials, internal activities, and external activities for a product in the
form of a unit cost estimate [Ext.]
• Assign overhead [Ext.] to the product in the production and material areas
• Assign the calculated costs to the cost components as well as when saving them
• Group the costs of the materials used for semifinished products into cost components
It can also be used to enter data from non-SAP systems. (See also Connection of Non-SAP PP
Systems [Ext.])
Integration
A cost estimate without quantity structure can access data in the following components of the R/3
System:
• Materials Management (MM), such as material master records and services
• Production Planning (PP), for example work centers and resources
• Controlling (CO), such as cost centers and activity types
For further information ,see Master Data for Unit Costing [Ext.].
Features
If you want to carry out costing without a quantity structure (consisting of BOMs and routings)
existing in the R/3 System, you can create the material cost estimate as a unit cost estimate (cost
estimate without quantity structure) and enter the data manually.
You can thus calculate the costs for a multilevel production structure without access to the BOMs
and routings from PP. You create the quantity structure manually using unit costing [Ext.]. For
each semifinished product, you create a cost estimate that assigns the costs to cost elements
and cost components. You specify these semifinished products as material items when costing
the highest-level material. The costing results of the highest-level material then contain the costs
of the lower materials.
You create a spreadsheet, which can consist of materials, internal activities, external activities,
services, processes, variable items and overhead. The system determines the prices for the
costing items entered.
Because the cost elements remain transparent in the itemization [Ext.], you can compare the cost
estimate with the following:
• The preliminary cost estimate of a production order
• With actual postings from other areas of the R/3 System
100 December 1999

See also:
Creating a Material Cost Estimate Without Quantity Structure [Ext.]
Unit Costing [Ext.]
Master Data for Unit Costing [Ext.]
Creating Costing Items [Ext.]
Valuation of Costing Items [Ext.]
December 1999 101

Reference and Simulation Costing

Purpose
Reference and Simulation Costing is a tool for planning costs and setting prices, with which you
manually enter the costing items in spreadsheet form in a unit cost estimate [Ext.].
With this component, you can create base planning objects. A base planning object is a
reference object of Product Cost Planning which you create in Reference and Simulation
Costing, in order to plan costs for a new product or service and simulate changes to existing cost
estimates.
Integration
In base object costing, you can access data in the Controlling, Materials Management and
Production Planning modules.
You can access data that already exists in the R/3 System, such as:
• Data from Controlling (CO), such as cost centers, activity types and prices, process costs,
base planning objects
• Data from Materials Management (MM), such as materials, and prices for materials
For further information ,see Master Data for Unit Costing [Ext.].
Features
You create base planning objects to plan new products or services. They provide the data
required for management decisions as to the manufacture of products, the provision of services,
or whether the product should be produced internally or externally.
You enter the additive costs manually in the form of a unit cost estimate.
You can use the base planning object as follows:
• As a building block in other cost estimates, such as other base object cost estimates, or
material cost estimates without quantity structure
• As a reference when planning other objects in the R/3 System, such as WBS elements, CO
production orders
• To simulate the effects on costs following changes to production factors or to the exchanging
of materials or internal activities
You can use a base planning object in the costing of the following objects in the R/3 System:
• Other base planning objects
• Materials (material cost estimate without quantity structure and additive cost estimate for the
material)
• General cost objects
• Production orders without quantity structure
• Sales document items
• WBS elements (projects)
102 December 1999

• Network components
• General costs activities
• Internal orders
• Primary cost elements
As a Spreadsheet Without Accessing Data in the R/3 System

In the first stage of a feasibility study, you create a cost estimate. In this cost estimate, you create
an item consisting of a quantity, a unit of measure, and a price, for each operation to be carried
out. The sum of the item values is the total costs of the undertaking.
At a later stage, you can expand this costing template with detailed information from the R/3
System on the materials to be used and activities to be provided.
Spreadsheet with Access to Data in the R/3 System

In a base object cost estimate, you list all the materials and activity types required to carry out a
specific process. The R/3 System valuates them using prices from the material master records
[Ext.], and the activity prices from Cost Center Accounting [Ext.]. The total costs of the process
are produced from the total of the costing items.
You can use this cost estimate later as a reference [Ext.] when carrying out cost planning for an
order or a project.
Item in Another Cost Estimate

You create three base object cost estimates containing the materials, internal activities and
external activities that are regularly used. When processing a quotation, you enter these base
object cost estimates in the cost estimate for the quotation and add further costing items specific
to that customer's requirements. This gives you a basis for the quotation price in Sales (SD).
Reference when Planning Specific Reference Objects in the R/3 System

You create a base object cost estimate in which you list all the activities generally carried out by
the marketing department during a trade fair. When you open an internal order for collecting the
costs of a particular trade fair, you can copy the relevant costing items to the order and use them
as a basis for planning the order.
You can create multiple base object cost estimates in which you plan the expected costs for the
various components of a standard product. When you enter a quotation for a particular variant of
this product in Sales and Distribution (SD), you can select the relevant costing items from the
base object cost estimate, transfer them into the quotation and use them to process the quotation
in SD.
December 1999 103

Price Update
Price Update
Purpose
Once you have carried out a cost estimate for a material, you can transfer the costing results to
the material master as prices (see graphic).
Material
Cost est. for
master
the material:
+ Material costs Tax-based

Tax-based prices
prices Future
Future
+ Production costs 1-3 standard price
price
+ Overhead Commercial
Commercial prices Current
1-3 standard price
price
= COGM
Planned prices
1-3
1-3
You can update the results of the various material cost estimates, depending on the purpose of
costing [Ext.], in selected price fields in the material master [Ext.]:
Type of price updated in Cost estimate
material master
Future and current Standard cost estimate (see Updating the Standard Prices [Ext.])
standard price
Commercial or tax-based Inventory cost estimate (see Tax-Based Prices and Commercial
prices 1-3 Prices [Ext.])
Other planned prices 1-3 Modified standard cost estimate, current cost estimate, standard or
inventory cost estimate (see Update of Other Planned Prices
[Ext.])
Prerequisites
The Saving allowed indicator has been set for the costing variant. For more information, see
Saving the Costing Results [Ext.].
The setting has been made in the costing type specifying that the costing results can be updated
in the material master.
• Indicator Standard price:
The costing results can be updated as the standard price in the material master.
• Indicator Tax-based price or Commercial price:
The costing results can be updated as the tax-based or commercial price in the material
master. In such cases, the determination of lowest value applies. This means that the
prices are only updated if they represent the lowest value.
104 December 1999

Price Update
• Indicator Price other than standard price:

The costing results can be updated as planned prices, or as tax-based or commercial
prices in the material master. Here, however, the "determination of lowest value"
principle does not apply when updating the tax-based or commercial prices.
• Indicator No updating
It is not possible to transfer the costing results to the material master.
For more information, see Costing Sequence [Ext.] and Preparing for Material Costing [Ext.] and
also the Implementation Guide (IMG) for Product Cost Planning
Integration
First, you can update the costing results in the material master. Second, within the cost estimate
you can access the various prices in the material master in order to valuate the materials for the
cost estimate (see graphic). You can specify these prices from the material master in the
valuation variant in Customizing, and use them in further cost estimates, such as inventory prices
for inventory cost estimates. You can find further information under Valuation of Materials [Ext.].
Valuation of the Cost est. for

materials the material:
+ Material costs
Material + Production costs
master + Overhead
Standard, planned and = COGM

inventory prices
You can also use the costing results in other applications. For more information, see Purpose of
Product Cost Planning [Ext.] and Information for Other R/3 Applications [Ext.].
You can cost three parallel values (legal valuation view, group view, profit center view). You can
update the results of all three valuation views. For further information about multiple valuation
approaches, see Multiple Currencies and Valuations for Materials [Page 129] in the R/3 Library
under Actual Costing/Material Ledger (CO-PC-ACT).
See also:
• Standard cost estimate [Ext.]
• Inventory cost estimate [Ext.]
• Modified standard cost estimate [Ext.]
• Current cost estimate [Ext.]
December 1999 105

Cost Object Controlling

Purpose
The Cost Object Controlling component is designed to answer the question: “What costs have
been incurred for which objects?” To answer this question, the component assigns the costs
incurred in the company to the company’s output. The output of a company can consist of
materials manufactured in-house, individual orders, or intangible goods.
This component offers real-time cost management functions that determine the cost of goods
manufactured in all plants.
The Cost Object Controlling component enables you to determine the cost of goods
manufactured or the cost of goods sold for the manufacturing or service output of the company.
You can:
• Establish planned costs (budgeted costs)
• Record actual costs for the cost objects
• Compare actual costs with target costs and with planned costs, and analyze variances
• Determine price floors for products or individual orders
You can use the functions of Cost Object Controlling by lot or by period.
Cost Object Controlling supplies basic information for the following business functions:
• Price setting and general price policy
• Inventory valuation
• Cost of goods manufactured
• Profitability analysis
• Profit Center Accounting
Here are some of the ways you can utilize the Cost Object Controlling component:
• To determine whether the actual cost of an order matched or exceeded the planned cost
• To determine the production variances between actual costs and target costs, and why these
occurred
• To decide whether to accept a particular sales order (whether the sales order will be
profitable or not)
• To determine where your company has particularly low costs and therefore which cost
objects it should concentrate on
• To decide whether it would be more profitable to manufacture a cost object in-house or to
outsource it
• To determine whether and how the cost of goods manufactured can be optimized
Cost Object Controlling also can provide special information on:
106 December 1999

• The cost of unplanned scrap

• Cost savings resulting from new production methods
• Cost behavior during capacity bottlenecks
The cost of goods manufactured for finished products and the work in process calculated for
orders can be used to capitalize the inventories in your balance sheet.
Integration
Before you use the Cost Object Controlling (CO-PC-OBJ) component in the R/3 System, you
establish the planned (budgeted) costs for each product in a cost estimate. You can use various
costing methods in Product Cost Planning (CO-PC-PCP) for this purpose.
Cost Object Controlling accesses master data and transaction data in Production Planning (PP),
Production Planning - Process Industries (PP-PI), Materials Management (MM), Sales and
Distribution (SD), and Overhead Cost Controlling (CO-OM).
You can view the data of Cost Object Controlling in the Product Cost Controlling Information
System (CO-PC-IS).
When you settle, you can transfer the data of Cost Object Controlling to other components in the
system:
• Actual Costing / Material Ledger (CO-PC-ACT)
• Financial Accounting (FI) for purposes such as capitalizing unfinished and finished products
and automatically creating reserves
• Profitability Analysis (CO-PA) to analyze the costs by market segment
• Profit Center Accounting (EC-PCA) to analyze the results by profit center
See also: Integration of Cost Object Controlling [Ext.]
Features
All postings of actual data that refer to a cost object result in an immediate debit of the cost
object.
The closing activities at the end of the period allow you to do the following:
• Revaluate activities at actual prices
• Allocate overhead using template allocation and by defining overhead rates for cost objects
• Determine the work in process (the value of unfinished goods)
• Determine the variances between target costs and actual costs
• Transfer the calculated data to other objects and application components
• Compile periodic reports on a regular basis
Reporting functions are supported by the Cost Object Controlling Information System.
In the R/3 System, you can analyze planned costs, target costs, actual costs, and quantity
information at various levels, such as that of the plant, product group, or individual cost objects.
The data are always available in real time.
Drilldown capabilities enable you to access detailed information.
December 1999 107

From the evaluations at plant level, you drill down to the product groups and from
there down to materials/products or individual orders.
See also:
The sections following this one tell you:
• Which cost objects you can use in the R/3 System
• The relationship between Product Cost Planning and Cost Object Controlling
• Which master data you use
• The different forms of Cost Object Controlling available
This documentation also provides detailed background information on the functions provided in
Cost Object Controlling and the different scenarios available.
Cost Object Controlling in the R/3 System is divided into the following subcomponents:
• Product Cost by Order [Page 113]
• Product Cost by Period [Page 109]
• Product Cost by Sales Order [Page 116]
• Costs for Intangible Goods and Services [Page 120]
For detailed information on creating material cost estimates, such as for the purpose of
calculating the standard costs of your materials, see the document Product Cost Planning.
For detailed information on evaluating data in the information system, see the document Product
Cost Controlling Information System.
The present documentation does not contain detailed information on cost accounting for projects.
For information on cost accounting in engineer-to-order environments, refer to the document
Project System.
108 December 1999

Product Cost by Period

Purpose
The application component Product Cost by Period enables periodic analysis of costs at the
product level.
In contrast to Product Cost by Order in which you analyze costs by lot, in Product Cost by Period
you analyze costs by period. This means that you collect the costs on a cost object over an
extended period of time, and analyze the debits and credits in each period.
You can use the following cost objects in Product Cost by Period:
• Product cost collectors [Ext.]
Product cost collectors enable you to collect costs at the product level independently of
the production type. Regardless of whether the production environment is order-related
production, process manufacturing, or repetitive manufacturing, you collect the
production costs for the product on a product cost collector and analyze the costs in each
period.
• Cost object hierarchies [Ext.] with their cost object nodes and assigned objects (such as
materials)
You can use cost object hierarchies in addition to product cost collectors. Costs that
cannot be assigned directly to particular orders (usually product cost collectors) can be
collected at higher levels by means of a cost object hierarchy. In this case, the costs are
collected on cost object nodes in the cost object hierarchy. You can structure cost object
hierarchies in different ways, for example according to product group or area of
responsibility. This enables you to collect costs according to how closely the costs are
related to the product. All orders assigned to a cost object hierarchy must be settled in
each period.
You can also periodically analyze and settle costs for manufacturing orders. However, it is
recommended that you settle manufacturing orders by lot rather than by period. If you want to
settle costs by period, you should use a product cost collector. If you want to collect and analyze
costs directly on manufacturing orders [Ext.], read the information under Product Cost by Order
[Page 113].
You can use the Product Cost by Period component for the following purposes:
• Create a preliminary cost estimate for product cost collectors
• Calculate and analyze target costs and actual costs for product cost collectors and cost
object hierarchies
• Calculate or update the Work-in-Process Inventory [Ext.] and the Finished Goods Inventory
• Calculate and analyze variances for each period
• Transfer data to Financial Accounting (FI)
• Transfer data to Profitability Analysis (CO-PA)
• Transfer data to Profit Center Accounting (EC-PCA)
• Transfer data to Actual Costing/Material Ledger (CO-PC-ACT)
You can use the Product Cost by Period component in the following production environments:
December 1999 109

• In make-to-stock production [Ext.]

• Mass production based on sales orders [Ext.] if you are using a valuated sales order stock
[Ext.] and the production environment is repetitive manufacturing
You normally use the Product Cost by Period component in the following situations:
• In repetitive manufacturing environments
In repetitive manufacturing environments, you always collect and analyze your costs on
product cost collectors.
• In make-to-order or process manufacturing when you are not interested in managing your
costs at the order level In this case, instead of using the manufacturing orders as the basis
for Cost Object Controlling, you create a product cost collector.
• When you have costs that you cannot (or do not want to) assign to particular orders
You then assign these costs to the cost object nodes in a cost object hierarchy.
Integration
For general information on Cost Object Controlling, refer to the section Cost Object Controlling
[Ext.].
You can use both the Product Cost by Period component and the Product Cost by Order
component in conjunction with the Product Cost by Sales Order [Page 116] component.
When production orders or process orders are assigned to a cost object hierarchy, you use the
Product Cost by Order [Page 113] component in conjunction with the Product Cost by Period
component.
You can see the costs in the Product Cost Controlling Information System (see also: Information
System for Product Cost by Period [Ext.]).
Features
You analyze the costs of product cost collectors in the Product Cost by Period component.
Product cost collectors enable realization of lean cost management scenarios that are not
integrated with the logistics components.
The use of product cost collectors does not prevent you from performing logistical functions on
the manufacturing order or production version (such as goods issues, confirmations, and goods
receipts). The costs incurred from the logistical transactions are updated directly on the product
cost collector.
– You enter reporting point backflushes in repetitive manufacturing. The product cost
collector is charged with actual costs.
– You create a goods receipt in repetitive manufacturing. The product cost collector is
credited.
If you are in a sales-order-related production environment and are using a valuated sales order
stock in repetitive manufacturing, you can collect the costs for individual requirements materials
110 December 1999

on product cost collectors. (See also: Product Cost Collectors in Sales-Order-Related Production
[Ext.])
You can use cost object hierarchies in addition to collecting costs at the level of product cost
collectors. You can distribute the costs assigned to the cost object nodes to the orders on the
basis of keys. You can then calculate and analyze the variances on the orders. It is also possible
to calculate the variances on the cost object nodes instead of distributing the costs.
In the Product Cost by Period component you always calculate the work in process at target
costs. All orders used in the Product Cost by Period component have the settlement type PER
(periodic).
You can do the following at the end of the period:
• Allocate process costs to product cost collectors and to the cost object hierarchy.
• Revaluate activities and business processes at actual prices
• Allocate overhead
• Distribute the actual costs if you are using a cost object hierarchy
• Calculate work in process for the product cost collector
• Calculate variances for the cost object hierarchy or for the product cost collector
• Transfer data to other application components such as FI, EC-PCA, CO-PA, and CO-PC-
ACT
Constraints
Period-based cost management at the level of manufacturing orders is not recommended. At the
level of manufacturing orders, you should perform lot-based cost controlling in the Product Cost
by Order component.
In sales-order-related production, product cost collectors are possible if you are using a valuated
sales order stock and the production environment is repetitive manufacturing. If you are
manufacturing on the basis of production orders and process orders in sales-order-related
production, you cannot use product cost collectors as cost objects.
You cannot use the Product Cost by Period component together with the Product Cost by Sales
Order component in sales-order-related production environments when you are using a
nonvaluated sales order stock [Ext.]. The reason for this is that all orders in which the sales order
item is the settlement receiver have the settlement type FUL (full settlement).
See also:
Recommendations for repetitive manufacturing environments are provided in the following
section:
Recommendations for Repetitive Manufacturing [Ext.]
For detailed information on the Product Cost Controlling Information System, see the
documentation Product Cost Controlling Information System [Page 131].
For detailed information on Profitability Analysis (CO-PA), see the document CO Profitability
Analysis.
For detailed information on Profit Center Accounting (EC-PCA), see the document EC Enterprise
Controlling.
December 1999 111

112 December 1999

Product Cost by Order

Purpose
The Product Cost by Order application component enables you to analyze costs at the level of
manufacturing orders [Ext.]. You can use the Product Cost by Order application component in
make-to-stock and sales-order-related production environments. In sales-order-related
environments, you can use Product Cost by Order in mass production on the basis of sales
orders and as a complement to the Product Cost by Sales Order component (including complex
make-to-order environments).
In Product Cost by Order, the manufacturing orders themselves are the cost objects. Costs
charged to manufacturing orders are usually analyzed and settled by lot. This means that
variances can only be analyzed after the entire planned production quantity has been put into
inventory.
The Product Cost by Order component allows you to do the following:
• Calculate and analyze planned costs, target costs, and actual costs of production orders
and process orders
• Calculate or update the work-in-process inventory [Ext.] and the finished goods inventory
• Calculate and analyze variances
• Transfer data to Actual Costing / Material Ledger (CO-PC-ACT)
You can use the Product Cost by Order component in the following situations:
• In sales-order-related production [Ext.] environments when you are using complex make-
to-order production [Ext.] with valuated sales order stocks [Ext.] and want to calculate the
work in process and variances at the level of the logistical orders (production orders and
process orders)
In this case you use the Product Cost by Order component together with the Product
Cost by Sales Order component.
• In sales-order-related production environments with mass production on the basis of
sales orders [Ext.] when you are using valuated sales order stocks and you want to
concentrate your cost-management efforts more on the costs of the logistical orders than
on the cost of the products
• In make-to-stock environments [Ext.] when you want to focus on the cost of the order
When based on manufacturing orders, the Product Cost by Order component is particularly
suitable for measuring the cumulative cost of lots (that is, when the settlement rule specifies full
settlement).
You can implement Product Cost by Order with production orders and process orders in order-
related production or process manufacturing environments.
December 1999 113

Integration
For general information on Cost Object Controlling, refer to the section Cost Object Controlling
[Ext.].
You can use both the Product Cost by Order component and the Product Cost by Period
component in conjunction with the Product Cost by Sales Order component.
You can use the Product Cost by Order component with projects.
You can look at the costs in the Product Cost Controlling Information System.
Features
You can analyze costs of manufacturing orders by period. However, SAP recommends lot-based
cost controlling for manufacturing orders. The manufacturing order must have settlement type
FUL (full settlement) in this case.
You can implement Product Cost by Order with or without the Production Planning application
component. If the Production Planning component is not installed, you can create a production
order without a quantity structure [Ext.] in Controlling.
In Product Cost by Order, you can link production orders and process orders into a collective
order [Ext.].
You can represent joint production with process orders and production orders. (See also: Special
Requirements in Joint Production [Ext.]).
When you are costing by lot, you calculate the work in process using the actual costs (difference
between debits and credits for the order). When you are costing by period, you calculate the work
in process at target costs based on the confirmed operations or reporting points.
• Allocate process costs to the manufacturing orders
• Calculate the work in process, variances, and scrap
• Transfer data to other application components such as FI, EC-PCA, CO-PA, and CO-PC-
ACT
The information system allows you to summarize the data in various ways, so that you can view
the costs by material, by order type, or by plant.
Constraints
If you are using the Product Cost by Sales Order component with a nonvaluated sales order
stock [Ext.], you cannot calculate work in process or variances for production orders or process
orders assigned to a sales order item. Variance calculation is not supported by the system when
you are using a nonvaluated sales order stock. Standard costing is therefore not possible in this
case. However, all these functions are available if you are using a valuated sales order stock.
See also:
You can cost production orders and process orders by period. For information on the Product
Cost by Period functions, such as on using cost object hierarchies, refer to the documentation on
the application component Product Cost by Period [Page 109].
114 December 1999

You can use production orders and process orders in conjunction with the Product Cost by Sales
Order component. It is advisable to use the Product Cost by Sales Order component together
with cost object controlling on the basis of lots. For more information, refer to the documentation
on the application component Product Cost by Sales Order [Page 116]. This document also
provides information on the special aspects of valuated sales order inventories, such as
calculating standard prices.
For detailed information on logistical processing, see the documentation PP Production Planning
and PP-PI Production Planning Process Industries.
You can view the data of the Product Cost by Order component in the information system in a
number of different formats. For more information, see the document Product Cost Controlling
Information System.
For detailed information on Profitability Analysis (CO-PA), see the document CO Profitability
Analysis.
For more information on Profit Center Accounting, see the document EC Enterprise Controlling.
For more information on engineer-to-order environments, see the document Project System.
For information on rework, see the following sections:
Integration of Rework for Production Orders [Ext.]
Representing Rework in the System [Ext.]
Rework Operations and Rework Quantities [Ext.]
Rework and Confirmations [Ext.]
Preliminary Settlement for Co-Products, Rework [Ext.]
Preliminary Settlement for Rework [Ext.]
Performing Preliminary Settlement for Co-Products, Rework [Ext.]
December 1999 115

Product Cost by Sales Order

Purpose
In the application component Product Cost by Sales Order, the sales document items (items in
inquires, quotations, or sales orders) function as the cost objects for which you can calculate
costs and revenues for both planned and actual data.
If you have already created a sales document item that carries costs and revenues for an inquiry
or quotation, the subsequent sales document item (such as the sales order item) references the
previous one. This enables you to manage the costs of the entire sales and distribution process.
You can also flag a sales order item without a previous inquiry and quotation as carrying costs
and revenues.
In sales-order-related production, you use the functions of Product Cost by Sales

Order to collect and analyze the costs in complex make-to-order production [Ext.] on
the sales order item.
In mass production on the basis of sales orders [Ext.] the focus of cost management
is on the material being produced. If you are using a valuated sales order stock [Ext.]
in mass production on the basis of sales orders, you can collect and analyze the
costs on manufacturing orders (production orders or process orders) or product cost
collectors. In this case you control the costs of the products. The flow of quantities
and values corresponds to that of make-to-stock production, while the cost
accounting method costs the products.
For information on product cost management at the level of manufacturing orders,
refer to the following documentation:
Product Cost by Order [Page 113]
For information on product cost management at the level of product cost collectors,
refer to the following documentation:
Product Cost by Period [Page 109]
For information on the use of product cost collectors in sales-order-related
production, refer to the following section:
Product Cost Collectors in Sales-Order-Related Production [Ext.]
The documents Product Cost by Order and Product Cost by Period are also relevant
if you are a manufacturing enterprise and are interested in using the Product Cost by
Sales Order component in conjunction with Product Cost by Order or Product Cost
by Period.
You can use the Product Cost by Sales Order component in the following situations:
• When you are manufacturing in-house with reference to a sales order in complex make-
to-order production
• When you are purchasing customer-specific trading goods with reference to a sales
order and reselling them to your customers
• When you are providing services whose costs are assigned to a sales order
116 December 1999

The Product Cost by Sales Order component enables you to do the following:
• Calculate and analyze planned costs and actual costs by sales document item
• Calculate and analyze planned revenues and actual revenues by sales document item
• Revaluate the activities and business processes allocated to the cost objects with actual
activity prices
• Allocate the overhead costs to the cost object using overhead calculation or dynamic
process allocation
• Calculate the value of goods that have been delivered to your customer but not invoiced
• Create reserves automatically
You use the Product Cost by Sales Order component in the following situations:
• When you want to analyze costs and revenues for sales document items
• When you are using a nonvaluated sales order stock
Integration
Product Cost by Sales Order accesses master data and transaction data in Controlling (CO),
Sales and Distribution (SD), and Materials Management (MM). In manufacturing enterprises,
Product Cost by Sales Order also accesses data in Production Planning (PP) or Production
Planning for the Process Industries (PP-PI).
If you are a manufacturing enterprise, you normally use Product Cost by Sales Order in
conjunction with Product Cost by Order or Product Cost by Period.
To estimate the costs for materials, you use the Product Cost Planning component (CO-PC-
PCP).
You can display planned costs, target costs and actual costs in the Product Cost Controlling
Information System (CO-PC-IS).
Features
With the Product Cost by Sales Order component you can collect and analyze costs for:
• The manufacturing orders (production orders and process orders) and product cost
collectors assigned to a sales order item
• The purchase orders assigned to a sales order item
• Funds commitments in inventory
You can supplement the display of these funds commitments with the purchase
requisition commitment and the purchase order commitment for the sales order item.
• The trading goods in a sales order item
December 1999 117

• The service performed for a sales order item

Flagging a sales order item as carrying costs and revenues enables you to:
• Assign special direct cost of sales to the sales document item
• Allocate process costs (such as development costs) to the sales document item
• Allocate process costs to sales order items
• Perform results analysis
• Transfer data to other application components such as FI, CO-PA, and EC-PCA
• Enter a commitment carryforward at the end of the year
In Product Cost by Sales Order you normally use a valuated sales order stock. As a
manufacturing enterprise, the unfinished goods are valuated through the calculation of work in
process (WIP) on the manufacturing orders assigned to the sales order item. The valuation of
materials that have been manufactured but not yet delivered is made at the time of the goods
receipt posting for the manufacturing order (production order or process order). You can valuate
delivered but not yet invoiced goods using results analysis. Settling to FI activates goods in
transport and goods at construction site in your balance sheet. You can also represent the
valuation of goods in transit and goods at construction site with FI functionality.
If you are not using Sales and Distribution, you can create a customer
requirement for the material in Production Planning. The costs and revenues can be
assigned to this requirement and analyzed in the information system.
Constraints
You cannot determine variances for the sales document item.
See also:
For information on valuated sales order stocks, read the following sections:
Valuated Sales Order Stock [Ext.]
Update of Valuated Sales Order Stock [Ext.]
Standard Price with Valuated Sales Order Stocks [Ext.]
Viewing Valuated Special Stocks [Ext.]
Example for Valuated Sales Order Stock Without Product Cost by Sales Order: Quantity and
Value Flow [Ext.]
Product Cost Collectors in Sales-Order-Related Production [Ext.]
Variances with a Valuated Sales Order Stock [Ext.]
For information on sales order items that carry costs and revenues, refer to the following section:
Sales Order Item That Carries Costs and Revenues [Ext.]
118 December 1999

For information on logistical processing such as assembly processing and variance

manufacturing, refer to the following section:
Selected Logistical Processes and Cost Objects in Cost Object Controlling [Ext.]
For information on the special requirements with a nonvaluated sales order stock, refer to the
following section:
Special Case: Nonvaluated Sales Order Stock [Ext.]
For more information on the master data in Controlling and Production Planning, as well as other
basic information, see the following section:
Cost Object Controlling [Page 106]
For detailed information on master data in Sales and Distribution, as well as other information on
sales and distribution processing, see the document SD Sales and Distribution Processing.
You can view the data of the Product Cost by Sales Order component in the information system
in a number of different formats. For more information, see the document Product Cost
Controlling Information System.
For detailed information on Profitability Analysis, see the document CO Profitability Analysis.
For detailed information on Profit Center Accounting (EC-PCA), see the document EC Enterprise
Controlling.
In engineer-to-order environments, you link a project to the sales order. The necessary
information on cost management for a project can be found in the document Project System.
December 1999 119

Costs for Intangible Goods and Services

Purpose
The application component Costs for Intangible Goods and Services provides capabilities for
analyzing the costs of intangible goods and services.
A telecast is an example of an intangible good. Assembling a machine at a customer site is an
example of a service.
The cost objects can be internal orders or general cost objects [Ext.].
You can group general cost objects into cost object groups.
This component allows you to do the following:
• Calculate planned costs and actual costs for the cost objects.
• Transfer data to Profit Center Accounting (CO-PCA)
Features
This component allows you to do the following:
• Determine the costs for a general cost object over its entire life or by period
When you cost a general cost object by period, you can plan your costs on the basis of
statistical key figures. You can also calculate your actual costs in this case on the basis
of statistical key figures.
You can analyze the difference between the planned costs and the actual costs in the
Product Cost Controlling Information System.
• Collect actual costs on a general cost object when the actual costs were incurred from:
− Goods movements
− Postings in Financial Accounting
− Postings in Controlling
• Collect revenues on internal orders if the internal orders can carry revenues
• Perform results analysis for the internal order when you are using internal orders that carry
revenues
In the period-end closing activities you can:
• Allocate process costs to the cost objects
• Perform results analysis if you are using internal orders that carry revenue
• Transfer data to other application components such as FI, EC-PCA, and CO-PA
120 December 1999

Constraints
If you are using a general cost object in the Costs for Intangible Goods and Services component,
you cannot assign revenues to this cost object.
See also:
You can view the data of the Costs for Intangible Goods and Services component in the
information system in a number of different reports. For more information, refer to the document
Product Cost Controlling Information System [Page 131].
For more information on internal orders, refer to the documentation CO Internal Orders [Page
33].
For more information on results analysis, refer to the following documentation:
Product Cost by Sales Order [Page 116]
December 1999 121

Actual Costing / Material Ledger
Actual Costing / Material Ledger
122 December 1999

Single-Level Material Price Determination

Use
Single-level material price determination calculates the periodic unit price for a material. The
standard price and the cumulative single-level differences of the period are taken into account.
The material price calculated in multilevel price determination can be used for stock valuation.
Single-level price determination is a prerequisite for the execution of multilevel price
determination [Ext.].
For more information see Periodic Material Valuation [Ext.] and Multilevel Actual Costing [Ext.].
Prerequisites
The material ledger is active.
The price determination indicator 3 is set in the material master.
The price control indicator 3 is set in the material master.
Features of Single-Level Material Price Determination

A level is identified through a material and its corresponding procurement process [Ext.]. For a
material whose price is calculated through single-level price determination, movements are
always carried out at the standard price as the price control indicator S is set in the material
master record. Differences between the standard price and the actual price of a valuated
transaction are updated in the material ledger.
Single-Level Price Determination
Level
Finished Level
product
Level
Semi-
Level
finished
product
Level
Raw Level
material
December 1999 123

The differences that arise during the procurement of a material are included in single-level
material price determination.
• Price differences
These occur when the amount posted for a movement differs from the standard price in
the material master record. The following transactions can cause these differences:
− Goods receipts resulting from a purchase order
− Invoice receipts
− Settling production orders, process orders, and run schedule headers
− Transfer postings
− Initial entry of stock balances with values
− Free delivery
− Inward movements from consignment stock to the company’s own stock
• Exchange rate differences
These occur when an amount in a foreign currency is translated using different exchange
rates. This is the case, for example, when the exchange rate at the time of the invoice
entry differs from the exchange rate at the time of the goods receipt.
• Differences from revaluations
These occur, for example, from a credit/debit to a material, a price change, or a posting
to a prior period.
The price calculated through price determination is updated as a moving average price (V price)
in the Accounting 1 view of the material master record. The price control indicator S remains set.
The standard price does not change.
Constraints
Materials whose prices are determined with transaction-based price determination cannot be
considered later in multilevel actual costing.
See also:
Periodic Material Valuation [Ext.]
Multilevel Actual Costing [Ext.]
Transaction-Based Material Price Determination [Ext.]
124 December 1999

Costing Run: Multilevel Actual Costing
Costing Run: Multilevel Actual Costing

Purpose
In the component Actual Costing/Material Ledger, you can perform multilevel actual costing by
plant during a costing run. The follow-up costs are allocated to the finished and semi-finished
goods. The differences between the material's preliminary valuation price and actual prices are
assigned to the material stock and consumption. The recalculated prices can then be used for
future valuation.
To use this function, choose Accounting → Controlling → Product Cost Controlling → Actual
Costing/Material Ledger → Actual Costing → Edit Costing Run.
Features
In multilevel actual costing, the system calculates a new valuation price for a material using both
the material ledger master data and quantity structure data across all manufacturing levels.
See the following for further information:

Creating a Costing Run [Ext.]
Performing a Selection [Ext.]
Determining the Costing Sequence [Ext.]
Allowing Material Price Determination [Ext.]
Performing Single-Level Material Price Determination [Ext.]
Performing Multi-Level Price Determination [Ext.]
Allowing Closing Entries [Ext.]
Performing Closing Entries [Ext.]
Marking Prices for Future Valuation [Ext.]
December 1999 125

Price changes
Price changes
Use
Using this function, you can change prices, mark prices for change and release prices for
material valuation.
If the material ledger is active, a price change for a material with price determination 3 (single-
and multi-level material price determination) is only possible if there have been no goods
movements relevant to valuation and no incoming invoices for the material in the period.
If the material ledger is not active, it is always possible to change material prices, regardless
which price control has been set for the material.
• If a material is valuated at the standard price, it is always valuated at the same price. The
development of delivered prices is included in the material master for statistical purposes, but
not used for material valuation. The price differences are posted to a price difference
account.
• If a material is valuated at the moving average price, the price changes with every goods
movement and incoming invoice if the purchase order price or invoice price varies from the
moving average price. In other words, the price automatically reflects the delivered price.
You can make a price change in the following two ways:
• In a processing step with immediate effect
For more information, see Changing Material Prices [Ext.].
• In a two-step procedure
For more information, see Determining Future Prices [Ext.] and Releasing Planned Prices
[Ext.].
When making changes with immediate effect, you can post a price change to the previous period
or year. For more information, see Posting Price Changes to the Previous Period or Year [Ext.].
Features
If you activated the material ledger, you can maintain valuation prices independent of one
another in up to three currencies and/or valuations. If the material ledger is not active, you only
maintain the valuation prices in company code currency with legal valuation. You can perform the
following functions:
Change material prices

You can change current material valuation prices retrospectively or at the current date. To do so,
enter the posting date and company code in the selection screen.
Debit / Credit materials

You can debit and credit materials retrospectively and at the current date. To do so, enter the
posting date and company code in the selection screen.
Determine future prices

You can maintain future price for materials as follows:
126 December 1999

Price changes
• Manually with a validity date in the material master.

• Through self-defined translation rules between currencies/valuations in the rule maintenance
of the transaction Maintain Future Prices [Ext.].
• Through manual individual maintenance in the transaction Maintain Future Prices [Ext.]. With
rule maintenance, you determine the translation rules between currencies and valuations
with which the future prices are calculated. If you are performing manual individual
maintenance, you can manually overwrite the prices calculated by the system.
Release planned prices

You can release planned prices for material valuation in the following ways:
• manually using the price release functions
• automatically using the settings for Dynamic Price Release in Customizing
Planned prices are released automatically upon the first goods movement or invoice receipt
in a period. A manual price release is necessary for materials with no goods movements or
invoice receipts.
Future planned prices are calculated in the standard cost estimate. The results of a standard cost
estimate take first priority as the valuation price for materials with price control S. For more
information, see Product Cost Planning [Ext.].
If multiple planned prices exist for a material, they will be treated by the system according to the
following priorities:
1. Marked standard cost estimate
Release
Standard
Cost Estimate
Future Current
Standard
Plan
Stück -
Standard
liste
Price Price (S)
Period 1
2. Manually maintained future valuation price
December 1999 127

Price changes
Manual
Release
Future
Valuation Price
Current
Future
Valuation
Valuation
-
Price
Price (S/V)
Price valid from

5.5.2000
Influence on Currency Translation

In order to simplify maintaining valuation prices independent of one another in the transaction
Maintain Future Prices; you can influence how the amounts in the different currencies and
valuations are translated from currency to currency and valuation to valuation. You can overwrite
the translated amounts manually if you activate manual individual maintenance in the transaction.
Maintaining future valuation prices in the material master record is possible in all set
currencies. Translation into further currencies is performed with the exchange rate
set in Financial Accounting.
See also:
Debiting / Crediting Materials [Ext.]
Determining Future Prices [Ext.]
Releasing Planned Prices [Ext.]
Changing Material Prices
[Ext.]Displaying Price Changes [Ext.]
Material Valuation in the SAP System [Ext.]
128 December 1999

Multiple Currencies and Valuations for Materials

Purpose
Using the component Actual Costing/Material Ledger, you can carry values for materials in up to
three currencies. If you use the functions for parallel valuation, the values in each currency can
also represent a valuation view (such as legal valuation, group valuation, and profit center
valuation).
The combination currency/valuation is a valuation approach.
Integration
The system makes historical currency translation possible for valuation-relevant transactions.
This means that items are translated using the exchange rate that was valid at the time of posting
that item.
Currency amounts that come from stock valuation, invoice verification, cost estimates, and order
settlement are translated into the other currencies in the respective areas and updated in the
material ledger.
You post an invoice receipt. The system translates the amount into the currencies
specified in the material ledger at the current exchange rate.
You settle a production order that is carried in two currencies/valuations. The values
in the production order correspond to currencies/valuations that are carried in the
material ledger. These values are not translated in the material ledger, but rather
transferred directly. The amount in the third currency is translated from the company
code currency using the average rate.
You mark a standard cost estimate, which has results in two currencies/valuations.
The results are not translated in the material ledger, but rather transferred directly.
The amount in the third currency is translated using the amount in the company code
currency and the exchange rate at the time of marking.
During actual costing, the system calculates new valuation prices and new inventory values
independent of each other in the different currencies/valuations.
December 1999 129

Price in Price in Price in

Curr. 1 Curr. 2 Curr. 3
Material Settlement
New New New

Price in Price in Price in
Curr. 1 Curr. 2 Curr. 3
This procedure also means that over the course of time, the price of a material could rise in one
currency while falling in another.
In Customizing for Financial Accounting, you can determine whether translations

should take place working from the transaction currency (currency of a document
when received by the system) or in the company code currency. You can also
determine which exchange rate type should be used for the translation, such as
translation at average rate.
Features
In the standard system, exchange rate differences are calculated in which the exchange rates at
goods receipt and invoice receipt are compared. In Customizing for Invoice Verification, you can
specify that exchange rate differences should not be translated using the exchange rate at goods
receipt, but rather with an assumed exchange rate, which can be held constant for a period of
time (such as a year or a season). Using these Customizing settings, you can also specify that all
exchange rate differences are to be regarded as price differences.
See also:
Multiple Value Flows in Financials [Ext.]
Multiple Values for Material Stocks Using the Material Ledger [Ext.]
130 December 1999

Product Cost Controlling Information System
Product Cost Controlling Information System

Purpose
The component CO-PC-IS (Product Cost Controlling Information System) provides an extensive
and powerful range of reports for the following areas:
• Product Cost Planning
• Cost Object Controlling with the subcomponents
– Product Cost by Period
– Product Cost by Order
– Product Cost by Sales Order
– Costs for Intangible Goods and Services
• Actual Costing / Material Ledger
You can use the Information System to evaluate the data generated in the respective
components. The information system provides reports for both standard and specialized analysis
purposes.
Integration
The information system is a part of Product Cost Planning, the application component Cost
Object Controlling, and Actual Costing / Material Ledger.
Features
The standard setup of the Product Cost Controlling Information System is a structured report list
from which you can choose the reports you need.
The standard reports provided in the R/3 System are presented in a tree structure. You can
change this SAP tree structure to suit your own needs, and add your own custom reports. For
more information, see: Customer Modification to the Information System [Ext.]
The documentation for the Product Cost Controlling Information System is oriented around the
structure of the SAP report tree. This ensures easy access to the desired information in the
documentation, as navigating through the documentation mirrors navigating through the report
tree.
See also:
Information System for Product Cost by Period [Ext.]
December 1999 131

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CO Component Short

SAP, SAP Logo, mySAP.com, mySAP.com Marketplace, mySAP.com Workplace, mySAP.com

CO Component Short Description.....................................................................6

Releasing the Budget..................................................................................................... 69

CO Component Short Description

Cost Center Accounting (CO-OM-CCA)

Internal Orders (CO-OM-OPA)

Product Cost Controlling (CO-PC)

Profitability Analysis (CO-PA)

Profit Center Accounting (EC-PCA)

Overhead Cost Controlling

Cost and Revenue Element Accounting

Cost Center Accounting

Cost Element Accounting

Primary Cost/Revenue Elements

Examples of primary cost elements include:

Secondary Cost Elements

Examples of secondary cost elements include:

The Reconciliation Ledger

Statistical Key Figures

Cost Center Accounting

Depending on the level of decision-making powers assigned to the manager of an organizational

Cost center Recording costs with reference to plan values

Allocating actual costs

Planning activities and costs

Allocating plan costs

Entering plan and actual statistical key figures

Master Data in Cost Center Accounting

• Using the original cost element (reposting, distribution) or

Cost Center Planning

Cost Center Budgeting

Funds Commitments (Cost Centers, Internal Orders,

− Reducing Funds Commitments Individually

Periodic Repostings/Accrual Calculation

Reconciliation with Financial Accounting

Cost Center Summarizations

Master data in internal orders

Planning in Internal Orders

Planning in More Than One Plan Version

Manual Internal Order Planning

Periodic Reposting in Planning

Business processes do not use commitments.

Settlement occurs in parallel in all valuations, with the exception of settlement to

Cost planning Budgeting

The Project System recognizes the following different budget types:

• The prerequisites for budget allocation [Ext.]

• How you allocate the original budget [Page 66] in a project

• How you release the budget [Page 69]

• Carrying Forward Commitments at Year-End-Closing

Period-End Closing in Internal Orders

Telephone Mail room

Business processes do not use commitments.

Internal Order Settlement

Manual Cost Planning in the Work Breakdown Structure

Cost planning Budgeting

Planning in More Than One Plan Version

• Hierarchy Planning in the WBS

• Cost Element Planning and Activity Input Planning [Ext.]

• See Unit Costings [Ext.]

Business processes do not use commitments.

Orders for Projects

• Plant maintenance orders

Cost planning Budgeting