TO-BE WORKSHOP

Presentation to BPO

Controlling
Nov 17, 2008

AGENDA

09:00am-12:00am PC Session Key Data for PC

Cost Component Valuation of Cost Component Overall Process Standard Cost Calculation Actual Cost Calculation Analysis of Costing Result

Overall Process on PC

02:00pm-03:45pm Cost Center Session Cost Center Structure Overall Process on Cost Center

Budget control process Month-end process

04:00pm-05:00pm PA Session Key Data for PA Overall Process for PA The reporting result

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TO-BE WORKSHOP

Product Costing

Changes and Benefits

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Main Component of Product Costing

Product Cost Planning

Verify Master Data: BOM/ Routing BOM Routing

Cost Object Controlling

Record Planned Cost/ Actual Cost
Production Oder No. xxx Material Cost xxx Activity Cost xxx Overhead Cost xxx

Calculated Cost of Material/Activity/OH

Month-End Closing Activity Price Revalue Work in Process Variances Settlement

Standard cost of produced material

Actual cost/variance per Order

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Cost Components
Cost of Production
Direct Material Cost Main Material Sub Material Scrap (Re-usable components) Package Internal Semi Finished Goods External Semi Finished Goods Chemical & Spare Part Direct Activity Cost Direct Labor Machine Depreciation Mold Depreciation Overhead Cost Electric Expense Indirect Salary Expense Indirect Material Expense Tools and Instrument Expense Uniform, Labor Safety, Promotional Stuff Indirect Depreciation Others

Quantity Structure

Valuation Structure

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Cost Components Valuation - Material

Price Data Price on Material Master
Material component
Outsourcing Material Scrap Semi FG (In-house Produced) FG

Standard Cost
Moving Price at the time running STD cost Standard Price Standard Price Standard Price

Actual Cost
Moving Price at the time goods issued Standard Price Standard Price Standard Price

Quantity Data BOM and Actual Usage on Production Order

Material component
Raw Material Scrap Semi FG FG

Standard Cost
BOM QTY BOM QTY BOM QTY BOM QTY

Actual Cost
Actual usage QTY Actual usage QTY Actual usage QTY Actual usage QTY

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Cost Components Valuation - Activity

Price Data Price of Activity
Standard Cost
Direct Labor (HR) Planning price with version 0 on each period

Actual Cost
Actual price

Machine Depreciation (HR)

Mold Depreciation (HR)

Planning price with version 0 on each period

Planning price with version 0 on each period

Actual price
Actual price

Quantity Data Routing and Actual Confirmed

Standard Cost
Direct labor (HR) Machine depreciation (HR) Mold depreciation (HR) Routing time Routing time Routing time

Actual Cost
Actual time confirmed Actual time confirmed Actual time confirmed

** Activity Unit confirmed in MIN and translate to HR for calculate price

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Cost Components Valuation - Overhead

Price Data OH Rate Maintenance
Standard Cost
Overhead Rate Plan Rate

Actual Cost
Actual Rate

Quantity Data (Overhead Cost Driver)

Overhead Type
Electric Indirect salary Indirect material Tools and equipment Uniform, Labor safety, Promotional stuff

Allocation based
Capacity and machine time Direct labor time Main material value Machine time Direct labor time

Indirect deprecation

Main material value (for pressing & grinding) Labor time (assembling/glue sticking/ water color/ ink) Machine time (printing & wax)
Main material value

Others

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Costing Variant
Expect to: Compare alternative cost estimates to optimize your business decisions Simulate the cost impact of changing one production factor or modifying the amount of overhead allocated to a product Design the variants fit your need: Variant version 0: Std. Cost Est. Period Cost real version, use for your actual costing Variant version 1: Std. Cost Est. Plan plan version 1 (before move to real version)
Variant 0 Variant 1

Variance 1 use the same condition but use for running to compare with old (actual)
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Overall Process of Product Costing

Calculate standard cost for new product PC Calculate standard cost for current product PC Update standard price in material master PC Create production order PP Confirm activity usage Confirm output unit PP Cost of Production Order FI Allocation process on cost center CCA Calculate production order with actual price PC Post variances to FI FI Adjust variance to COGS/Inventory FI
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Confirm material usage Record daily expenses

Calculate production variance PC

Calculate WIP PC

Detail STD cost for new product

Product Cost Estimates for New Products

CO

Start

1 Create Base Planning Object

2 Analyze costing results

3 Change Base Planning Object

4 Monitor the Base Planning Object

End

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Detail STD cost for current product

Standard Cost estimate calculation
MM Start

1 New Material creation

PP

2 Create BOM

4 Create Routing

5 Create Production Version for Material

CO

3 Activity type prices planning (COF301)

6 Quantity Overhead rates maintenance (COF302)

7 Creating a cost estimate

8 SAP valuates the quantity structure & calculates overhead to create the estimate

9 Analyze costing results

10 Save cost estimate

End

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Main Comps. See how they work

OH

allocate

allocate

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Detail Process Actual Cost Calculation

Production Order Processing for Semi-finished / Finished Goods During month Month-end

PP Start

1 Create Production Order

2 Goods issue 3 Day-end Activity confirmation

M M

4 Day-end Goods issue Backflush

5 Day-end Goods receipt from Production 7 Collect expense data (COF101) 8 Activity Actual Price calculation (COF307) 9 Re-valuate Production Order at Actual Price 10 Actual Overhead allocation (COF308) YES 12 Calculate variance Production Order completed? 6 Month-end Goods receipt from Production

FI

C O

N O

11 Calculate WIP 13 Setlement Confidential to FI

Analysis of Costing Result

Total Variance
Input Side
Actual cost Input Price 10 Input Quantity 14 Resource Usage 100 4 Standard cost Lot Size Output Price

80

Output Side

Remaining

Variances

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Variance Analysis Sample Data

Standard Cost @ Lot size = 100 KG
Component Material Price 10/KG QTY 100 KG Cost 1000 Target Cost ( 120 KG) Price 10/KG QTY 120 KG Cost 1200

Labor
Total

20/HR

2 HR

40
1040

20/HR 2 .4 HR

48
1248

Actual Cost @ Lot size = 120 KG Component Price QTY Cost

Material
Labor Total

10/KG
24/HR

130 KG
2 HR

1300
48 1348

Variance compare between Target cost / Actual cost

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Variance Analysis - Calculation

Price Variance : different between Target Price and Actual Price = [ (actual cost/actual qty) - (target cost / target qty)] * actual qty QTY Variance : different between Target Qty. and Actual Qty. = [actual qty- target qty] * [target cost/target qty] Resource Usage Variance : different from actual usage of unplanned Activities / Materials = actual cost of unplanned materials / activities Remaining Variance : the remaining variances on input side
Output Price Variance : different between Target Price and Actual Price on Credit side( in case of change STD cost after received stock from production order) Lot Size Variance : different from Lot size of Target QTY and Actual QTY Remaining Variance : the remaining variances on output side

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TO-BE WORKSHOP

Cost Center Controlling

Changes and Benefits

Current Process
No cost center.

SAP Process
Have a cost center in the system Must specify cost center that is the owner of cost. Should allocate indirect cost to related cost center.

Benefit
Can control/monitoring cost by cost center Can know actual cost of that cost center and can separate between direct/indirect cost after allocation process Easy to create new cost center Can view cost data by level of structure Easy to compare/group cost between different company Any changing in cost center structure will be covering in standard report.

Cost center structure must be standardized and clearly defined for all units under Thien Long Group

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Cost Elements Primary and Secondary

Whats Cost Elements
Cost elements classify any kinds of consumptions of an organization within a controlling area and there are 2 kinds of cost elements: Primary Cost Elements: Corresponding with Profit & Loss GL on financial statement

Secondary Cost Elements: Not corresponding with external financial statement, use for internal costing/controlling purpose

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Cost Center Structure

6 digits X X X X X X

Sub running (2 digits) Group running (2 digits) Company Code Functional category 1 2 3 1 Functional category 2 3 4 Nam Thien Long Thien Long Hoan Cau Thien Long Long Thanh Management / Center Administrative Sales and Marketing Production
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Company Code

Cost Center Structure

1000 Thien Long Group 100000 Nam Thien Long
11xxxx 12xxxx 13xxxx 14xxxx Management Administrative Sales and Marketing Production

Cost of Thien Long Group

Can Report by Company code

TLGC TLHC TLLT

Functional Category
Management Administrative Sales and Marketing Production

200000

Thien Long Hoan Cau

21xxxx 22xxxx 23xxxx Management Administrative Logistic and Supply Chain

Individual Unit
Each department Each production process ..

300000

Thien Long Long Thanh

31xxxx 32xxxx 33xxxx 34xxxx Management Administrative Sales and Marketing Production Page 23

Others grouping (depend on purpose)

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Cost Center Structure Nam Thien Long

As admin. group

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Cost Center Structure Thien Long Hoan Cau

As admin. group

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Cost Center Structure Thien Long Long Thanh

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Overall Process of Cost Center Month-end

Logistic Side Perform Daily Operation SD MM PP Check Report Data CCA CO Accountant Financial Posting (Accounting Entry) Financial Side Perform Daily Operation FI Financial Side Finished Month-End Task inform to adjust incorrect dat

FI

CO Accountant

Cost Center Month-End

Adjustment Incorrect Entry CCA CO Accountant Record / Adjustment Key Figure for allocation CCA CO Accountant Run allocation Process

CO Accountant Perform PC month-end Task PC Run CO Report

CCA

Controlling Side

CO

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Allocation Flow Administrative Cost

Financial expense Corporate management expense

Direct Corporate management expense

All Costs (Direct & Indirect Costs)

All Costs (Direct & Indirect Costs)

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Allocation Based Administrative Cost

Sender Sender Cost Element Allocation Base Allocate Direct Cost from Management Group Financial and Investing Financial Expense (635) depend on situation Activities Management / Center All Corporate Management Expense (642) -6421 Employee Expense actual salary amount - of previous month -6422 Material Expense head count on other department -6423 Tools & Stationary head count on other department -6424 Asset Depreciation Area of each department -6425 Tax / Fee / Charge head count on other department -6427 Outside Service Expense head count on other department -6428 Others Expense head count on other department Allocate Direct Cost from Admin Dept to Other Department Admin & HR All Corporate Management Expense (642) head count on other department Finance & Accounting All Corporate Management Expense (642) ** same criteria as MGT Internal Audit Committee All Corporate Management Expense (642) ** same criteria as MGT Total Quality MGT All Corporate Management Expense (642) ** same criteria as MGT Procurement All Corporate Management Expense (642) Value of PO on the period IT All Corporate Management Expense (642) Number of PC and Notebook Business Development All Corporate Management Expense (642) ** same criteria as MGT

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Allocation Based Administrative Cost

Allocate from Admin to Every Cost Center in Sales (not allocate to production) All cost center in Group All Corporate Management Expense (642) allocate by sales amt "Admin" allocate by COGS * can change the allocation base Indirect Cost From Financial &Investing allocate by sales amt Activities (C42101) allocate by COGS * can change the allocation base Indirect Cost From MGT/Center (C42102) allocate by sales amt allocate by COGS * can change the allocation base Indirect Cost form Admin Dept (C422xx) allocate by sales amt allocate by COGS * can change the allocation base Indirect Cost form Research & allocate by sales amt Development Group allocate by COGS * can change the allocation base Indirect Cost from Marketing Group / allocate by sales amt Logistic Group allocate by COGS ** For TLHC * can change the allocation base

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Allocation Flow Production Cost

Production Overhead

Direct Costs Indirect Costs (Overhead)

Direct Costs Indirect Costs (Overhead) Direct Costs Indirect Costs (Overhead)

All Costs

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Allocation Based Production Cost

Sender Sender Cost Element Allocate from Production Admin to Every Production Cost Center Production Admin -6271 Salary expenses -6272 Material expenses -6273 Tool and instrument expenses -6274 Depreciation expenses -6275 Promotional Stuff -6276 Utility Expense -6277 Outside service expenses -6278 Other expenses Allocate from Production Support to Real Production Unit Quality Control (for internal) Production Overhead (627) Planning Production Overhead (627) Automation & Maintenance Production Overhead (627) Allocate from Mold Unit to Production Order Mold Techical Staff Production Overhead (627) Mold Team Lead & supervisor Allocate Remaining Cost from Mold Unit to Internal Order Mold Techical Staff Production Overhead (627) Mold Team Lead & supervisor Allocation Base head count on other department head count on other department head count on other department Area of each department head count on other department Machine Time head count on other department head count on other department SKU SKU Maintenance & downtime (HOUR) % of Time using for fixing for mold using on each work center

Time using for each mold (IO)

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Internal Order and Budget Control

Code Z1X1 Z1X2 Z1X3 Z2X0 Z300 Z9X0 Description Purchase new asset Own production (mold) Major Repair New Projects Cost Center Investment Others Purpose Use for capture construction in progress (include mold) Use to collect the cost that occurs for new product launch Use for budget monitoring/control for the cost center investment For special event (such as trip, road show) Coding Format 1X1xxxxxxx 1X2xxxxxxx 1X3xxxxxxx 2Xxxxxxxxx (cost center code) 9Xxxxxxxxx Budget Control IO

CCTR IO CCTR

X = first digit of company code

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Detail of Budget Control

Copy detail planning to budget Planning Cost Center Expense by GL Planning individual Investment On Total Value

Availability Check at Total Amount Budget for Expenses (Budget on Cost Center) Separate Budget Budget for Investments

Check availability Budget Check availability Budget Expenses Special Event (IO) Others / Special Events (IO) Purchase Complete Asset Asset Under Construction

Tolerance limit Reach 95% alert warning Reach 105% alert error

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Flow of Budgeting Control Expense Budget

every department Every Department Planning Expense for Next Year Compare / Check with Historical Data every department Every Department Adjust Planning Expense CCA Compare / Check with Historical Data CCA Chief Accountant (Optional Task) Revise plan data version 0 CCA requested department Send approved of budget supplement CO Accountant
Expense over budget ?

inform the changes

CO Accountant
Upload into SAP (via Cost Center) CO Accountant Copy to verision 0

CO Accountant Transfer plan version 0 to Budget

YES

Supplement budget

CCA

NO System will check budget PR PO FI

Year End CO Accountant Carry forward Commitment To next year

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Flow of Budgeting Control Investment Budget

every department Every Department Planning Investment for Next Year Compare / Check with Historical Data every department Every Department Adjust Planning Investment

CO Accountant
Upload into SAP (via IO) CO Accountant Copy to verision 0 CCA Chief Accountant (Optional Task) Revise plan data version 0 CCA Compare / Check with Historical Data

inform the changes

CCA requested department Send approved of budget supplement CO Accountant Supplement budget

CO Accountant Transfer plan version 0 to Budget

Expense over budget ?

YES

CCA

Year End CO Accountant Carry forward Commitment To next year

NO

System will check budget

PR

PO

FI

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TO-BE WORKSHOP

Profitability Analysis

Profitability Characteristic
Sales Activity Sales Organization Distribution Channel Sales Office Sales Group Sales District Customer Individual Customer Customer Industry Customer Region Product Individual Product Material Group

Can analyze value by GL

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Overall Process related to PA

Logistic Side Create Sales Order SD Logistic Side Create Billing Invoice SD Logistic Side Perform Delivery Order MM

COGS related on Sales

Controlling Side

revenue related on Sales

Profitability Data PA

Financial Side Post Selling Expense and Specify Customer/Product

FI

Direct Selling Expenses Of customer/product group

Controlling Side Allocate every expense to Sales Dept CCA

Controlling Side

Allocate every expense to customer/product group CCA

Allocated Selling Expenses Indirect Admin Expense

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Reporting Result PL by Customer/Product

Report (can view by GL) Main Revenue Trading Goods (Domestic/Foreign) Finished Goods (Domestic/Foreign) Intercompany Sales Others Materials Sales (Domestic/Foreign) Sales Deduct [ - ] Trading Goods (Domestic/Foreign) Finished Goods (Domestic/Foreign) Intercompany Sales Others Materials Sales (Domestic/Foreign) Discount (Yearly/Monthly, Rebate) Return - Trading Goods (Domestic/Foreign) Return - Finished Goods (Domestic/Foreign) Return - Intercompany Sales Return - Others Materials Sales (Domestic/Foreign) Net Revenue By customer Direct from Billing By Product Type Direct from Billing

Direct from Billing

Direct from Billing

Define on each Transaction Direct from Billing

Define on each Transaction Direct from Billing

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Reporting Result PL by Customer/Product

Report (can view by GL) Cost of Goods Sold [ - ] Trading Goods (Domestic/Foreign) Finished Goods (Domestic/Foreign) Intercompany Sales Others Materials Sales (Domestic/Foreign) Gross Margin Operational Cost [ - ] Selling Expense . Transportation Expense (Define Directly) . Corporate Management Expense Net Revenue Allocate by Sales QTY Sales AMT COGS Allocate by Sales QTY Sales AMT COGS By customer Direct from Delivery By Product Type Direct from Delivery

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