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© SAP AG 1999

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R/3 System

Release 4.6C

December 2000

Material Number 5004 2894

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© SAP AG 1999

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Cost Managementand Controlling

5 days

Cost CenterAccounting

3 days

Product Cost Planning

3 days

Profitability Analysis

5 days

Profit CenterAccounting

2 days

Executive InformationSystem (EIS) 1 -Reporting

2 days

Cost CenterAccounting:Extended Functionality

2 days

Activity Based Costing

2 days

Cost Object Controllingfor Products

3 days

Transfer Prices

2 days

Executive InformationSystem (EIS) - Settingup the System

2 days

Overhead Orders

2 days

Cost Object Controllingfor Sales Orders

3 days

Actual Costing / Material Ledger

2 days

Executive InformationSystem (EIS) 3 -Business Planning

1 day

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The training materials are . They

. Your material includes space for noting down this additional information.

There may not be enough time to do all the exercises during the course. The exercises are intendedto be additional examples that are dealt with during the course. Participants can also use them todeepen their knowledge after the course.

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Unit 5

Unit 6

Unit 7

Unit 1

Unit 2

Unit 3

Unit 4

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At the end of this unit, the course participant should be able to accomplish these tasks.

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Each controlling object in R/3 has a specific purpose.

The Business Process is the controlling object related with activity based costing.

The Business Process is an integral part of controlling, just like cost centers, internal orders etc.

There is no separate module for ABC.

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All controlling objects collect costs.

Some controlling objects collect both costs and revenues.

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At any time, the sum of all costs in all controlling objects is equal to the total for controlling area.

The controlling area deals with all primary cost element postings from or through the FI module andevaluates them under cost management aspects.

Each secondary cost element follows the value flow idea from FI and gets debited and credited.

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Many methods are available to transfer costs between controlling objects of the same type.

Cost can also be transferred from one type of controlling object to another.

For primary and secondary cost elements, the sum of all such transfers in debit and credit is zero.

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Allocations from cost centers to processes and other controlling objects may be done usingdistribution, assessment, activity allocations and repostings.

These tools have long been available in R/3 and are not new to ABC.

The "value flows" resulting from assessments and distributions and the "quantity flows" fromactivity allocations may be used. Quantity allocation results in significant advantages, such asenabling the backflushing (pulling) of indirect costs from cost centers.

In addition to these methods, the template is a new tool for allocating cost centers to processes andother controlling objects.

The use of templates results in a quantity and value flow.

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Allocations from processes to cost centers and other controlling objects may be done usingdistribution, assessment, and activity allocation. These techniques have long been available in R/3

and are not new to ABC. The "value flows" resulting from assessments and distributions and the "quantity flows" from

activity allocations may be used. Quantity allocation results in significant advantages, such asenabling the backflushing (pulling) of indirect costs from cost centers.

In addition to these methods, the template is a new tool for tracing processes to cost objects,profitability segments and other controlling objects.


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SAP’s comprehensive approach to Activity Based Costing comprises the functionality of theCO components CO-OM-ABC, CO-PC and CO-PA.

In CO-OM-ABC processes can be defined to pull overhead resources from different parts in theorganization. Using appropriate drivers the corresponding costs are allocated to products (CO-PC) ordirectly to profitability segments (CO-PA).

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Even if the management-driven success factors are in place, ABC projects may fail due tosoftware-driven factors.

By implementing ABC, you can overcome software-related problems because of the R/3’s highdegree of integration and scalability.

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Operational ABC is conceptually valid in all industries as only the cost objects change.

Process quantities can be traced to the corresponding industry specific cost objects.

SAP offers also specific ABC solution integrated within the SAP Banking.

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Expenses in FI are first assigned as costs in CCA, which are then allocated either by a value flow orquantity flow to processes.

The advantage of dealing with quantity flows in the context of ABC is that costs are not justdistributed by using tracing factors from the cost center resources to the processes, products, orprofitability segments. Instead, resource quantities are pulled automatically by the correspondingobjects as they are consumed.

This methodology is the basis for Activity Based Management, or ABM. ABM allows you toidentify idle capacity of overhead resources at the cost center level. It also simulates changes incapacity usage when the sales quantity plans are modified in the CO-PA component. As a result,overhead resources can be leveraged more effectively.

By multiplying the process quantities by the process price you can not only identify the cost of theconsumed quantities but the cost of unused capacities as well.

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CAM-I is the Consortium for Advanced Manufacturing - International.

The SAP approach to ABC fully covers the requirements of the CAM-I Cross.

Before R/3 included ABC, it had already used several terms that were subsequently used in theCAM-I Glossary with different meanings. For example, the term activity type in R/3 is NOT thesame as the term Activity in the CAM-I Cross.

Each term in the CAM-I cross must be mapped to it’s R/3 counterpart.

The CAM-I cross, or variations of it, appear in many articles and textbooks about ABC and ABM.Therefore, the mapping will help you apply “textbook” ABC within R/3.

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The CAM-I term “Resource” correspond to the R/3 term “Cost Center” and “AT,” which stands for“Activity Types.”

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The CAM-I term “Activity” corresponds to the R/3 term “Process” and “Business Process.”

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The CAM-I term “Cost Objects” maps to the R/3 terms “Cost Objects” and “Profitability Segments”

In R/3, the term “Cost Object” may refer to product cost , service costs or sales order item costs.

A process can also be assigned to projects and internal orders.

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“Resource Cost Assignment” means allocating costs from cost centers to processes.

R/3 includes several methods to accomplish these allocations.

Any combination of these allocation methods may be used.

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AssessmentDirect Activity AllocationIndirect Activity AllocationTarget = Actual Activity Allocation


Distribution

Allocation from and to processes may be done using distribution, assessment and activity allocation.These techniques have long been available in R/3 and are not new to ABC.

In addition to these methods, the template is a new tool for allocation. The new tool provides amore general capability than the other methods since it includes the use of formulas and functions.


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Quantities of Process 123 consumed will trigger the consumption of quantities from all lower levelprocesses and cost center/activity types.

The template is similar in concept to a bill of material, except that it is really a “bill of activity types.”

Unlike standard bills of material which have “hard coded quantities”, the “bill of activity types” cancalculate the quantities using formulas in the template.

Also unlike standard bills of material which have “hard coded material content”, the “bill of activitytypes” is capable of using functions to determine which specific activity types will be needed.In other words, the cost center/activity type itself can be a variable in the template!

The quantities are then multiplied by the activity prices to determine the costs.

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The template is similar in concept to a bill of material, and can be thought of as a “bill of processes.”

Unlike standard bills of materials which have “hard coded quantities”, the “bill of processes” cancalculate the quantity based on situations, product characteristics, or other characteristics of thereceiving object.

Also unlike standard bills of material which have “hard coded material content”, the “bill of processes” is capable of using functions to determine which specific processes will be needed.In other words, the process itself can be a variable in the template!

The quantities are then multiplied by the process prices to determine the costs.

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A process driver is the quantity measures of the process that is being assigned to (consumed by) costobjects and profitability segments.

Process driver quantities may be found from almost anywhere within R/3 or in external systems.

Often the cost object itself contains process driver relevant information. Such structures as theBOM, Material Master record, and router provides a wealth of potential process driver information.

For process drivers based on transactions, information on quantities can be retrieved from theLogistics Information System (LIS).

The template is the tool which can dynamically calculate the quantities consumed by cost objects andby profitability segments .

Processes may also be manually allocated to cost objects and to profitability segments.

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Operational Activity Based Costing is fully integrated into the corporate planning cycle.

When quantity planning methods are used in integrated planning the results of SOP / Long TermPlanning will "backflush” (pull) a properly calculated amount of process quantities and finally of indirect resources (cost center/activity types) required to support the sales plan.

The backflushing of sales plan requirements results in the sales plan process quantity requirementsbeing transferred to business process planning as scheduled quantities, where they may be comparedto the original planned quantities.

Once the plan and scheduled quantities have been reconciled the plan reconciliation program may berun which will replace the original plan quantities with the scheduled quantities. Alternatively, thescheduled quantities may selectively replace the original plan quantities through manual adjustments.

The result is a completely integrated product cost and profitability planning environment.

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Operational Activity Based Costing is also fully integrated into the corporate planning cycle if thebusiness processes are service oriented.

The Sales Plan in CO-PA will also "backflush” (pull) a properly calculated amount of processquantities and finally of indirect resources (cost center/activity types) required to support the salesplan if the business processes are assigned through the process template directly to the profitabilitysegments (customers, divisions, distribution channels...).

The backflushing of sales plan requirements results in the sales plan process quantity requirementsbeing transferred to business process planning as scheduled quantities, where they may be comparedto the original planned quantities.

Once the plan and scheduled quantities have been reconciled the plan reconciliation program may berun which will replace the original plan quantities with the scheduled quantities. Alternatively, thescheduled quantities may selectively replace the original plan quantities through manual adjustments.

Executing the process price calculation values the CO-PA plan. This means that the process costswill be transferred to Profitability Analysis (CO-PA).

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A complete set of reports for process results as well as cost center and cost object reports aredelivered with the system.

Users can use both the report painter and report writer tools to supplement the delivered reports.

In addition, the full functionality of the CO-PA reporting tool to write user reports will enable theprocess value fields to be included where desired.

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There are two different ABC scenarios supported by the R/3 system: Analytic ABC and IntegratedABC.

Analytic ABC provides a statistical result, suitable for strategic cost views and high level what - if analysis. Integrated ABC results in actual cost postings throughout the CO application and costobjects, including CO-PA postings.

Both methods of ABC are available when Integrated ABC is activated in R/3 customizing. AnalyticABC can also be used without activating Integrated ABC.

In Integrated ABC, processes are full controlling objects (cost collectors) and are not statistical.

Integrated ABC can be used for some overhead costs, while other indirect costs use the traditionalsurcharge method provided by costing sheets.

The template is the new tool which traces process quantities to cost objects and to profitabilitysegments (CO-PA).

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Analytic ABC is an overhead cost simulation method which is neither linked to product costplanning (not valuation relevant) nor profitability analysis. Integrated cost accounting is unaffected

by analytic ABC. Analytic ABC, being statistical, can allocate to “general cost objects,” but not products.

Analytic ABC results are defined in a “delta version”, which is a special version number other thanzero.

The purpose of analytic ABC is to get transparency for the overhead resources being allocatedthrough surcharges in operative controlling.

The results enable you to compare the surcharges applied to the product in your operational costingwith the parallel model of process overhead costs in the delta version.

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Multiple ABC delta versions may be used in analytic ABC. All delta versions are statistical.

This allows the simulation of different process scenarios to co-exist while using the samecost center data.

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At the conclusion of this exercise, you will be able to:

• Run a CO reconciliation report that includes businessprocesses.

• Activate integrated ABC.

For your meeting, you need to demonstrate that the businessprocess is an integral part of controlling, and you need todemonstrate how to activate ABC in R/3.

1-1 At any time, the sum of all costs in all controlling objects is equal to the total for thecontrolling area. The total in the controlling area is the sum of all primary costelement postings from or through the FI module. The sum of all secondary costelements is always zero in Actual.

Find a report in CO that gives you an overview of this concept.

Run the report for the current period or any prior period, for controlling area 1000.

1-2 “Resource Cost Assignment” means assigning costs from cost centers to processes.R/3 includes several methods to accomplish this cost assignment. Any combinationof these methods for assigning costs may be used.

Find the menu path for actual period allocations in cost center accounting and viewthe list of selections offered. (distribution, assessment, indirect activity allocation,template allocation, and target=actual activity allocation)

1-3 “Process Cost Assignment” means assigning costs from Processes to cost objects orprofitability segments. R/3 includes several methods to accomplish this cost

assignment. Any combination of these methods for assigning costs may be used.

Find the menu path for transferring process costs to profitability analysis and viewthe list of selections offered.

(assessment, indirect activity allocation and template allocation)

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1-4 There are two different ABC scenarios supported by the R/3 system:

• Analytic (parallel) ABC and Integrated ABC. Parallel ABC provides astatistical result, suitable for strategic cost views and high level what - if analysis.

• Integrated ABC results in actual cost postings throughout the CO applicationand cost objects, including CO-PA postings.

Both methods of ABC are available when Integrated ABC is activated in R/3customizing.

First ADD the IMG transaction SPRO to your favorites.

Find the configuration entries for controlling area 1000 and determine which ABCscenarios are active.

Select controlling area 1000

Select “Activate components/control indicators.” Both analytic and integratedActivity Based Costing are active.

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• Run a CO reconciliation report that includes businessprocesses.

• Activate integrated ABC.

For your meeting, you need to demonstrate that the businessprocess is an integral part of controlling, and you need todemonstrate how to activate ABC in R/3.

1-1 At any time, the sum of all costs in all controlling objects is equal to the total for thecontrolling area. The total in the controlling area is the sum of all primary costelement postings from or through the FI module. The sum of all secondary costelements is always zero in Actual.

Find a report in CO that gives you an overview of this concept.

Run the report for the current period or any prior period, for controlling area 1000.

:

(S_ALR_87013602)

1-2 “Resource Cost Assignment” means assigning costs from cost centers to processes.R/3 includes several methods to accomplish this cost assignment. Any combinationof these methods for assigning costs may be used.

Find the menu path for actual period allocations in cost center accounting and viewthe list of selections offered. (distribution, assessment, indirect activity allocation,

template allocation, and target=actual activity allocation)

1-3 “Process Cost Assignment” means assigning costs from Processes to cost objects orprofitability segments. R/3 includes several methods to accomplish this costassignment. Any combination of these methods for assigning costs may be used.

Find the menu path for transferring process costs to profitability analysis and viewthe list of selections offered.

(assessment, indirect activity allocation and template allocation)

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1-4 There are two different ABC scenarios supported by the R/3 system:

• Analytic (parallel) ABC and Integrated ABC. Parallel ABC provides astatistical result, suitable for strategic cost views and high level what - if analysis.

• Integrated ABC results in actual cost postings throughout the CO applicationand cost objects, including CO-PA postings.

Both methods of ABC are available when Integrated ABC is activated in R/3customizing.

First ADD the IMG transaction SPRO to your favorites.

Find the configuration entries for controlling area 1000 and determine which ABCscenarios are active.

From the main menu (application side)

(SPRO)

push the “SAP Reference IMG” button

(OKKP)

Select controlling area 1000

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This is the definition of business process in the R/3 Glossary.

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Processes are easy to understand when you compare them with cost centers.

Cost centers and processes are very similar, with a few key differences.

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All controlling objects require a company code.

If business areas are used in the company code then the controlling object requires a business area.

Cost centers and processes each have their own standard hierarchy.

If profit center accounting is active, then a profit center must be assigned to each controlling object.The dummy profit center is used if an explicit assignment is not made.

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Process groups can be used to achieve different purposes.

The standard hierarchy assignment is mandatory for all business processes.

Alternative process groups are optional but very useful. They help to maximize the efficiency of process planning, organize the actual allocation function and provide for convenient user-definedreporting levels in the information system.

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Cost centers and processes both collect primary and secondary costs.

Primary costs may be posted directly to cost centers.

As of release 4.6, primary costs may be posted directly to processes.

SKF’s (statistical key figures) may be posted to cost centers and processes.

SKF’s may be used as tracing factors (allocation portions), in assessment, distribution, and indirectactivity allocations.

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A cost center may perform many tasks. The amount of each task is measured by an activity type, e.g.man hours.

A cost center must be linked to activity types in planning.

Calculation of activity type prices requires “splitting”, which is the allocation of costs within a costcenter to the various activity types to which it is linked.

A business process is similar to a cost center with one output measure.

Since there is only one process driver (output measure), the quantity measure and cost areautomatically linked.

Price calculation divides the process costs by the output quantity of this process.

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The process driver and activity type master data screens are identical.

These choices apply to both plan and actual.

If you will use template allocation of processes, use category 1.

If you need to use different categories for actual and plan, check the “variant values for actual” boxand enter the category for actual.

If you need to use different price indicators for actual and plan, check the “variant values for actual”box and enter the price indicator for actual.

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Distribution

Allocations from and to processes may be done using distribution, assessment and activity allocation.These techniques have long been available in R/3 and are not new to ABC.

In addition to these methods, the template is a new tool for allocation. The new tool provides a moregeneral capability than the other methods since it includes the use of formulas and functions.


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Distribution

Allocations to processes may be done using distribution, assessment and activity allocation.These techniques have long been available in R/3 and are not new to ABC.



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The structured process is a more formal type of process grouping as it contains all the data necessaryfor automatic allocations of resources from the lower level cost center/activity types and /or

processes to the highest level business process in the structure . The structured business process is described by a template created in environment “SBP” which

means Structured Business Process. This template is assigned in the process master data record.

Each template can contain sub-templates where the lowest level in the hierarchy is on the task levelrepresented by a cost center/activity type. This can be effectively used to model multi-level businessprocess hierarchies.

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Assessment

Direct Activity AllocationIndirect Activity AllocationTarget = Actual Activity Allocation

Allocations from processes to cost objects may be done using distribution, assessment and activityallocation. These techniques have long been available in R/3 and are not new to ABC.

In addition to these methods, the template is a new allocation tool. The new tool provides a moregeneral capability than the other methods since it includes the use of formulas and functions.


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The link connecting the template to the cost object is created through a template assignment functionin customizing.

The template is assigned to a combination of overhead key and costing sheet.

The costing sheet is linked to a valuation variant, which is linked to a costing variant, which is linkedto the order type.

The overhead group is material master data. The overhead group is assigned to an overhead key incustomizing.

For overhead that will not be modeled using business processes, the surcharge method of overheadapplication is still available.

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general assignment Dates/qtys master data

The costing sheet and overhead key assigned may be seen in the order master data controldata screen.

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The same template is used for all objects using the same costing sheet and having the same overheadkey within the same environment.

This means that a template may be designed to apply to hundreds or thousands of cost objects.

Basic environments are: 001 cost estimate/production orders; 002 reference and simulation costing;003 cost estimate without quantity structure; 004 network; 005 WBS element; 006 general costobjects; 007 internal order; 008 sales order; 010 product cost collector; 011 service order; SBPstructured business process, and PAC costing-based profitability analysis.

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The first cell identifies a process or another process template which is supplying the indirectresources to a cost object. The template above has two rows. One row is for process 300000 / Paint

and one row is for process PALMOVE /pallet movement. The “Activation” cell determines when a process is to supply resources to a cost object. The example

above requires a rule or method for the template to determine the applicability. In this example, thematerial being produced contains a value for the characteristic “color” in the material masterclassification view. If the color of the material being produced is anything but the standard color, thepaint process will be active. Pallet Movement is always required.

The “Quantity” cell may be a fixed value or a formula using functions to determine both the costdriver quantity and how this quantity is to be used for this cost object. In the example above,a function retrieves the cost driver quantity found for the R-4000 product in the material master asthe value for the characteristic “Number of coats” and then multiplies the cost driver quantity by theorder lot size to calculate the proper quantity of process 300000 to apply to the cost object.

This above row in the process template is reusable over any cost object requiring painting.The material master would simply reflect the proper color for activation and the proper number of coats for the correct cost driver quantity for that product.

The number of pallet movements is calculated using a function type called “flexible function” whichreads the bill of material and determines the number of pallets required to move the material.

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Allocations from processes to profitability segments may be done using assessment and activityallocation. These techniques have long been available in R/3 and are not new to ABC.



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The configuration for template determination for CO-PA is done within CO-PA configuration.

It is a two step process.

In the first step, you identify which characteristics can be used to identify templates. This isdifferent than for cost objects where the template is always identified using the costing sheet,overhead key, and environment.

In the second step you list specific characteristic values and the template which should be used.

In the above example, we want the template to be determined from the sales organizationand division.

The choice of sales organization and division is called a determination rule.

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Sales OrganizationCustomer GroupProductDivision....

Derivation Rule 1

The derivation strategy to find the appropriate Process Template for a specific Profitability Segmentis defined by derivation rules in CO-PA. A specific set of characteristic values points to a specific

Process Template. You can define several rules for identifying a Process Template. The first derivation rule that finds a

Process Template is used. No other rules will be evaluated. This ensures that no double-postings of processes to CO-PA can occur.

The Process Templates can be tied to just a few main characteristics making full use of the dynamicsof the Process Template. Such a Process Template will contain generic methods and formulas thatare able to deal with many of your company’s processes in one single Process Template.

The Process Template can also be tied to a more detailed level of characteristics (morecharacteristics are used in the derivation rule). In this case the Process Template contains methodsand formulas for processes that are specific for the profitability segments specified in the derivation

rule and not relevant to other profitability segments.

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This example shows a template for the process “sales order processing for service division.”

The goal is to assign the cost of sales order processing to a different profitability segment for eachcombination of sales organization and division.

When templates are processed, this template determines the number of sales order items for thecombination of sales organization 2000 and division 08.

The number of sales order items may be stored in a value field in costing-based PA, or in theLIS system.

One determined, a posting is made to a segment for that sales organization and division, with thecalculated number of process executions times the process price.

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Qty Activity-Type

PC-1 Preparation 2 min. 1421

PC-2 Assembly 3 min. 1422

Work Center

PC-3 Quality Check 1 unit

Consumption of processes by a product can be determined by a template. In addition, it is possibleto specify process consumption directly in the routing.

To do this, you make the following assignments: 1) process to work center , 2) work center to arouting operation.

This allows you to post resources from different cost centers to cost objects through a process usingone single operation of the routing. The standard values of the routing are used to calculate theprocess quantity based on PP formulas.

The PP confirmation triggers the posting of the processes in the routing real time. Posting of processes not in the routing but in the template occurs at period end.

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Cost drivers can originate from many diverse parts of the integrated R/3 system.

As examples; bills of material can provide the number of components in a cost object, the router canprovide the number of work centers through which the cost object must move.

Product costing can provide the lot size of the material being produced.

You may also create your own LIS library and structures to maintain the necessary transactionalstatistics if the delivered structures do not capture them.

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•

•

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•

•

•

•

•

•

•

•

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Resource drivers consumed by processes can use any of R/3’s allocation techniques. Thesetechniques include “value allocation” resulting from assessments and distributions, and “quantity

tracing” from direct, indirect, or structured process assignments. Using the “quantity tracing” technique has significant advantages, such as enabling the backflushing

of all indirect resources down to—but not including—primary cost planning.

Structured processes also provide flexibility in quantity tracing by introducing a template structure.This structure can be considered as a dynamic Bill of Activities because it allows for dynamiccalculations of resource driver quantities consumed by a process. If value allocation is used, usuallythe resource driver is the tracing factor used in the allocation.

You can now use the Process Template as an additional new tool for tracing processes to marketsegments. The Process Template dynamically calculates the cost driver quantities consumed by thecorresponding market segment, based on operational data related to these segments.

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74110 / 1414

Generic Template functions can be used to build automatically the costing relevant quantitystructure between cost center / activity types and processes based on Workflow descriptions.

Basically you only need one Template for all Structured Processes that are described throughWorkflows.

The cost center functions determine the cost center / activity types that are associated with thesingle-step tasks in the Workflow and add the standard quantities (defined in the task catalog) forall tasks that are performed by the same resource (cost center /activity type).

The process functions identify the Processes associated with the multi-step tasks and count thenumber of occurrences of each process. The number of occurrences corresponds to the sub-processconsumption of the main process.

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Controlling area 1000Company codeOperating ConcernSales Organization

Distribution ChannelDivisionsCustomersCustomer Groups

10001000IDEA

0101,02 and 04T-co05a## and T-co05a##A (## = 1 –20)20 + ##

Business areas 5000, 7000, 9900 3000##Process: Sales Order Processing

40090-##PALMOVE##

SORES##

PROD##PPROD##

SALESPRO##

Planning layout for COPALine item layout for COPA

SOI420SOIL420

Type 43 elements used w/c centers 622500, 614000, 634000, 638500Type 43 elements for processes 629000, 629100, 629600Hierarchy areas for processes BP02, BP03, BP04Hierarchy areas for cost centers HAC420Version for actual postings in CO 0Version for plan postings inproduct costing and profitabilityanalysis

0 (product costing)42I (profitability analysis)

Sender Cost center / Activity for

resource allocation to businessprocess Paint

4500 / 1421

Sender Cost center / Activity forresource allocation to sales orderprocessing (40090-##)Activity Type Group

420SHIP/4202420SOP/4201420TELCOM/4203 & 4204AC420

Material (Finished product) R-4000 , T-F44## copy of R-4000, no bom or routingBOM for material T-F44## Copied from R-4050Routing for material T-F44## Copied from R-4050

Plant 1200Class type (material) 001

Class (material) PC01Characteristics (material) T-COATST-COLOR

Costing sheets COGMCOGS

Overhead group SAP900 , T-G##Overhead key SAP900 , T-K##Costing variant PPC1

Movement type for goods issue 261Storage location 0001Environment for structured businessprocesses

SBP

Environment for product costestimates

001, 003

Environment for Profitability PAC

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Analysis PROF_SEG_NUM_SALES_ORD_ITEMS

UnitCostingLotSizeMaterialCharacteristicValueBomItemRequiredQtyTotalOfBomItemsCEILAltQtyFactorFromMaterial

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• View the master data for any business process and determinethe allocation parameters.

• Determine the cost element and price for any cost center / activity type combination.

• Create and assign a template to pull resources from costcenters into a business process.

• Modify a template to assign costs from a business process to aprofitability segment.

To decide how much training will be needed to implement ABC,you will maintain the basic data and structures and review thecost assignment techniques to determine how similar they are toother CO module techniques.

1-1 A business process is defined as a:

"business procedure within an enterprise that uses resources and can involveactivities from a number of different cost centers in a controlling area."

You have a business process for processing sales orders. Several cost centersperform this work. Ultimately, you want to charge this process to profitabilityanalysis.

Your process has already been created: it is - where ## is your two digitgroup number.

View the master data for your process, verifying the following master data:

basic data tab allocation tab

name = sales order proc ## process driver = number of sales order items

area (hierarchy) = BP04 category = 1, (manual entry manual alloc)

company code = 1000 cost element = 629000

business area = 9900 price indicator = 3, determined manually.

Profit center = 9999

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1-2 Processes are easy to understand when you compare them with cost centers. CostCenters and Processes are very similar, with a few key differences.

Each sales order process execution involves work from 3 different cost centers.View these cost centers and verify the basic settings. These cost centers belong tocost center group HAC420.

shipping admin sales order admin communications

paperwork prep receive and enterorders

telephone andnetworks

G - logistics 3 - sales 2 - service

HAC420 HAC420 HAC420

1000 1000 1000

5000 5000 5000 1500 1500 1500

1-3 In the master data for the three cost centers (420SHIP, 420SOP and 420TELCOM),determine what cost element will be used when allocations are done from the costcenter.

1-4 When executing a business process, activities can be utilized from several costcenters of a controlling area.

There are 4 activity types from three different cost centers required to process salesorders. Verify the following master data for the activity types: (use activity typegroup AC420)

sales order entry document prep incoming phone network time

H hours H hours MIN minutes H hours

3 G 2 2

1 manual 1 manual 1 manual 1 manual

622500 614000 634000 638500

3-manual 3-manual 3-manual 3-manual

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1-5 A cost center may perform many tasks. The quantity of each task is measured byan activity type. A cost center must be linked to activity types in planning.

The activity types we are using for sales order processing have PPI (planning priceindicator) of 3, which means determined manually. Ideally, activity type andprocess prices are calculated based on plan spending and planned quantity.However, for this exercise the primary focus is on understanding the quantity flow,

so the prices have been preset. Setting the price for a cost center/activity typecombination links them together so that combination may be used for allocation.

Verify that the following prices have been established in version 0 andin version 42I :

420TELCOM none none 25 per minute 10.00 per hour

420SHIP none 30.00 per hour none

420SOP 25.00 per hour none none

1-6 In order to "pull" resources to your process -## from each of the costcenter/activity types, you will use a template. Your template will be named

## (sales order lines group ##).

The template will contain each cost center/activity type combination required toprocess sales orders, and the quantity of each.

Create your template ## and assign it process -##, for planning only,using the following data:

c center/acty typ 420SOP / 4201 0.2 12 minutes of salesorder entry time

c center/acty typ 420SHIP / 4202 0.1 6 minutes of logistics

document preparation

c center/acty typ 420TELCOM / 4203

6 6 minutes of incoming

telephone time


0.2 12 minutes of computernetwork time

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1-7 In order to "pull" resources to your profitability segments, you need two things:

1. A template,

2. A way to identify or link the template to the appropriate profitability segments.(we will do this in the next exercise)

Your template already exists, but it has no lines. It is Modify thetemplate to charge one unit of your process to profitability analysis foreach sales order line item processed. Initially, do this only for planning.

The number of sales order items processed is a statistical key figure in profitabilityanalysis.

1-8 Each student group ## has two customers and a customer group.

customers: and

customer group = 20 + ##

(group 01 has customer group 21, group 02 has customer group 22,

and so on)Verify that the system is already properly configured to use your templateSALESPRO## for your customer group.

Verify that statistical key figures can be used as cost drivers in template allocationto COPA.

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• View the master data for any business process and determinethe allocation parameters.

• Determine the cost element and price for any cost center / activity type combination.

• Create and assign a template to pull resources from costcenters into a business process.

• Modify a template to assign costs from a business process to aprofitability segment.

To decide how much training will be needed to implement ABC,you will maintain the basic data and structures and review thecost assignment techniques to determine how similar they are toother CO module techniques.

1-1 A business process is defined as a:

"business procedure within an enterprise that uses resources and can involveactivities from a number of different cost centers in a controlling area."

You have a business process for processing sales orders. Several cost centersperform this work. Ultimately, you want to charge this process to profitabilityanalysis.

Your process has already been created: it is - where ## is your two digitgroup number.

View the master data for your process, verifying the following master data:

basic data tab allocation tabname = sales order proc ## process driver = number of sales order items

area (hierarchy) = BP04 category = 1, (manual entry manual alloc)

company code = 1000 cost element = 629000

business area = 9900 price indicator = 3, determined manually.

Profit center = 9999

(CP03)

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1-2 Processes are easy to understand when you compare them with cost centers. CostCenters and Processes are very similar, with a few key differences.

Each sales order process execution involves work from 3 different cost centers.View these cost centers and verify the basic settings. These cost centers belong tocost center group HAC420.

shipping admin sales order admin communications

paperwork prep receive and enterorders

telephone andnetworks

G - logistics 3 - sales 2 - service

HAC420 HAC420 HAC420

1000 1000 1000

5000 5000 5000

1500 1500 1500

(KSH3)

Enter HAC420

Select one cost center and click the display icon. Repeat for each cost center.

1-3 In the master data for the three cost centers (420SHIP, 420SOP and 420TELCOM),determine what cost element will be used when allocations are done from the cost

center.

Unlike business processes, cost centers do not have an allocation cost elementassigned in master data. There is also no assignment for price indicator or allocationcategory. This is because each cost center may be linked to many different activitytypes. Each activity type is linked to an allocation cost element.

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1-4 When executing a business process, activities can be utilized from several costcenters of a controlling area.

There are 4 activity types from three different cost centers required to process salesorders. Verify the following master data for the activity types: (use activity typegroup AC420)

sales orderentry

documentprep

incomingphone

network time

H hours H hours MIN minutes H hours

3 G 2 2

1 manual 1 manual 1 manual 1 manual

622500 614000 634000 638500

3-manual 3-manual 3-manual 3-manual

(KLH3

Enter AC420

Select one activity type and click the display icon. Repeat for each activity type.

1-5 A cost center may perform many tasks. The quantity of each task is measured byan activity type. A cost center must be linked to activity types in planning.

The activity types we are using for sales order processing have PPI (planning priceindicator) of 3, which means determined manually. Ideally, activity type andprocess prices are calculated based on plan spending and planned quantity.However, for this exercise the primary focus is on understanding the quantity flow,so the prices have been preset. Setting the price for a cost center/activity typecombination links them together so that combination may be used for allocation.

Verify that the following prices have been established in version 0 and in version42I:

420TELCOM none none 25 per minute 10.00 per hour

420SHIP none 30.00 per hour none

420SOP 25.00 per hour none none

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(KP27)

Enter version 0, period 1 through period 12, current yearEnter cost center group HAC420Enter activity type group ac420Use the next combination down arrow to view each combination.

Repeat for version 42i

1-6 In order to "pull" resources to your process -## from each of the costcenter/activity types, you will use a template. Your template will be named

## (sales order lines group ##).

The template will contain each cost center/activity type combination required toprocess sales orders, and the quantity of each.

Create your template ## and assign it process -##, for planning only,using the following data:

c center/acty typ 420SOP / 4201 0.2 12 minutes of salesorder entry time

c center/acty typ 420SHIP / 4202 0.1 6 minutes of logistics

document preparation


6 6 minutes of incoming

telephone timec center/acty typ 420TELCOM /

42040.2 12 minutes of computer

network time

(CP02)

Enter Click the "master data" icon, then click the "templates" tab.

Enter in the " " section (section2!), then click the create icon on the right.

Enter description "group ## sls ord line template"

In the first cell, click the down arrow and select 3, "cost center/activity type."

In the object column, enter 420SOP / 4201

In the plan variable quantity column, enter .2

repeat this procedure for the next 3 rows using the data above

Click the check icon at the top.

Save - left green arrow –Save again!

Note as you are entering data, you can drag the column lines to enhance your view.

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The template determination rule says that the template will be identified bycustomer group in CO-PA. (KDGRP). Click the "maintain rule values" icon.Here you will see that your customer group (20 + ##) is mapped to your template(SALESPRO##).Exit - stay in the IMG for COPA

Verify that statistical key figures can be used as cost drivers

(KEVG)

Note that record type H, "stat key figures" is selected.

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$

$

$

$

To fully integrate ABC into the corporate planning cycle, several new customizing activities shouldbe performed.

In order to identify ABC costs in the cost component view of product cost, new cost components forprocesses may be needed..

New value fields may be needed for processes in CO-PA based on the new cost components.

New value fields may be needed for processes in CO-PA which are not product related.

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The planning concept has been expanded to include process requirements. This achieves the sameprecision for indirect resources as has been available previously for direct resources.

SOP supports both the high-level planning of complex planning hierarchies and the detailed planningof finished products.

LTP is used to simulate the future stock and requirements for materials. It uses operative bills of material, routings, and work centers.

Each of these two sales planning methods can transfer scheduled quantities to integrated ABC.

The template is the tool that will transfer quantity requirements from either SOP or LTP to ABC.

Scheduled quantities can also be transferred from business processes which are assigned to work centers used in routings.

If this work center is assigned to a routing operation, the corresponding process is pulled. Thestandard values of the routing are used to calculate the process quantity based on PP formulas.

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There are two approaches that may be used to plan process input quantities: activity allocation andtemplate allocation.

There are several activity allocation methods in R/3: direct, indirect and target = actual.

The structured business process is a method of automating quantity allocations from both costcenter/activity types and from other processes to a higher level process.

Assessment or distribution methods may also be used to allocate costs from cost centers to processesbut we then lose any ability to know the quantity of the indirect resources consumed by theprocesses.

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A structured process is described by a Template created in environment SBP.

Planning starts with the output from the process, then calculates the required inputs to achieve theoutput. You can think of this as “ARP” - activity requirements planning, which is analogous toMRP - material requirements planning.

In the structured template above, Process 1 is the top process in the resource allocation chain. Forevery output from Process 1, the template will automatically plan outputs from Process 21 and 22,based on the quantities found in Template 1. Then, resources will be allocated to Process 22 fromthe two cost center/activity types.

Process 1 will pull a variable quantity of Process 22 based on Formula-2 and pull 20 fixed quantitiesof Process 22.

For every Process 22 output planned, Process 22 will pull 2 variable quantities from CC2/AT2, afixed quantity from CC2/AT2 determined by “Formula-3” and 10 variable quantities of CC1/AT1.

Note that cost center/activity types must be linked before they can be used in the structured processtemplate. Linking is done whenever the combination of cost center/activity type is planned.

The quantities which result from the structured process allocation are considered scheduledquantities.

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Statistical key figures can be planned on a business process in the same way as they can be plannedon cost centers.

Planned statistical key figures can serve as a tracing factor for an indirect activity allocation.

They can also be used as the basis for resource allocation in the formula of a structured businessprocess template.

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Output quantities of a process may be planned manually without identifying a specific cost object.

Output quantities may also be planned in SOP / Long Range Planning which will integrate theprocess output with the sales and production plan.

SOP/LTP will create “scheduled quantities” for the process. The plan reconciliation program willshow you any discrepancies between the planned quantity and the scheduled quantity. It may also beused to automatically adjust the planned quantity to the scheduled quantity to eliminate anyinconsistencies occurring from the planning effort.

Process outputs may also be planned with cost centers as receivers. An example might be theallocation of centralized administrative processes back to cost centers.

When a Template is used for cost objects, the process type must be set to “manual entry manualallocation” (type 1).

The planned process output is the basis for price determination of the process.

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Before the plan is finalized, the planned relationships should be reconciled. This will show if anyplanned output quantities are unequal to scheduled input quantities.

Any discrepancies in planned quantity may either be ignored, manually adjusted, or automaticallyadjusted through the reconciliation program.

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Each process carries its own unique price with fixed and variable components.

The process price calculation is executed after planning the resource input to the process and thequantity output from the process.

Only if one of the quantity planning methods have been used in providing indirect resources to theprocess will the system calculate a variable process price component.

The value of the variable quantity of resource inputs divided by the total quantity of the processoutput results in the variable process price. If fixed resource quantities have also been planned asprocess inputs, the value is divided by the total quantity of the process outputs to calculate the fixedprocess price.

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Product cost planning includes the quantities and prices from the planned consumption of processquantities.

The cost component view can be maintained in customizing to include processes in an aggregatedview of process costs and quantities.

In cost component customization, each component may be assigned as valuation relevant if theprocess costs should be included in inventory.

The itemization view of the product cost estimate identifies process values with a code of "X."

Overhead values calculated using a costing sheet are identified with a code of “G.”

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The template is assigned to a combination of overhead key and costing sheet.



For overhead that will not be modeled using processes the costing sheet method of overheadapplication is still available.

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The “Object” cell on a process template determines the process to be consumed by a cost object.

The process carries the price (fixed and variable) which will be used to value the quantity of theprocess consumed by the cost object.

The price may be calculated at the end of the period, after the quantity allocation. In this case theprice is applied retroactively to the allocation.

There are two possible ways for the template to identify the correct business process:

• Entering the process directly into the “Object” cell on the template row as shown above.

• Using template functions to determine the process dynamically as a function of relevant criteriasuch as plant, profit center, etc. This has the advantage of being able to use the same templaterow over multiple processes.

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Whether a process is active for a given cost object will be determined by the “Activation” columnusing one of three possible different criteria:

• The cell is set by default to “always active” (by blank).

• The cell may be set to “never active”.

• The cell may use the template functions and let the template determine whether it is active for acertain cost object (with Boolean logic).

In the above example, a function call in the activation routine accesses the material classificationview of the material master of the material being produced and compares the color found there to thefixed value of "stand", meaning standard color. If the material being produced has a color other than"stand” (the result of the Boolean logic is "true”) then the material will need to be painted andsubsequently dried, utilizing process resources.

Methods for activation of a process are pre-defined and many functions are available for eachcompany‘s unique needs. You can also define own customer functions.

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If the process is "active" for the specific cost object, the template next determines what the costdriver parameters are, where they are found, and how to calculate the quantity of the process that will

be consumed by the cost object . There will probably be a different quantity formula for actual quantities from the plan quantity

calculation. This example multiplies the process driver quantity by the order quantity confirmed. Inplan the same process driver quantity was multiplied by the plan lot size.

To simplify process template construction, a set of pre-defined functions are available, and userdefined functions may be added.

Note that for the "Activation" example, the colors were compared, while the cost driver amount inthe "Quantity" column requires that the value be included in the calculation.

Note also that “order quantity confirmed” will result in a period specific quantity calculationdiscussed in the previous slide for the actual valuation event of “blank”.

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Qty Activity-Type



Work Center


Consumption of processes by a product can be determined by a template. In addition, it is possible tospecify process consumption directly in the routing.

To do this, you make the following assignments:1) process to work center ,2) work center to a routing operation.


The PP confirmation triggers the posting of the processes in the routing real time.Posting of processes not in the routing but in the template occurs at period end.

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For assigning processes that do not relate to product, but relate to profitability segments,the template is linked to CO-PA characteristics.

Cost driver information may come from CO-PA or the LIS. In many service industries cost driverdata is held in external systems.

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The derivation strategy to identify the appropriate Template for a specific Profitability Segment isdefined by derivation rules in CO-PA. A combination of characteristic values points to a Template.

You can define several rules for identifying a Template. The first derivation rule that finds a ProcessTemplate is used. No other rules will be evaluated. This ensures that no double-postings of processesto CO-PA can occur.

The Templates can be tied to just a few main characteristics making full use of the dynamics of theTemplate functions. Such a Template will contain generic methods and formulas that are able to dealwith many of your company’s processes in one Template.

The Template can also be tied to a more detailed level of characteristics (more characteristics areused in the derivation rule). In this case the Template contains methods and formulas for processesthat are specific for the profitability segments specified in the derivation rule and not relevant toother profitability segments.

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During Template Allocation to CO-PA, there are conceptually 4 steps:

First, using characteristics specified in the template determination rule, the system finds all datawith that set of characteristic values.

Second, the data is aggregated (summarized) for each set of characteristic values.

Third, the summarized data is used as input to the template for further calculation

Forth, CO-PA is updated with the results of the calculation.

Here the number of Sales Order per characteristic value combination, which was as well used for thetemplate determination, is summarized on this level in order to be used as input to templatecalculation.

Depending on the result of the Template using this input to calculate Process quantities certainamount of sales processes will be allocated to this PA-segment.

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You may assign your processes to profitability segments on a more detailed level than specified inthe characteristics from the derivation rule.

To do this, you specify additional update characteristics in CO-PA configuration.

You can add an unlimited number of additional dimensions of CO-PA as relevant characteristics forposting your processes. Depending on the characteristics of the derivation rule plus the additionalcharacteristics relevant for posting, the R/3 system can dynamically derive up to 5 additionalcharacteristics for the posting of processes.

All single items of your operating concern complying with the characteristics that you select asrelevant for posting are aggregated and the processes will be posted to this aggregate data set(profitability segment).

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For assigning processes that do not relate to product, but relate to profitability segments, it is alsopossible to use assessments as well as templates.

LIS key figures can be transferred to CO-PA and can serve as tracing factors for the plan-assessmentof business processes.

The CO-PA record type of “H” has been created for the transfer of LIS key figures to CO-PA.New value fields are needed in CO-PA for the key figures.

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At the conclusion of these exercises, you will be able to:

• Enter planned statistical key figure quantities to profitabilityanalysis, and use that data to plan the proper amount of theapplicable business processes.

• Run a structured process allocation to plan the correctquantities of cost center / activity types for the process.

• Explain the difference between planned quantities andscheduled quantities.

• Create a business process and run price calculation for thebusiness process.

• Create a template for cost object controlling which uses datafrom the classification view of the material master.

• Assign the template to a costing sheet and overhead key.

You are intending to use ABC for profitability planning and costobject planning. To test this, you need to plan the number of

sales order items by customer group, then have R/3 ABCcalculate the process quantity requirements and the cost center / activity type requirements to support the number of sales orderitems.

For cost object planning, you want to create a cost estimate usingdata from the classification view of the material master.

You want to test the use of a template for cost object controlling, using product costing. Forthis test, we will use direct activity allocation in plan for resource cost assignment, andtemplate allocation for process cost assignment. In addition, we will calculate a process pricein plan.

You’ve just been asked to come up with a way to quickly provide cost estimates for customcolored PC’s. Each colored PC has it’s own material number. The color of the material numberand the number of coats required is information stored in the material master classificationview.

You could create a bom and routing for each material and create a cost estimate with quantitystructure. But since you are only planning at this point, you decide instead to use a template tocalculate the cost of painting using information from the material master. Templates can bethought of as "overhead cost routings" or "financial routings."

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1-4 In order to ensure your template gets applied to your material, you need to assign itto its costing sheet and overhead key. Verify that the overhead key for your materialin plant 1200 is Verify that the costing sheet used for cost estimates withoutquantity structure is COGS.

1-5 Assign your template PROD## so that it will be used when:

1-6 To test your template and template assignment, create a cost estimate withoutquantity structure for your material. The component that is to be painted is R-4050,which is a standard unpainted PC.

However, the cost of the painting can be seen without entering the componentitems. View the cost estimate without saving. What template was used? Howmany coats of paint were applied?

1-7 Using the material master classification view for your material T-F44##, determineit’s color and the number of coats of paint.

What is the technical name for the characteristic number of coats?

What is the technical name for the characteristic color?

1-8 Change your template to use a formula which multiples the lot size timesthe number of coats.

Test your template by creating a cost estimate exactly as you did before.

No need to save your cost estimate.

You are now ready to do your planning for Profitability analysis. Planning in PAconsists of two broad categories:

Revenue planning (sales, deductions, product costs)

Indirect cost planning. (support, admin, selling costs, and so on.)

Indirect costs are generally support costs or administration costs that occur in CO-OM (cost center, orders and processes). In this exercise, the indirect costs are thecosts incurred to receive and enter sales orders, and prepare the necessary logistics

documents.To do this, the quantity of the processes required will be calculated, then thequantity will be "pulled" from the process. Subsequently, the process will "pull" theresource usage (cost centers / activity types) from the cost centers. Since that is theway it will happen in actual costs, it makes sense to "simulate" the actual flow inplanning, using the identical pull method.

1-9 The process quantity will be determined by your template . Reviewthat template now. The cost center/activity type usage will be determined by yourtemplate . Review that template now. The price of the process

has been preset to 10.00, verify that price now.

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1-10 We want to plan the usage of your process by planning the number of sales order items we expect to process for your customer group. Then based on theprocess usage planned to support that number of sales order items, we will plan thequantities of resources (cost center/activity types) needed to provide that service.

The next step therefore is to plan the number of sales order items in PA. We willdo this only for the current month since it makes it easier to see the flow.Normally, this type of data is planned for an entire quarter or year.

Using PA planning transaction with layout enter the followingplanning data for your customer group

Use operating concern IDEA, costing based.

T-co05a## 01 100T-co05a## 02 200T-co05a## 300T-co05a## 01 400T-co05a## 02 400T-co05a## 600

After entering your data, verify the entry by running a PA line item list usinglayout .

1-11 Now that you have planned the number of sales order items, you want to plan thenumber of process executions using integrated planning.

Run dynamic process allocation in COPA

Verify that the cost of the appropriate number of processes has been charged to PAfrom your process

Use line item layout

1-12 Now that you have run template allocation to PA, you have yourprocess quantity Scheduled means you have actually identified receivers, in thiscase 3 profitability segments. You might have the output previously,without specifying the receiver. This is frequently done at the beginning of planning. It is similar to planning revenue without initially planning the customers.

Verify that you have scheduled quantities but no planned quantities for yourprocess Create a business process group consisting of justyour one process. Execute the function which will replace your planned quantity of zero with your scheduled quantity.

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1-13 Now that you have planned the number of units of your process youwant to use that plan to pull the necessary quantity of resources from the 3 costcenters involved.

Run template allocation for Verify thatthe template allocation pulled the proper quantity of each cost center/activity type.

Run a planning overview report for your process to see the integrated result.

Why is there an amount in the under/over-absorbed? How could we have avoidedthis?

You have now seen the complete pull process in plan, using a template in COPAand a template for your process. (ex 1-9 to 1-13)

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At the conclusion of these exercises, you will be able to:

• Enter planned statistical key figure quantities to profitabilityanalysis, and use that data to plan the proper amount of theapplicable business processes.

• Run a structured process allocation to plan the correctquantities of cost center / activity types for the process.

• Explain the difference between planned quantities andscheduled quantities.

• Create a business process and run price calculation for thebusiness process.

• Create a template for cost object controlling which uses datafrom the classification view of the material master.

• Assign the template to a costing sheet and overhead key.

You are intending to use ABC for profitability planning and costobject planning. To test this, you need to plan the number of

sales order items by customer group, then have R/3 ABCcalculate the process quantity requirements and the cost center / activity type requirements to support the number of sales orderitems.

For cost object planning, you want to create a cost estimate usingdata from the classification view of the material master.

You want to test the use of a template for cost object controlling, using productcosting. For this test, we will use direct activity allocation in plan for resource costassignment, and template allocation for process cost assignment. In addition, wewill calculate a process price in plan.

You’ve just been asked to come up with a way to quickly provide cost estimates forcustom colored PC’s. Each colored PC has it’s own material number. The color of the material number and the number of coats required is information stored in thematerial master classification view.

You could create a bom and routing for each material and create a cost estimatewith quantity structure. But since you are only planning at this point, you decideinstead to use a template to calculate the cost of painting using information from thematerial master. Templates can be thought of as "overhead cost routings" or"financial routings."

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Templates provide a method of costing products or other objects with specific kindsof work (processes), which are not included in the quantity structures of bills-of-materials or routings.

The other method of applying overhead is to use an overhead costing sheet. Thisdoes not provide for identification of work actually required.

1-1 Create a business process 3000## for painting, valid from the beginning of thecurrent year to the end of any following year.

C

(CP01)

Click "master data"

Enter the data as above through the profit center line, then click the allocation taband enter the rest of the data.

1-2

Plan output of 10000 coats of paint for the current year, spread evenly over themonths. (You don’t know what products, but you do know the approximate total.)

Plan Process input to your process using manual entry manual allocation in planversion 0, per 1-12, for the current year.

(you estimate 10000 coats of paint

requires 3600 hours)

Have the system calculate the planned price .

If the result of the price calculation looks right, post the result. No need to rerunwith test mode off.

Verify that when using a calculated planned price (PPI=1), the plan for the businessprocess has unabsorbed cost of zero.

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(CP26)

Enter , period 1 through period 12, current yearprocess:

in the planned activity column, enter 10000 SAVE

(CP06)

Using the next layout icon , go to layout 1-D02

click overview

(this is the number of hours needed to apply 10000 coats of paint)

You can’t run price calculation for a single process. Therefore, create process group(consists of one process, ).

(CPH1)

Click the business process icon, enter your process , save

(CPPI)

review results on the screen.If you see a price for just your process,click the save icon (ignore warning about iteration)

(CPBL)

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Note that the plan for the business process shows under/over-absorbed of zero.This is the benefit of using price calculation (price indicator 1) , compared tomanual prices (price indicator 3).

1-3 The material numbers which may need painting are To first test whetheryou can get a template to work, create a simple template to apply a fixed number of coats of paint whenever it is used.

Your template should be named PROD##, "painting group ##"

Create the template in environment 003, "cost estimate without quantity structure"

The template should consist of one row - business process The quantity is10 + ## (coats of paint). Group 1 applies 11 coats, group 2 applies 12 coats, and soon.

(CPT2)(CPT1) add CPT1 to your favorites

cost estimate w/o quantity structure

Click overviewIn the first column, choose "business process"

In the object column, enterIn the plan quantity column, (group 1 enters 11, group 2 enters 12,and so on)

Save your template.

1-4 In order to ensure your template gets applied to your material, you need to assign itto its costing sheet and overhead key. Verify that the overhead key for your materialin plant 1200 is Verify that the costing sheet used for cost estimates withoutquantity structure is COGS.

(MM03)

Enter your material click "select views"choose the costing 1 viewenter

The overhead group for your material is

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(OKZ2)

The overhead group T-G## is assigned to the overhead key

In product cost planning, the settings for cost estimate without qty structure point tocosting sheet COGS (note that the costing sheet is not on the material master- it isconfigured in product costing.)

(OKKN)

Select PPC1click the details iconclick the valuation variant button. Click the overhead tab.

1-5 assign your template PROD## so that it will be used when:

(KTPF)

Click new entries, make your entry, save

1-6 To test your template and template assignment, create a cost estimate withoutquantity structure for your material. The component that is to be painted is R-4050,which is a standard unpainted PC.

However, the cost of the painting can be seen without entering the componentitems. View the cost estimate without saving. What template was used? Howmany coats of paint were applied?

(KKPAN)

Execute the transaction from your favorites menu.

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Click enter twice, accepting the dates. This brings you to the "create unit costestimate" screen. Here you can enter the quantity structure manually.

However, click the "revaluate all items" icon first.

You should see your business process and the quantity of 10 + ##, at theprice you calculated previously.

Note that the quantity is not multiplied by the lot size. This would be fine for lot-size independent processes, like setup, or like "back-office setup." However, wewant to multiply it by the lot size and the number of coats of paint required for oneof the material

We will do that in the next exercise.

To see how it determined the template to use,

In the additional information section, you should see:

So far, the costing sheet has done nothing for you EXCEPT help determine thetemplate! To see the costing sheet calculate costs, you need something to apply itto, which is the material you will paint.

Enter "M" in the category field, then enter material R-4050 which is an unpaintedPC.

Enter plant 1200 and quantity 1.

Click the "revaluate all items" icon, ignore warnings about cost component split.You should now see a category G (overhead), calculated as a percent of the materialcost.

You can see indirect costs on cost objects as category X - process (ABC) costs, andalso as G - overhead costs. In otherwords, you can still use percent or quantityoverhead where it makes sense, it is not an either/or situation.

Exit your cost estimate without saving.

Add the transaction for cost estimate without quantity structure to your favorites.(KKPAN)

1-7 Using the material master classification view for your material T-F44##, determineit’s color and the number of coats of paint.

What is the technical name for the characteristic number of coats?

What is the technical name for the characteristic color?

(MM03)

Enter your material click "select views"choose the classification viewchoose material class type (001)

In the bottom section, "values for class PC01", select "Number of Coats.".

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You should see 30 coats of paint. (lot size 10 times 3 coats per unit)

You are now ready to do your planning for Profitability analysis. Planning in PAconsists of two broad categories:

Revenue planning (sales, deductions, product costs)

Indirect cost planning. (support, admin, selling costs, and so on.)Indirect costs are generally support costs or administration costs that occur in CO-OM (cost center, orders and processes). In this exercise, the indirect costs are thecosts incurred to receive and enter sales orders, and prepare the necessary logisticsdocuments.

To do this, the quantity of the processes required will be calculated, then thequantity will be "pulled" from the process. Subsequently, the process will "pull" theresource usage (cost centers / activity types) from the cost centers. Since that is theway it will happen in actual costs, it makes sense to "simulate" the actual flow inplanning, using the identical pull method.

1-9 The process quantity will be determined by your template . Reviewthat template now. The cost center/activity type usage will be determined by yourtemplate . Review that template now. The price of the processhas been preset to 10.00, verify that price now.

(CPT2)

(CP03)

Enter 40090-##, click master data, then click the "templates" tab.

appears in the "activity and business process allocation" section, sinceyou put it there in a prior exercise.

Click the display icon on the right.

This is the template you entered in a prior exercise. It should have 4 rows.

(CP27)

Enter your process , plan version 42i, period 1 to 12, current year. Repeatfor plan version 0. The price is 10.00

1-10 We want to plan the usage of your process by planning the number of sales order items we expect to process for your customer group. Then based on theprocess usage planned to support that number of sales order items, we will plan thequantities of resources (cost center/activity types) needed to provide that service.

The next step therefore is to plan the number of sales order items in PA. We willdo this only for the current month since it makes it easier to see the flow.Normally, this type of data is planned for an entire quarter or year.

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Using PA planning transaction with layout enter the followingplanning data for your customer group

Use operating concern IDEA, costing based.

T-co05a## 01 100T-co05a## 02 200T-co05a## 300

T-co05a## 01 400T-co05a## 02 400T-co05a## 600

After entering your data, verify the entry by running a PA line item list usinglayout .

At the top of your SAP window, click favorites, then insert transaction ke11

(KE11)

(Operating Concern: IDEA)

Enter layout (sales order items, ac420)

Enter current period and fiscal year, customer group

Enter the data (6 lines) and click the save (post) icon.

To verify the data is entered correctly, run PA line item report

(KE25)

At the bottom of the screen, enter

For selections, enter record type , version , current period/year, then click "additional selections "

Look for customer group and enter your customer group number which is 20 + ##

Check, then click the execute icon. Click through the warning message

1-11 Now that you have planned the number of sales order items, you want to plan thenumber of process executions using integrated planning.

Run dynamic process allocation in COPA


Use line item layout

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(CPPE)

Enter the following selection criteria, execute with a test run, detailed lists

If you see 3 receiving profitability segments and no error messages, execute againwith the test button off.

To verify results, run PA line item report

(KE25)

At the bottom of the screen, enter

For selections, enter version , current period/year, (do not enter record type!)then click "additional selections ".

Look for customer group and enter your customer group number 20 + ##.

Check, then click the execute icon. Click through the warning message.

You should see the charges in , from your business process.

1-12 Now that you have run template allocation to PA, you have yourprocess quantity Scheduled means you have actually identified receivers, in thiscase 3 profitability segments. You might have the output previously,without specifying the receiver. This is frequently done at the beginning of planning. It is similar to planning revenue without initially planning the customers.

Verify that you have scheduled quantities but no planned quantities for yourprocess Create a business process group consisting of justyour one process. Execute the function which will replace your planned quantity of zero with your scheduled quantity.

(S_ALR_87011767)

:

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(CPH1)

EnterClick the business process button. Enter

(CPMB)

Review the results, if it shows the right plan quantity, post the result.

Now rerun the comparison of scheduled/planned process quantities.

1-13 Now that you have planned the number of units of your process youwant to use that plan to pull the necessary quantity of resources from the 3 costcenters involved.

Run template allocation for Verify thatthe template allocation pulled the proper quantity of each cost center/activity type.

Run a planning overview report for your process to see the integrated result.

Why is there an amount in the under/over-absorbed? How could we have avoidedthis?

You have now seen the complete pull process in plan, using a template in COPAand a template for your process. (ex 1-9 to 1-13)

(CPPS)

Click the business process selectionEnter your business process

Current periodCurrent fiscal yearSelect test run, detailed listsClick the execute icon

If the result shows 4 sender objects for your process, rerun the allocation with thetest button off.

(CPBL)

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The reason there is an over/under-absorbed amount is that the prices used for theactivities and processes were created using manual planning.

If we had used planning price indicator 1, then the system would compute the pricesnecessary to make the unabsorbed = zero in plan.

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One of the great strengths of planning in the R/3 CO module is the similarity between actual postingsand plan postings.

Plan postings are basically a simulation of actual postings.

Once you learn plan or actual techniques, that learning is easily transferred.

Each template contains columns for plan calculations and columns for actual calculations.

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Cost centers and processes both collect primary and secondary costs.

Primary costs may be posted directly to cost centers.

As of release 4.6, primary costs may be posted directly to processes.

SKF’s (statistical key figures) may be posted to cost centers and processes.

SKF’s may be used as tracing factors (allocation portions), in assessment, distribution, indirectactivity allocations and template allocations.

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The tools used for resource assignment and process assignment are the same for actual postings andplan postings, with two exceptions noted in the slide.

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For actual quantity resource assignment from cost centers to processes or from one process toanother the following activity allocation methods are available:

direct activity allocation

indirect activity allocation

target = actual activity allocation

The target = actual method would be a viable option to use only when the planned allocations areknown to be correct with a high degree of certainty.

Resource allocations based on a cost flow only, no quantity flows, can be done using assessment ordistribution.

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Compared to activity allocations, Template allocation is a much more flexible method of quantitybased resource cost assignment.

A structured business process template may include cost center/activity types, other processes andother structured business process templates.

There are two different types of templates used with processes and each has its own specific andunique purpose.

1-The structured business process template defines the resource assignment from cost centers orprocesses to an ultimate consuming process, based on the actual output quantities of the “top”process. This template is created in environment “SBP” (“Process ínput template”).

2-The Template is used to allocate process quantities to a cost object that is consuming that processor process group (“Cost object input template”).

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The structured process is a more formal type of process grouping as it contains all the data necessaryfor automatic allocations of resources from the lower level cost center/activity types and/or processes

to the highest level business process in the structure. The structured business process is described by a template created in environment “SBP” which

means Structured Business Process. This template is assigned in the process master data record.

Each template can contain sub-templates where the lowest level in the hierarchy is on the task levelrepresented by a cost center/activity type. This can be effectively used to model multi-level businessprocess hierarchies.

There is a graphical display in process master data.

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The cost object which uses process resources receives the actual postings from the templateallocation. The process consumption quantities may be adjusted manually.

Plan template formulas must be reviewed carefully and not simply duplicated and used as the actualtemplate formulas because actual formulas must address actual values. Where “lot size” wasappropriate to include in the consumption formula in plan it will probably be replaced with “orderquantity” to calculate the actual consumption.

Similar to the transaction that applies surcharges to cost objects, processes consumed by a cost objectare actually allocated to the specific cost objects by a periodic transaction located in the menu pathunder period end processing. You find this menu path always in the menu of the receiving objects(application and implementation guide). It is important to perform this processing before period endclosing of cost object controlling (wip, variances and settlement).

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The technique used by the system to identify the template to use for actual process consumption isexactly the same as in plan process consumption:


The templates are assigned to a combination of overhead key and costing sheet.



The costing variant is defaulted by the order type. Since different cost objects have different ordertypes, different templates can be used if the material can be manufactured under different types of

cost objects which consume resources in different proportion. By using different costing sheets and valuation variant/costing variant assignments, different

templates may be used for actual process consumption using the Standard Cost Estimate, ModifiedStandard Cost Estimate, Current Cost Estimate, etc.

For overhead that will not be modeled using business processes , the surcharge method of overheadapplication is still available.

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The “Object” cell on a process template determines the process to be consumed by a cost object.

The process carries the price (fixed and variable) which will be used to value the quantity of theprocess consumed by the cost object.

The price may be calculated at the end of the period, after the quantity allocation. In this case theprice is applied retroactively to the allocation.

There are two possible ways for the template to identify the correct business process:

• Entering the process directly into the “Object” cell on the template row as shown above.

• Using template functions to determine the process dynamically as a function of relevant criteriasuch as plant, profit center, etc. This has the advantage of being able to use the same templaterow over multiple processes.

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Whether a process is active for a given cost object will be determined by the “Activation” columnusing one of three possible different criteria:

• The cell is set by default to “always active” (by blank).

• The cell may be set to “never active”.

• The cell may use the template functions and let the template determine whether it is active for acertain cost object (with Boolean logic).

In the above example, a function call in the activation routine accesses the material classificationview of the material master of the material being produced and compares the color found there to thefixed value of "stand", meaning standard color. If the material being produced has a color other than"stand” (the result of the Boolean logic is "true”) then the material will need to be painted andsubsequently dried, utilizing process resources.

Methods for activation of a process are pre-defined and many functions are available for eachcompany‘s unique needs. You can also define own customer functions.

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calculation. This example multiplies the process driver quantity by the order quantity confirmed.In plan the same process driver quantity was multiplied by the plan lot size.




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calculation. This example multiplies the process driver quantity by the order quantity confirmed.In plan the same process driver quantity was multiplied by the plan lot size.




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Qty Activity-Type



Work Center


Consumption of processes by a product can be determined by a Template. In addition, it is possibleto specify process consumption directly in the routing.

To do this, you make the following assignments: 1) process to work center , 2) work center to arouting operation.


The PP confirmation triggers the posting of the processes in the routing real time. Posting of processes not in the routing but in the process template occurs at period end.

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For assigning processes that do not relate to product, but relate to profitability segments, the templateis linked to CO-PA characteristics.

Process driver information might be available already e.g. in CO-PA or the LIS. In many serviceindustries process driver data is held in external systems. Functions can be custom-made to calculatewith them.

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The derivation strategy to identify the appropriate Template for a specific Profitability Segment isdefined by derivation rules in CO-PA. A combination of characteristic values points to a Template.

You can define several rules for identifying a Template. The first derivation rule that finds a ProcessTemplate is used. No other rules will be evaluated. This ensures that no double-postings of processesto CO-PA can occur.

The Templates can be tied to just a few main characteristics making full use of the dynamics of theTemplate functions. Such a Template will contain generic methods and formulas that are able to dealwith many of your company’s processes in one Template.

The Template can also be tied to a more detailed level of characteristics (more characteristics areused in the derivation rule). In this case the Template contains methods and formulas for processesthat are specific for the profitability segments specified in the derivation rule and not relevant toother profitability segments.

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Here the number of Sales Order per characteristic value combination, which was as well used for thetemplate determination, is summarized on this level in order to be used as input to templatecalculation.

Depending on the result of the Template using this input to calculate Process quantities certainamount of sales processes will be allocated to this PA-segment.

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For assigning processes that do not relate to product, but relate to profitability segments, it is alsopossible to use allocations as well as process templates

There are two methods that can be used to allocate processes to CO-PA.

• The first method is a direct internal activity allocation, This method is available for actualallocations only and can not be used for plan allocations.

• The second method of allocating processes to profitability segments is assessment.

LIS key figures can be transferred to CO-PA to serve as tracing factors for the actual assessment.

The CO-PA record type of “H” has been created for the transfer of LIS key figures to CO-PA.New value fields are needed in CO-PA for the key figures.

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Because a process is a controlling object in Inegrated ABC and will contain both planned and actualcosts, variances will naturally occur on a process as they do on cost centers.

Complete variance analysis, consistent with the variance analysis traditionally available for costcenters, is available to use on processes to answer the inevitable questions on process managementand the differences in actual resource utilization from planned utilization.

The same variance categories are used for process variance analysis as are used for cost centervariance analysis.

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• Update existing templates to process actual data in addition toplan data.

• Post actual quantities of a statistical key figure to profitabilityanalysis.

• Based on the actual statistical key figure quantities in PA, rundynamic process allocation to pull process quantities into PAand then run structured process allocation to pull the requiredquantities of resources into the process.

You are intending to use ABC to post overhead costs toprofitability analysis. To test this, you need to post the actualnumber of sales order items by customer group, then have R/3ABC calculate the process quantity requirements and the costcenter / activity type requirements to support the number of salesorder items.

1-1 You are now ready to post actual data to Profitability Analysis. To do this, thequantity of the processes required will be calculated, then the quantity will be"pulled" from the process. Subsequently, the process will "pull" the resource usage(cost centers / activity types) from the cost centers. The flow is identical to whatyou did in planning.

The process quantity will be determined by your template , which isthe same as in planning. However, you need to update that template for actualpostings.

The cost center/activity type usage will be determined by your template ,which is the same as in planning. However, you need to update that template foractual postings.

The price of the process has been preset to 10.00, as in planning.

Update your templates and

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1-2 We want to post the number of sales order items we actually processed this monthfor your customer group. There are two ways this can be done:

• Transfer the quantities from the LIS system, if we have an active LIS structurewith the data. We don’t.

• Manually post the data as an actual to a value field in costing based PA,operating concern IDEA. (controlling area 1000 is in operating concern IDEA).

Using the create line item function in costing-based PA, post the following actualquantities using record type H, company code 1000, sales organization 1000, anddistribution channel 01.

T-co05a## 01 100T-co05a## 02 200T-co05a## 300T-co05a## 01 400

T-co05a## 02 400T-co05a## 600

After entering your data, verify the entry by running a PA line item list usinglayout

1-3 Now that you have posted the actual number of sales order items, you want to useyour template to charge the actual quantity of process to profitabilityanalysis.

Run actual dynamic processallocation in COPA co code 1000

division 01 to 04sale org 1000customer group ## + 20


Use line item layout .

1-4 Now that you have posted the number of units of process 40090-## to PA, the costcenters want to get paid for their work. Run actual template allocation for

Verify that the template allocation pulled the proper quantity of each costcenter/activity type and that the cost centers got paid.

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Position your cursor in the plan quantity cell. Move your pointer to the "copyrow/cell" icon at the top and single click.

Position your cursor in the actual quantity cell. Move your cursor to the "insertrow/cell" icon and single click to paste the formula.

Click the check icon.

Save your template.

Left green arrowChange the environment to SBP.

Click the down arrow and select the template

We want the actual: variable quantity column to be the same as the plan: variablequantity column, you may type in the numbers or use copy and paste.

Save your template.

Left green arrow

1-2 We want to post the number of sales order items we actually processed this monthfor your customer group. There are two ways this can be done:

• Transfer the quantities from the LIS system, if we have an active LIS structurewith the data. We don’t.

• Manually post the data as an actual to a value field in costing based PA,operating concern IDEA. (controlling area 1000 is in operating concern IDEA).

Using the create line item function in costing-based PA, post the following actualquantities using record type H, company code 1000, sales organization 1000, anddistribution channel 01.

T-co05a## 01 100T-co05a## 02 200T-co05a## 300T-co05a## 01 400T-co05a## 02 400T-co05a## 600

After entering your data, verify the entry by running a PA line item list usinglayout

(KE21N)

Enter record type H, click enter

Enter the 6 transactons, posting after each one.

On each transaction, enter the characteristics, then click the value field tab andenter the sales order line items.

(KE24)

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At the bottom of the screen, enter line item layout soil420.

Enter record type H

Period/year: current period/yearEntered by you: ac420-##

Click "additional selections", choose customer group,enter Custormer group 20 + ##

Continue, execute.Ignore warning message

1-3 Now that you have posted the actual number of sales order items, you want to useyour template to charge the actual quantity of process to profitabilityanalysis.

Run actual dynamic processallocation in COPA co code 1000

division 01 to 04

sale org 1000

customer group ## + 20


Use line item layout .

(CPAE)

Enter controlling area 1000 if promptedEnter the following selection criteria, execute with a test run, Detailed lists

If you see 3 receiving profitability segments and no error messages, execute againwith the test button off.

To verify results, run a PA line item list using layout

(KE24)

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At the bottom of the screen, enter line item layout soil420.

Click the multiple selection icon to the right of record type, enter D and H, thenclick copy.

Period/year: current period/year

Entered by you: ac420-##

Click "additional selections", choose customer group, enter custormer group 20 +##

Continue, execute.

Ignore warning message

You should see the charges in , from your business process.

1-4 Now that you have posted the number of units of process 40090-## to PA, the costcenters want to get paid for their work. Run actual template allocation for

Verify that the template allocation pulled the proper quantity of each costcenter/activity type and that the cost centers got paid.

(CPAS)

Click the business process selectionEnter your business processVersion 0

Current periodCurrent fiscal year

Select test run, detailed listsClick the execute icon

If the result shows 4 sender objects for your process, rerun the allocation with thetest button off.

(S_ALR_87013611)

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The report will show you all the credit that these cost centers have earned byprocessing sales order lines for all customer groups (not just yours).

Select a single cost element, click the "call up report" icon, then choose thebreakdown by partner

(S_ALR_87011762)

what?, why an actual version? Huh?

Answer: you can have actual delta versions if you are using parallel (analytic) ABC

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A template is created within a certain environment, which is determined by the cost object that willconsume the process quantities. For instance, a process that will be consumed by a PP production

order will be controlled by a template created in environment 001, while a process (and it may bethe same process) that will be consumed by a sales order will be controlled by a process templatecreated in environment 008.

A template consists of pre-defined columns. Each of these columns is looking for information -that is asking a question. The answer may be “hard coded” by the user, or found dynamically by thesystem.

The real power of ABC in R/3 is realized when the system answers these questions dynamically.

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Each cost object in the system has its own environment pre-assigned to it in the delivered system.These assignments cannot be changed.

Each environment contains pre-assigned sub-environments. This assignment is also fixed and cannotbe changed.

Each sub-environment contains a collection of specific functions which is designed to work with thedata in that particular sub-environment. For instance, a function designed to read the materialcharacteristics assigned to a material in the material master will be found in the material sub-environment in the environment defined by the consuming cost object.

The template, which is assigned to a specific environment when it is created, has access to all of thefunctions and the corresponding data that they can resolve, found in the different sub-environments.

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A sub-environment may be assigned to more than one environment, making the functions within thesub-environment available to more than one type of cost object. For instance, the sub-environment

containing the functions involving routers is available to the sales order and the production order butis not available when using cost estimates without a quantity structure.

New user defined functions may be created and assigned either to a sub-environment or directly toan environment. Assignment to a sub-environment provides for more flexibility because more thanone type of cost object can use the function.

In customizing, you can restrict the use of each new function to a single template cell. Inside eachcell, the specific purposes of each function may be further defined for such things as parameters,whether a value is entered or defaulted, what the default value will be, etc. The purpose of theserestrictions is to assure that the function hierarchy only allows the template to use a function whereand how it makes sense. For instance, when a function requires a material number as a parameter,only material number functions are made available.

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001 Material Costing / Production Orders

002: Reference and SimulationCosting

003: Material Costing withoutQuantity Structure

004: Network

005: WBS Element

006: General Cost Object/CostObject Hierarchy

007: Internal order

008: Customer order

009: Process order

010: Product cost collector

011: Service order

012: CO-production order

BPP: Business processplanning

PAC: Costing based profitabilityanalysis

SBP: Business process

SOP: Transfer schedulequantities from PP

These environments are delivered and fixed in the system

The sub-environments are also delivered and fixed in the system.

This means you cannot create new environments or sub-environments.

However, you can move functions to different environments, and you can create new functions.

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Each environment contains many functions which could be used in the template.

Each of these functions is designed to be used with certain columns, but usually not all columns.For example, division from the material master could be used in the activation column,but wouldn’t be used in the quantity columns.

When you are constructing a template, the system will only display as possible functions thosefunctions assigned to the environment you are in, and usable for the column you are working on.

In this way, the number of function possibilities displayed is usually a small fraction of the entirefunction library.

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The external name refers to the language or translation version of a function. Each language versionwill have its own external name but will point to a single logical name assigned to each function.

The logical name will then have a field within a table that is already visible to a function assigned toit (table-field function) or point to an ABAP program which can access data from anywhere in thesystem.

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Σ

A flexible function is a special ABAP function which is included in the delivered system.

This type of function contains two parts, a general part in ABAP and a user-defined part.

The general part of Total_Of_BOM_Items in the example above is delivered with the system.Its only purpose is to loop over the components of a BOM and add whatever values are found by theuser-defined part of the function. The values to be accumulated are not specified in the general partof the flexible function.

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Σ

A flexible function is a special ABAP function which is included in the delivered system.

This type of function contains two parts, a general part in ABAP and a user-defined part.

The general part of Total_Of_BOM_Items in the example above is delivered with the system.Its only purpose is to loop over the components of a BOM and add whatever values are found by theuser-defined part of the function. The values to be accumulated are not specified in the general partof the flexible function.

The user-defined part of the flexible function must identify the conditions the general part will use(example: only components identified as stock items) and what to do when the conditions aresatisfied (example: accumulate the quantity of each component, or apply a formula). Components 1and 3 qualify, so the BOM quantity of 2+5 is returned for this specific material. This quantity cannow be used in the template cell which used this flexible function.

Together both of these parts form a single flexible function. Note that the same general part could beused in a different flexible function with a different user-defined condition which might be based ona different BOM characteristic than stock/non-stock.

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A function tree is a directly definable structure used to organize functions.

A function tree is assigned to an environment and consists of nodes and function nodes.

Delivered as part of the software, function tree SAP1 is standard to all environments (for example,for Environment 001 - Function Tree SAP-001, for Environment PAC - Function Tree SAP1-PAC).Furthermore, this includes all standard-delivery nodes (sub-environments) and function nodes (withlinks to the respective functions).

You can copy the standard-delivery function trees SAP1 and their nodes and function nodes. Furthermaintenance (changes, deletions, and so on) is only possible with the copied function trees.

The function tree allows you to create new functions or to change existing functions under any nodeof the tree. There can be multiple trees for each environment.

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• Explain the purpose of functions.

• Explain the link between functions and environments.

• Determine what functions are available in each sub-environment and environment.

• Create a template using a flexible function.

You need to investigate the complete list of functions availablefor activity based costing to determine if you need to add anycustom designed functions.

You need to create a template for cost object controlling whichwill access every material item in a bill of material and performcalculations for each item, then compute the total for all theitems.

1-1 Sub-environments group functions logically to help you find individual functions.

What sub-environment might contain a function to determine what plant supplies anitem on a bill-of-material? Find the sub-environment and the function.

What sub-environment might contain a function to find out how many work centerchanges are required to build a product?

Find the sub-environment and the function.

1-2 Are the sub-environments you just identified available in environment 003?

If so, why.

If not, why not?

Are the sub-environments you just identified available in environment 001?

If so, why.

If not, why not?

1-3 What sub-environment might contain a flexible function which can scan through abill-of-material and do calculations on each item?

What is the name of the function?

Can you verify that this is a flexible function?

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1-4 We want to test the flexible function "TotalOfBomItems."

To do this, you need a new template, new template assignment, and a quantitystructure.Your material T-F44## has no bill-of-material or routing.Copy the Bom and routing from material R-4050 to your material T-F44##.

1-5 We want to use the information in the bill of material for T-F44## to compute thenumber of pallet movements required to move all the material from the warehouseto the factory.Create a process which will be the business process charged to theproduction order.

1-6 For the system to compute how many pallets are required, it needs to know howmany of each part will fit on one pallet. We won’t have any mixed pallets or partialpallets, so if it takes 2.5 pallets for quantity 100 of a part, we have to use 3 pallets.

There is a mathematical function available to round up the 2.5 to 3, but first weneed to calculate the 2.5.The information is available in the material master, it is called an alternative unit of measure.Pick any part on your Bom and find the alternative unit of measure which willanswer this question.

1-7 Create a new template in environment(cost estimates/production orders)

This template (bill of processes) will have two lines.

1. Process (painting)2. Process (pallet movements)

Save your template after entering these two rows (no formulas). Now link thetemplate to your overhead key and costing sheet

1-8 The number of coats of paint is as before (number of coats of paint * order lot size.

The number of pallets is computed as follows:

For each item on the BOM, calculate the number of pallets, then round up to aninteger.

Update your template to reflect this, testing as you add each complete formula.

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• Explain the purpose of functions.

• Explain the link between functions and environments.

• Determine what functions are available in each sub-environment and environment.

• Create a template using a flexible function.

You need to investigate the complete list of functions availablefor activity based costing to determine if you need to add anycustom designed functions.

You need to create a template for cost object controlling whichwill access every material item in a bill of material and performcalculations for each item, then compute the total for all theitems.

1-1 Sub-environments group functions logically to help you find individual functions.

What sub-environment might contain a function to determine what plant supplies anitem on a bill-of-material? Find the sub-environment and the function.

What sub-environment might contain a function to find out how many work centerchanges are required to build a product?

Find the sub-environment and the function.

SAP reference IMG

(CTU6)

Look for the node with text "bill of material" (104). If you can’t see it, go to thetop, click the funnel, and enter blank environment.

Double click the node on the left.

Look for the function "BomItemPlant " on the right (collapse the bill of materialnode on the left).

Look for the node with text "routing" on the left (105).

Double click the node.

Look for the function "NumberOfWorkCenterChanges" on the right.

Stay where you are for the next exercise.

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1-6 For the system to compute how many pallets are required, it needs to know howmany of each part will fit on one pallet. We won’t have any mixed pallets or partialpallets, so if it takes 2.5 pallets for quantity 100 of a part, we have to use 3 pallets.

There is a mathematical function available to round up the 2.5 to 3, but first weneed to calculate the 2.5.

The information is available in the material master, it is called an alternative unit of

measure.Pick any part on your Bom and find the alternative unit of measure which willanswer this question.

(CS03)

Enter T-F44##, plant 1200, bom usage 1.

Click the "item overview" icon.Select any item on the bom

Click the "additional data" iconClick the "units of measure" tab.

Here you will see the number of parts per pallet. Unit of measure is PAL

1-7 Create a new template in environment

(cost estimates/production orders)

This template (bill of processes) will have two lines.1. Process (painting)

2. Process (pallet movements)

Save your template after entering these two rows (no formulas). Now link thetemplate to your overhead key and costing sheet

(CPT2)(CPT1)

Enter template , environment In the first row, select object type business process. Enter in the objectcolumn

In the second row, select object type business process. Enter in theobject column

SAP reference IMG

(KTPF)

Click "new entries"

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Select BomItemRequiredQuantity

Insert divided by symbol "/" (without the quotes") after the Y in Quantity andbefore the ")" )

Click functions

Double click "AltQtyFactorFromMaterial"

Enter the fixed value PAL in the field for quantity unit

Next to material number, click the down arrow. Select functions/variablesSelect "BomItemComponents"

Your screen at this time: (note that you can enter this directly)

CEIL( BomItemRequiredQuantity

/ AltQtyFactorFromMaterial( AlternativeQuantityUnit = ’PAL’,

Material = BomItemComponents ) )

Click the check icon for syntax errors.

Left green arrow

Click "copy"

Left green arrow

Click the test plan button, saving the template when prompted

Test as before. For a quantity of 100 , the result should be 300 coats of paint and22 pallet movements.

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ABC stands for Activity Based Costing, which is a costing method that allows you to find out wherecosts are really consumed in your company. A distorted product cost analysis can result in poor

business decisions in terms of pricing and product strategy. Although such decisions can increase , they often have no impact or even a negative impact

on .

By using ABC, you can make better business decisions by focusing on the right products and theright markets.

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•

•

• •

• •

Because of globalization, market forces require that companies recover investments in overheadresources more quickly than in the past. Therefore, a comprehensive understanding of your

company’s overhead cost structure is a prerequisite for properly responding to these market forces. ABC provides –on an activity level– the transparency that's needed to clearly see the activities and

associated costs in your company. This, in turn, provides a process-oriented view of the organization.

The result: Effective measurements of how overhead resources in your organization are utilized.

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In traditional Costing systems, overhead costs are allocated on a percentage basis based on directlabor costs.

The standard margin is the difference between the market price and the product cost. This margincontributes to both overhead costs and to profits.

This example shows the traditional costing view where two similar products that are sold at differentprices. Obviously product A looks much more profitable than product B.

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ABC, on the other hand, tries to assign process-related overhead costs to products as they areconsumed.

For example, assume that product A is a low-volume product, whereas product B is a high-volumeproduct. As a result, development cost are spread over a lower life-cycle volume for product A,which results in a higher new product Development Process Cost per piece compared to product B.

Because of the lower volumes, the average lot size for product A is probably smaller than for productB. This means that all batch-related activities in the Order Fulfillment Process, such as productionplanning, will contribute to the higher cost-per-piece for product A.

As you can see, Product B now looks more profitable than product A.

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As demand for revenue growth increases, many companies expand product-line offerings into"niche" products. Such expansions often increase a product’s complexity due to the need to maintain

product differentiation. Because niche products often use many of the same indirect resources as the"main" products, overhead costs are traditionally allocated in the same proportions.

Because this allocation method results in a "peanut-butter" spread of overhead to all similar products,the profit contribution of these niche products encourages development of additional niche products.

When ABC shows the utilization of indirect costs, a common discovery is that, because of product differentiation, the main products receive a larger share of indirect costs than they actuallyrequire. For the niche products, on the other hand, the share of indirect costs is understated.

Unless you are aware of this issue, you can make poor product strategy and pricing decisions.

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An ABC view typically shows a different picture of Cumulative Profit, where many by differentmarket segments contribute, than a traditional Costing View. For example, the ABC view shows how

total overhead costs cut into the profitability of many products, or how customers can look moreprofitable than they actually are when viewed with traditional period costing.

The Cumulative Profit curve generally has the shape of a whale’s back, where products are listed indescending order based on their contribution to total profit. The declining slope shows all productsthat make a negative contribution to income. These are the products that cut into the potentialprofitability of the entire product line.

Simply discontinuing these products usually isn’t the solution because the resources they consumeadd to unused capacity. Additional analysis is required to determine how the selling price, redesign,positioning, and other factors can increase profitability.

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The key factors for a successful ABC implementation fall into two categories: management-drivenand software-driven.

The management-driven issues, shown in the top of the slide, must be addressed first. This requiresthat management understands indirect cost utilization and establishes and enforces policies based onthat knowledge.

As we move down the slide, the issues become more and more software-driven. For example, if thereis no need for double-maintenance of parallel Cost Accounting Systems, you can eliminateredundant data input and reduce the potential for database inconsistency.

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Cost of Errors

Cost of Detail

Cost of Detail

The total cost of an accounting system is based primarily on two factors: the Cost of Error, which isdue to a lack of detailed information, and from the Cost of Detail, which depends on the level of

information needed for decision making. In non-integrated systems, the Cost of Detail usually grows rapidly when complex sets of

information need to be combined manually to create a consistent foundation for managementdecisions.

In an integrated system, all relevant information is always available and can be collectedautomatically by the system.

Because the Cost of Error is the same for both systems, an integrated system usually provides ahigher level of detail – at a lower cost – than a non-integrated system, even when implementationcosts are taken into consideration.

Evaluating cost driver quantities is an important factor for a successful ABC implementation. Thisevaluation usually requires detailed information from the operational systems.

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