Controlling Overview
Purpose of Controlling
The information that comes out of FI cannot serve as
management information, the reporting level is too high.
In CO we focus on management reporting.
It records both the consumption of production factors and the
services provided
Facilitates comparison of actual data with plan data
Variance Calculation
Help in make or buy decisions (Marginal Costing)
control and report on the efficiency of
a unit of responsibility for costs (cost center)
one single task/project, or specific part there off (order or WBS)
Controlling can and should consider all cost, whether the
expenditure already happened or not, therefore Controlling only uses cost of consumed material, not inventory
Controlling includes depreciation of fixed assets
Controlling always should take into account amounts and
quantities
Report the results to an internal user community
Flow of Data From FI to CO
Each Profit & loss posting in Financial Accounting can
come into Controlling. An account in FI will be a
primary cost element in CO. In CO there is additional
information needed on each cost element in order to
gather management information. That additional
information is a cost object. Cost Element is posted
on the cost object.
In CO we can further allocate between cost objects.
This is done with secondary cost elements which are
invisible in FI.
Components of Controlling
Cost Element Accounting
Primary Cost Elements
Secondary Cost Elements
Cost Element Groups
Cost Center Accounting
Master Data
Cost Center
Standard Hierarchy
Planning
Primary Cost Planning
Secondary Cost Planning
Activity Type Planning
Plan Assessment
Plan Distribution
Actual Posting
Reposting of Costs
Direct Activity Allocation
Period-End Closing
Assessment
Distribution
Reporting
Components of Controlling
Internal Orders
Master Data
Internal Order
Order Groups
Planning
Primary & Secondary Cost Element Planning
Unit Costing
Budget Management & Availability Control
Commitment Management
Actual Posting
Reposting of Costs
Time Sheet
Direct Activity Allocation
Period-End Closing
Revaluation at actual prices
Overheads
Settlement
Reporting
Components of Controlling
Activity Based Costing
Basic data and structures
Planning
Actual postings
Process template and environment
Reporting
Profit Center Accounting
Account based period accounting method
Basic settings
Object assignment to profit center
Profit center planning
Transfer prices
Actual data flow
Reporting
Components of Controlling
Product Cost Controlling
Product Cost Planning
Master data
Material costs
Production costs
Overhead costs
Product cost estimate using quantity structure (bill of material and
routing)
Product cost estimate without quantity structure
Reference and simulation costing
Costing variants
Cost Object Controlling
Product Cost by Period
Product Cost by Order
Product Cost by Sales Order
Cost of Intangible Goods & Services
Actual Costing / Material Ledger
Components of Controlling
Profitability Analysis (CO-PA)
Costing-based and account based methods
Master data
Currency of Operating Concern
Characteristics
Value fields
Valuation and derivation
Flow of actual values
Flow from the Sales and Distribution (SD) Module
Flow from Billing Document
Flow from the FI/MM direct postings
General Ledger Posting
MM Postings
Flow from the Product Costing
Settlement of Production Variances to PA
Plan integration and planning tools
Multi dimensional Drill-Down Reporting
Cost Element Accounting
A cost element classifies the organization's valuated
consumption of production factors within a controlling
area
Primary Element - costs that originate outside the company;
relate directly to the income statement in FI and must be
included in the FI Chart of Accounts
Secondary Element - costs that result from internal allocation
activities; NO relation to G/L accounts in FI. These accounts are
exclusively for cost accounting and are only maintained in CO
Cost Element Groups It is a group of cost elements of
same characteristics.
Cost Element Vs. G/L Account
Financial
Accounting
Cost Centre Accounting
Internal Orders
Product Costing
Profitability Analysis
Adjustment
Accounts
Income
Statement
Accounts
General Ledger
Accounts Payable
Accounts Receivable
Fixed Assets
Treasury
Primary
Cost
Elements
Secondary
Cost
Elements
Cost Elements
Chart of Accounts
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Balance
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Controlling
All
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Inc lin elem ary
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Ac
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Cost Center Accounting
Organizational unit within a controlling area that represents a
defined location of cost incurrence. The definition can be based on:
Functional requirements
Allocation criteria
Physical location
Responsibility for costs
Defines the smallest area of responsibility within the company that
causes and influences costs; the lowest level to which you can
meaningfully assign direct and indirect costs
Cost centres gather primarily overhead costs
As direct production costs are post on a production order and direct
sales costs are post on a profitability segment, just the remaining
overhead is gathered on cost centres.
Also some direct costs are first collected on cost centres and then
allocated to the PO or PSG
Cost Center Standard Hierarchy
Enterprise
A group
Standard
Hierarchy
Company
A Ltd
9100
Functional Area
Cost Center
xx01 - Production
9101000 Production Common
xx02 - Maintenance
9101011 EG- 1 Plant
xx03 - Utilities
xx04 Engineering & Projects
A1 Ltd
9200
xx05 Quality Assurance
xx06 Production Planning
xx07 Production Handling
xx08 Warehousing & Storage
A11 Ltd
9300
s
de
o
N
A111 Ltd
9400
xx09 Executive Office
xx10 - Finance
9110000 Finance
xx11 Human Resources
9111000 Human Resources
xx12 Information Technology
9111001 Housing Services
xx13 - Purchasing
9111002 Training Centre
xx14 General Services
xx15 Safety & Security
xx16 Sales & Marketing
xx17 Research & Technology
xx18 Company General
ts
c
e
bj
O
st
Co
Cost Center Planning
Cost Element Planning
Cost center
Senior
consulting
Cost center
Planned costs on the cost
center
FI/CO
consulting
Junior
consulting
Cost Element Planning
Year
Periods
Cost center
2001
1 to 12
30100 FI/CO consulting
Cost element
430000
474100
Name
Salaries
Travel costs
Inpu
t
Planned costs
900000
500000
Version
1
1
Cost Center Plan Distribution
Administration
Company General
Materials
60
Staff Salaries
120
Rent & Rates
Light & Heating
Materials
100
Vehicles
Staff Salaries
200
Repairs
Production Support
Rent & Rates
Travelling
12
Light & Heating
Hotels
18
Materials
40
Staff Salaries
80
Vehicles
Rent & Rates
Repairs
Light & Heating
Travelling
20
Hotels
30
Total
Total
210
Vehicles
Repairs
Travelling
Hotels
12
Total
140
Allocation
Allocation through
through original
original cost
cost element
element
Cost Center Plan Assessment
Administration
Materials
Staff Salaries
Company General
Rent & Rates
Light & Heating
Materials
100
Vehicles
Staff Salaries
200
Repairs
Production Support
Materials
Rent & Rates
Travelling
Light & Heating
Hotels
Vehicles
Company General Costs 210
Rent & Rates
Total
Vehicles
Staff Salaries
Repairs
Travelling
20
Hotels
30
Company General Costs -350
210
Light & Heating
Repairs
Travelling
Hotels
Total
Company General Costs 140
Total
Allocation
Allocation through
through secondary
secondary cost
cost element
element
140
Reposting of costs
Reposting of Line Items
Direct Activity Allocation
Reporting
Reporting Interactive Information
Internal Orders
Used to plan, collect and settle the costs of internal jobs and tasks.
Internal orders are categorized as either:
Orders used purely to monitor objects within Cost Accounting (such as
advertising, training, or trade fair orders) and
Productive orders that are value-added, that is, orders that can be
capitalized (such as in-house construction of an assembly line).
An internal order is a cost object with a life cycle:
it is created, released, post, completed and deleted
An internal order can be real or statistical
A real internal order gathers the cost elements. There is no other cost
object. At period end the costs are settled (allocated) to another cost
object (cost centre or profitability segment).
A statistical order is detail of a cost centre: you post on the order AND on
the linked cost centre. The real posting is on the cost centre, but the
orders give statistical details.
Order Groups It is a group of internal orders to display a certain
structure. It is used in for:
Planning
Overhead calculation
Settlement
Evaluation in reporting
Planning & Budgeting
Planning on Internal Orders
Budget Management
Availability Control
Commitments
Actual Posting from FI
Actual Posting from CO
Settlement of Internal Orders
Activity Based Costing Goals
Business Process
Product / Job Costing with Templates
Materials
Cost Object (Order, Project etc.)
LIS
Order Header
Material Lot-size
Routing
Functions
BOM
CO - Values
Material
Operations
Overhead
Template
ss
Proce es
iti
Quant
Processes
Processes
External Sources
Other
SAP Sources
Business Process Reporting
Profit Center
Organizational unit in Accounting that reflects a
management-oriented structure of the
organization for the purpose of internal control.
You can analyze operating results for profit centers
using the period accounting approach
By calculating the fixed capital as well, you can use
your profit centers as investment centers.
Profit Center groups are collections of Profit
centers with similar characteristics.
Accounts in PCA
A Group Chart of Accounts
Financial Accounting
1
Assets
1
Current
financial
assets
and
shortterm
capital
2
Liabilities
3
Equity
Expense Revenue
accounts
NonMaterial
Revenue
operainventory Primary
cost
elements
ting
elements
costs,
revenue
9
Secondary
cost
elements
Controlling
Profit Center Accounting
Object Assignment to Profit Center
Profitability
Segment
Sales order
Cost center
Profit
Center
Asset
Internal order
Production order
Material
Planning Methods In PCA
Plan data transfer
Excel-Upload
Copy existing data
New Plan
Plan
Allocations
Final Plan
Manual entry
Transfer Price
A transfer price is a price used to valuate the
transfer of goods and services between
independent organizational units.
Views in Enterprise Controlling
Legal View that of independent legal companies
Group View that of the organization as a whole
Profit center view - that of the decentralized responsibility areas
Transfer price from the group viewpoint
=
Transfer price from the profit center viewpoint =
Transfer price from the legal viewpoint
=
group production costs
management price
sales and purchase price
Actual Data Flow
Flow of Actual values in Profit Center Accounting
Flow from Profit and Loss accounts
Flow from materials management
Flow from sales and distribution
Flow from Balance Sheet items Period end closing
Flow from Asset Management
Transfer of Material Stock
Transfer of Work In Process
Flow from Accounts payable and receivable
Flow from controlling Period end closing
Flow from Overhead Cost Management
Profit Center Document Entry
Assessment & Distribution
Overview of Value Flow in PCA
ECECPCA
Profit Center Accounting
V
A
L
U
E
E
FI
Primary Costs
COOM
F
L
O
W
COPA
COPC
Procurement
MM
Production
PP
Goods
Movement
MM
Sales/Billing
SD
Reporting in PCA
Profit
Center
Report
Variable output
areas
Navigation tree /
drag & drop
Cumulative
display functionality
Listoriented
Reports
Interactive
Reporting
Line Item
Reports
Interface
Report-to-Report
Printing
options
Integration
with MS Office
Product Costing
Provides details of cost of Product and Services
with Cost break down into various components
such as material, Labor ,Overhead etc.
Helps in analysis of Cost of product and vital
Decision making related to Make or Buy.
Helps in Identifying the Value added in particular
step of Production thereby identifying and
controlling the variances with Planned costs
which in turn increases profitability.
Help in calculation of Cost of Goods
Manufactured and cost of Goods Sold
Product Cost Planning
Reference & Simulation Costing
Costing variant
Costing items
Base planning objects
Product Costing with Qty. Structure
Its Components:
BOM ( Bill of Material )
Routing
Costing Variant
Cost Component Structure
Costing Sheet
Overhead Key
Additive Costs
Types of Cost Estimate
Planned price/standard price
Price control/actual prices
Commercial/tax price
Current qty structure
Planned qty structure
Inventory
cost estimate
Current
cost estimate
Modified standard
cost estimate
Standard
cost estimate
Quantities
Prices
Costing Variant Qty. Structure
Cost Object Controlling
It helps in reporting and analysis of costs incurred in production activities
Simultaneous Costing
Material
Internal
Activitie
s
Nonstock
Invoices
Process Industry
Repetitive
Manufacturing
Order-related Man.
Period Closing
Work in process
Scrap
Actual cost split
Variances
Settlement
Make-to-Order
Project-relat. Man.
Cost Object Controlling
Components :
Product Cost by Period
Product Cost by Order
High-volume production
Stable manufacturing environment
Individual lot-based cost measurement is not required
Periodic analysis of costs at the level of products
Example: Repetitive Manufacturing
Highly flexible production environment
High setup costs
Full traceability of costs to orders required
Cost measurement by production lot required
Example: Discreet Manufacturing
Product Cost by Sales Order
Customer specific products are manufactured
Collecting special sales costs on sales orders
Tracking Funds committed for sales order
In-house manufacturing / purchase of products / services with reference to a sales
order
Example: Complex Make-to-Order Production
Cost Of Intangible Goods & Services
Preliminary Costing
Simultaneous Costing
Period-End Closing Activities
Overhead Cost
allocated
Calculate
Work in process
Input
Varianc
es
Output
Varianc
es
Work in process
calculated
Calculate
Variances
Scrap
calculated
Price variance
calculated
Quantity var.
calculated
Res.usage var.
calculated
Lot-size var.
calculated
Remain. var.
calculated
Settlement
WIP posted
to FI
WIP posted
to profit center
Variances/scrap settled
to profit. analysis
Variances/scrap settled
to material/price diff.acct.
Material Ledger / Actual Costing
The Material Ledger (ML) is a tool within the CO Module
that collects all transactional data for materials whose
master data is stored in the material master. It acts as a
sub-ledger for selected materials that captures all goods
movements, invoice values, transfers and price changes.
On the basis of this data, the material ledger calculates
and maintains the actual cost for these materials. This
actual cost can then be utilized to valuate the material
stock accounts.
Functions of Material Ledger:
Cost accounting using actual prices
Storing values of stock in three different valuations (legal
valuation, group valuation for reporting purposes, and profit center
valuation) in multiple currencies
Actual Data Flow
Actual data -> Actual Costing
Preliminary valuation price
When Actual costing is used all materials are valuated with a preliminary periodic
unit price. This price remains constant within a period.
This price can be the result of a standard cost estimate, a manual price or an actual
price calculated in the previous period.
The advantage of this price is (as with the standard price) that standard costs can
be calculated independently without price fluctuations hindering the controlling of
the production processes.
Actual Costing
Price differences
Updating single-level variances
During a period, variances are incurred for this preliminary valuation price (or
standard price).
These variances are posted from the material ledger to a price difference account
and updated for each material. Single-level variances are the variances incurred for
a material during its direct procurement.
Single-level price determination
At the end of the period, you can use the functions for single-level price
determination to assign the variances for each material. In this way, cumulated price
differences can be proportionally assigned to the ending inventory and material
consumption of the period at the end of the period.
Multilevel price determination
Multilevel material price determination can also calculate the variances that have
flowed into higher levels of the production process using a multilevel actual quantity
structure
Profitability Analysis
Profitability Analysis enables to analyze the profitability of market
segments according to the following characteristics:
Products
Customers
Sales Districts (i.e. USA West,
USA East, Saudi Arabia etc.)
Others
Master data in CO-PA
Fixed Characteristics
Characteristics
delivered
by SAP
Predefined Characteristics
Characteristics are the analysis dimensions for CO-PA. They
define what items or objects the user will be able to analyze.
Several characteristics (like "sales organization"," customer",
"product", etc.) are predefined automatically for every operating
concern; these are known as fixed characteristics.
Master data in CO-PA
Value Fields
delivered
by SAP
Value Fields
created
by Customer
Predefined Value Fields
Custom Value Fields
The value fields contain values and quantities that were updated or
planned for particular objects.
Plan Integration
Profit planning - V1
Sales
Profit planning V2
Planning
planning
SOP
Sales
Cost of goods
volume
manufactured
Product
Production
LTP
costing
Activity price
Activity quantities
Cost centers
Actual Value Flow in CO-PA
Flow of Actual in Profitability Analysis
Flow from the Sales and Distribution (SD)
Module
Flow from Billing Document
Flow from the FI/MM direct postings
General Ledger Posting
MM Postings
Flow from the Product Costing
Settlement of Production Variances to PA
