Profitability Analysis (CO-PA) Interview Questions

1. What are the differences between Profit Center Accounting (PCA) and Profitability Analysis
(CO-PA)?
PCA
PCA is aimed at Profit
reporting on internal
responsibility lines or SBU's
PCA is limited to reporting by
the profit center hierarchies
that you can setup.
PCA can be reconciled easily
back to the GL

CO-PA
CO-PA is aimed at external market
segment reporting for example by
customer and customer groupings
(industries), geographical areas.
PCA can slice & dice your
information by a variety of dynamic
hierarchies (a 'Rubiks' cube is often
used to symbolize this idea.
PCA has 2 'styles'

Account based which will

reconcile to the GL

Costing Based which Allows

approximations, estimations or
standards to be posted, which
may make reconciliation difficult
to explain to the user

2. Why does SAP talk about statistical assignments in CO - why are these different from real
Cost Accounting assignments?
The reason is to facilitate reconciliation between FI and CO. The sum of all 'real' assignments
in CO should add up to the sum of all expense and revenue postings (where cost/revenue
elements have been created for the GL account of course) in FI. A normal expense invoice
posting to expense accounts / cost elements will be a 'real' posting. If the system is displaying
an error message insisting on a 'cost accounting assignment' and you think you have entered
one, then possibly you have specified a statistical assignment. A common error is in thinking
that the business area will do - Business areas are FI elements not CO elements.
Example:
All Profit Center assignments
are statistical

EC-PCA is defined as statistical,

therefore if posting to a revenue
element, the system will insist on a
real cost accounting assignment even if
profit center is specified. A cost center
will not do, since revenue elements are
statistical in cost centers. The system
will accept the following as real: CO-

PA profitability segment, sales order,

customer project or a revenue bearing
order.
Revenue elements assigned to 'Revenue' when defined to the system
cost centers will always be
by setting up a revenue element is
statistical
always statistical in a cost center. If
however you have setup your revenue
accounts as primary cost elements then
the assignment will be 'real'.
3. What do you mean by Period based accounting (GL based) and cost of sales accounting
(COPA based)?
'Period Based Accounting' is Accrual Accounting and 'Cost of Sales' is 'Cost of Goods Sold'
Accounting.
Period based Accounting
"Period based" means that during the month or period, all and only actual events /
transactions are posted in the appropriate period. At the end of the period estimated accruals
and deferrals are made and posted to that posting period to give a more accurate view of
profit. IE any expected revenues and expenditures that should relate to the current period are
accrued for and equally any prepaid expenses or revenues are deferred to the next
period. (Accruals and Deferrals are posted temporarily, usually to special accounts, and
reversed prior to the next period end.)
These accruals and deferrals are usually done at a fairly high level of summarization (eg: at
company or business area). The FI Ledgers and financial statements etc are always period
based.
Cost of Sales Accounting
Cost of Sales in SAP means that we attempt to record or rather report the "costs of sales"
against the actual sale at as low a level as possible and during the period. (In CO-PA this is
down to a transaction level.) This enables the company to get a reasonably accurate view of
profitability on a real time basis.
This is done by using either standards or estimates for many of the components that make up
the "cost of goods sold". Any variations from the standards are usually posted through to the
cost of sales system either at month end or when they occur.
For example: A product cost estimate might be used to calculate and post a manufactured
cost through to CO-PA when every sale goes through. The actual production
orders variances from the product cost estimate can then be settled to a separate line in COPA. This has the benefits that

a reasonably accurate gross profit could be reported in real time at a transaction level and of
course therefore at all the characteristic levels in CO-PA.
The impact of any abnormal variances in production can quite clearly be seen and analyzed
separately from the normal profitability of a product.
4. How data flows from SD to COPA?
The normal SD document flow is as follows:
1. Sales order
2. Delivery (the delivery creates the goods issue, which debits COGS and credits
Inventory COGS is updated in CO-PA at this time)
3. Billing Document (the billing document updates A/R, Sales revenue, Discounts,
Freight, etc.)
5. How data flows from CO to COPA?
Through Assessments. Allocates costs from cost centers to profitability segments.
6. How data flows through MM into FI?
Through Account assignment model OKB9. Automatic postings created in materials
management, can be passed on to CO-PA by means of automatic account assignment to a
profitability segment.
7. How data flows from PP into FI & COPA?
Through Production Variances. It Posts variances from the production (product cost)
estimates or standards to the GL accounts and to Profitability Analysis if real costs are
required (vs standard costs). Standard cost figures would have been used to update Stock and
Cost of Goods sold figures when finished stock was issued from the production runs.
8. What do you mean by value field groups?
Value Field Groups represent the possible combinations of value fields in an operating
concern. Value field groups are used to specify:

Which value should be made available to users entering or displaying a line item

In what order these value fields should be displayed

Which specific value fields can be filled

You plan your data for the characteristics Product, Product group and Customer group. You
define three planning levels for which planning data is to be entered: Customer
group/product group (independent of the product), product/product group (independent of
the customer group), and product/product group/customer group (the lowest, most detailed
level). By using transaction-based top-down distribution, you can ensure that all planning
data is saved at the lowest level
9. What are Characteristics Values?
Characteristics are aspects on which we want to break down the profit logically such as
customer, region product, sales person etc.
10. What do you mean fixed characteristic fields?
Predefined characteristic fields in SAP R/3 system, which are obvious, are known as fixed
characteristic fields such as product, sales org and customer
11. What are Non-Fixed characteristics or user defined characteristics?
Up to 50 non-fixed characteristics can be added to an operating concern. E.g. Bill-to-party
Create -> Derived the value from Table PAPARTNER (SD partner that can be used in
COPA) -> Create user defined characteristic name WW008 -> Save

Profitability Analysis
Explain the organizational assignment in the PA module?
The operating Concern is the highest node in Profitability Analysis.
The operating concern is assigned to the Controlling Area.
Within the operating concern all the transactions of Profitability Analysis
are stored.
The operating concern is nothing but a nomenclature for defining the
highest node in PA.
What is the functionality of the PA module?
PA module is the most important module when it comes to analyzing the
results of the organization.
In this module you basically collect the revenues from the sale order , the
costs from the production order, cost center or internal order and
analyze their results.
The interesting part about this module is that when it collects the costs
and revenues it also collects the characteristics associated with the costs
and revenues and this is what makes it stand out
So for e.g. using PA module you can find out the following:
Profit of a certain product

Profit of a certain product in a certain region

Profit of a certain product in a certain region by a certain customer
Profit of a certain product in a certain region by a certain sales person
And the list can go on in depth
It is one of the most wonderful modules in the SAP
How do you get all those characteristics defined above and how do
you analyze them?
To do so while defining Operating concern one has to define
Characteristics and Value fields.
What are characteristics and Value Fields?
In the operating concern two things are basically defined
a) Characteristics
b) Value Fields
Characteristics are nothing but those aspects on which we want to break
down the profit logically such as customer, region product, product
hierarchy, sales person etc
Value Fields are nothing but the values associated with these
characteristics
Eg Sales, Raw Material Cost, Labour Cost, Overheads etc
Once you define the characteristics and value fields these values are
updated in the table.
From where does the characteristics come from?
The characteristics which are defined above basically comes from either
the Customer Master or the Material Master.
How does various values( revenues and costs) flow into PA?
The Sales Revenue comes from the Condition Type in SD.
We need to map the Condition Type in SD to the respective value fields in
customizing to have the revenue flow into PA.
The Cost comes from Cost estimates which are transferred using the PA
transfer structure which we have covered in the Product costing section.
The various cost components of the cost component structure is assigned
to the value field of PA module and this is how the costs come into PA.
Once the actual revenue and the std cost defined above are captured in
PA the variances are also transferred into PA.
This way the std cost variances equal the actual cost.
So actual revenue- actual cost helps us determine the profit.
How do you configure the assignment of variances from product
costing to COPA module?
The variance categories from product costing along with cost element is
to be assigned to the value fields in COPA

Once you have captured all the costs and revenues how do you
analyze them?
The costs and revenues which we have captured in the above manner are
then analysed by writing reports using the Report Painter Functionality
in SAP.
What is characteristic Derivation in Profitability Analysis Module?
Characteristic Derivation is usually used when you want to derive the
characteristics . An example of this could be say you want to derive the
first two characteristics of product hierarchy.
In such cases you define characteristic derivation where you maintain
the rules, which contain the table names of the product hierarchy fields
and the number of characters to be extracted, and it also specifies the
target characteristic field in PA.
What is the basic difference in customizing in Profitability analysis
as compared to other modules?
In PA when we configure the system i.e. creating operating concern,
maintain structures no customizing request is generated. The
configuration needs to be transported through a different transaction
called as KE3I.
What is the difference between Account based Profitability Analysis
and Costing based Profitability Analysis?
Account based Profitability analysis is a form of Profitability analysis (PA)
that uses accounts as its base and has an account based approach. It
uses costs and revenue elements.
Costing based Profitability Analysis is a form of profitability analysis that
groups costs and revenues according to value fields and costing based
valuation approaches. The cost and revenues are shown in value fields.
What are the advantages and disadvantages of Account based
profitability analysis vis--vis costing based profitability analysis?
The advantage of Account based PA is that it is permanently reconciled
with Financial accounting.
The disadvantages are that it is not powerful as the costing based PA,
since it uses accounts to get values. No Contribution margin planning
can be done since it cannot access the standard cost estimate. Further
no variance analysis is readily available.
The advantages of the Costing based PA are manifold. They are as
follows: Greater Reporting capabilities since lot of characteristics are
available for analysis.
This form of PA accesses the Standard cost estimate of the
manufactured product and gives a split according to the cost

component split (from the product costing module) when the bills
are posted.
Contribution margin can be planned in this module since the
system automatically accesses the standard cost estimate of the
product based on the valuation approaches.
Variance analysis is ready available here since the variance
categories can be individually mapped to the value fields.
Disadvantages:Since it uses a costing based approach, it does not sometime reconcile
with financial accounting.
Can both Account based and Costing based Profitability analysis be
configured at the same time?
Yes. It is possible to configure both types of costing based profitability
analysis at the same time.
What is the advantage of configuring both the type of Profitability
analysis together?
The advantage of activating account based profitability analysis along
with costing based PA is that you can easily reconcile costing based
profitability analysis to account based profitability analysis, which means
indirectly reconciling with Financial accounting.
Is there any additional configuration required for Account based
profitability analysis as compared to costing based profitability
analysis?
No. There are no special configurations required except for activating the
account based profitability analysis while maintaining the operating
concern.
What is the difference between Profitability analysis and Profit
center accounting?
Profitability analysis lets you analyze the profitability of segments of your
market according to products, customers, regions, division. It provides
your sales, marketing, planning and management organizations with
decision support from a market oriented view point.
Profit center accounting lets you analyze profit and loss for profit centers.
It makes it possible to evaluate different areas or units within your
company. Profit center can be structured according to region, plants,
functions or products (product ranges).
What configuration settings are available to set up valuation using
material cost estimate in costing based profitability analysis?
In Costing based Profitability analysis you define costing keys. A costing
key is a set of access parameters which are used in valuation to

determine which data in Product cost planning should be read. In the

costing key you attach the costing variant.
In the costing key you specify whether the system should read the
current standard cost estimate, the previous standard cost estimate or
the future standard cost estimate or a saved cost estimate.
The configuration settings to determine this costing key is as follows:1) Assign costing keys to the products Three costing keys can be
attached to a single product for a specific point of valuation, record
type, plan version.
2) Assign costing keys to Material types
3) Assign costing keys to any characteristics You can use your own
strategy to determine the costing keys. This is through user
defined assignment tables.
How to do costing run?
What is the use of costing run?
Steps for Product costing:
Create Cost center (FI/CO) KS01
Create Activity Type (FI/CO) KL01
Assign Rates for a cost center/activity type combination KP26
Do Cost estimates - CK11N, CK24 or CK40N
If you use CK40N, Costing, Mark the price and Release the same can be done in single step.
Cost Rollup is done for Finished product so that the system automatically calculates for the SemiFinished products standard cost.
IF you use CK11N, only costing will be done, but for marking and release you have to use CK24.
OPL8 - For each Production order type, Order Type Dependent Parameters Under controlling tab Costing variant Planned and actual has to be assigned.
KKF6N - Create Product Cost Collector for REM scenario for all In-house Manufactured assemblies.

Use of Costing run:

Costing run is used to capture the cost involved in the manufacturing of a product.

E.g.
Manufactured materials
Services
Other intangible goods
You can analyze costs to help provide answers to questions such as:
What is the value added of a particular step in the production process?
What proportion of the value added can be attributed to a particular organizational unit?
What is the cost breakdown including primary costs or transfer prices?
How high are the material, production, and overhead costs?
How can production efficiency be improved?
Can the product be supplied at a competitive price?
You can use Product Cost Planning to do the following:
To calculate the non-order-related cost of goods manufactured and cost of goods sold for each product
unit.
To establish how the costs are broken down for each product, and to calculate the value added for each
step of the production process ( Concept of Cost Rollup).
To optimize the cost of goods manufactured through comparison costing ( Product Cost Controlling
Information System).
To provide basic information for other R/3 applications, for example:
To establish standards with which to assess production efficiency in Cost Object Controlling.
To update prices in the material master record and in Profitability analysis.

The questions on COPA will be like

1. What is the difference between PCA and COPA as both are for profitability reporting ?

2. What are the differences between Account based and Costing based PA . What would you
recommend to the client ?

3. How many types of Charecteristics , value fields are there ? what are their purposes ?

4. What the the variou derivation method available .? give examples for each once ?

5. How do you create report in COPA ?

6. How do you do planning in COPA ? How do you export planning value from Excel ?

7. What is profitability Segment Charecters ? how do you define them ??

8. What are the various table used in COPA ?

9. What is valuation ? how do you use ? give an example or scenario ?

1. What is realignment and how does it works.

2. What is key figure Schema?

3. How does the data flows from other modules into COPA.

4. What is characteristic values?

5. What is summarization levels.

1) What are primary and secondary cost elements and what is the difference between them?

2) What is the difference between distribution and assessment?

3) How are cost center and profit center related or connected?
4) What are different types of profitability analysis?
5) Can you activate both forms of profitability analysis simultaneously?
6) What are true cost objects and statistical cost objects?
7) What is activity type and statistical key figure?
8) What is internal order and whats the difference between cost center and internal order?
9) whats the difference between internal order and WBS element in PS?
10) How does the data flow into CO-PA?
11) What is the organizational hierarchy in PA module?
12) How does the data flows to the PCA?
13) What are the imp activities in PCA?
14) What is the difference between CO-PA and PCA?
15) How is cost centers and comp code related?