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A.

Proposed Business Processes


Overview
Profitability Analysis (CO-PA) enables you to evaluate market segments, which can be classified
according to Products, Customers, Orders or any combination of these, or strategic business
units, such as Sales Organizations or Profit Centers, with respect to Company's profit or
contribution margin.
The aim of the COPA concept is to provide Profitability in multi-dimensional scenarios like,
Customer wise
Area wise
Product wise

This helps management to make decision-making for sales and product development
Profitability Analysis provides a basis for decision-making, for example, for price determination,
customer selection, and for choosing the distribution channel
As contribution margin accounting, it also provides concurrent comparison of actual and planned
data in order to evaluate the financial results of the individual market segments.
The business purpose of Profitability Analysis is to provide profitability-oriented performance
information of market segments or sales channels, in order to support corporate planning and
decision-making, especially in the areas of sales and marketing and analyses the contribution to
operating income or contribution margin of market segments and their individual value-based and
quantity-based components
The aim of this business process is to provide sales, marketing, product management and
corporate planning departments with information to support internal accounting and decisionmaking.
Performance figures are normally measurements of quantities, revenues, discounts, surcharges,
product costs, margins etc.
COPA analyses the profit or loss of an organization by individual market segments.
The results of Profitability Analysis can be analyses with a multidimensional reporting tool, which
allows the dynamic sorting and arranging of data to provide multiple perspectives within a single
report.

Types of COPA
Two forms of Profitability Analysis are supported:
I.
II.

Costing Based COPA


Account Based COPA

Costing-based COPA:
In Costing Based values will be stored in Value Fields under the table which is generated when
COPA activated
Costing based COPA updates the values and quantities
Costing-based Profitability Analysis is the form of profitability analysis that groups costs and
revenues according to value fields and it uses Costing-based valuation approach.
Costing-based Profitability Analysis provides access at all times to a complete, short-term
profitability report
Revenue Cost Elements:
Revenue Cost Elements have to be created under following category to allow the update of the SD
conditions in costing-based CO-PA

Cost Element Type


Revenues
Sales Deductions

Cost Element Category


11
12

Account-based Profitability Analysis:


In Accounting based data will be stored in Accounts and Cost Elements
Accounting based COPA updates the values only
Account-based Profitability Analysis is a form of profitability analysis organized in accounts and
using an account-based valuation approach.
Account-based Profitability Analysis provides you with a profitability report that is permanently
reconciled with financial accounting
The distinguishing characteristic of this form is its use of cost and revenue elements. It provides
you with a profitability report that is permanently reconciled with financial accounting
Account-Based Profitability Analysis reconciles the data between Financial Accounting and
Controlling, since all costs and revenues are stored in accounts.

Master Data
In COPA Master Data provided the fundamental data and content within the structures determined by
the Characteristics and Value fields
The structure of an operating concern is determined by:
1. Characteristics (Profitability Segments)
2. Value Fields (For costing-based Profitability Analysis)
Characteristics:
Characteristics are the criteria in Profitability Analysis (CO-PA) according to which you can
analyze your operating result and perform differentiated sales and profit planning and reporting.
Characteristics will be used to divide the market into market segments (such as product,
customer, business units such as sales organization or segment, or any summarization of these
concepts)
Characteristics are the analysis dimensions for CO-PA. They define what items or objects will be
able to analyze
Profitability Analysis will enable to analyze the profitability of market segments according to the
following characteristics
A combination of values for the characteristics in an operating concern is called a Profitability
Segment, i.e. values for characteristic Division are as follow:
In One Chemical following Characteristics are recommended for Birla White

1. Characteristics: - Sales Area level


Sales Organisation
Distribution Channel
Division

Business
For Birla White

2. Characteristics: - Customer level

Customer
Customer Group
City
Region
Zone
State
Country

Business
For Birla White

3. Characteristics: - Product level

Business

Product
Product Group
Segment

For Birla White

4. Characteristics: - Sales

Business

Depot Sales
Dealer Sales
Consignment Sales

For Birla White

5. Characteristics: - Sales Document

Business

Sales Office

For Birla White

following Characteristics are recommended for BW

6. Characteristics: - Product level

White cement
Wall Care Putty
Textura
Level Plast
GRC

Business
For Birla White

It is possible to view the information in PA by any combination of the characteristics, i.e. we can
view any segment that is defined by a combination of characteristic values.

Value fields
Value fields are the fields that contain the currency amounts and quantities that can be analysed
in Characteristics in CO-PA. They represent the structure of costs and revenues.
In costing-based Profitability Analysis, value fields store the base quantities and amounts for
reporting. Value fields can either be either summarized or detailed
Generally, value fields are detailed with regards to sales performance figures like types of
revenues, discounts, surcharges, etc.), and more summarized for other items relating to period
costs (like types of period expenses)

Value Fields are recommended for Birla White

Value Fields

Business

Bill Number

For Birla White


For Birla White

Billing Date
Quantity
Basic Value
Freight Realised
Freight Paid
Depot Freight
Depot Expenses
Ocean Freight
C&F Expenses
Freight up to Port
Other Expenses
Cash Discount
Trade Discount
Special Discount
Dealer Commission
Rate Difference
Net Value
Realisation Rate / Ton
Standard Cost per Ton
Contribution per Ton
FOB

For Birla White


For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White

Currency
Exchange Rate
Rate
Payment Terms
Conditions
Invoice No
Invoice Value
Stock Transfer
Usage
Fixed Cost
Variable Cost
Standard Cost
Contribution

For Birla White


For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White
For Birla White

By setting off the costs against the revenues, it can calculate that an operating profit for the
individual market segments that is defined by a combination of classifying characteristics.
Posting to an operating concern can be broken down into profitability segments which correspond
to market segment
CO-PA Planning
The aim of the system is to provide organisation sales, marketing, product management and
corporate planning departments with information to support internal accounting and decisionmaking
Once planning has been finalized, planning data can be entered manually
It is possible to plan on many different levels in CO-PA during a planning process.
For example, it's possible to plan on the product group level, Product level, Customer level or for
combinations of these.

Actual data flow


Actual Postings represent the most important source of information in CO-PA. You can
transfer billing documents from the Sales and Distribution (SD) application component to COPA in real time.
You can also transfer costs from Cost Centers and Orders received in MM
Costs and revenues from direct postings (G/L account postings in FI)

Flow of Actuals 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

Flow from the Sales and Distribution (SD) Module


The goods issue is triggered by a delivery in SD. This affects the values in Materials Management
and Financial Accounting.
Note that the goods issue posting does not cause any data to be posted in costing-based CO-PA.
The cost of goods sold is only transferred to costing-based CO-PA when the billing document is
transferred.
The following data is transferred from bills and debit and credit memos to CO-PA.
Revenues
Sales deductions (shipping, discounts, and so on)
Accruals (e.g. from rebate agreements at first posted in FI)

The cost of goods sold is only transferred to costing-based CO-PA when the billing document is
transferred according to a price in material master and a material cost estimate valid on the date
of a delivery.
This enhancement helps to reconcile COGS posted in FI in a moment of a delivery with COGS
posted in CO-PA during billing. It is extremely important while there is a huge time gap between a
delivery and a billing.

Flow from the FI direct postings through


Data flows from FI to COPA through direct posting, auto account assignments, Cost objects, profit
segments and transfer structures
Flow from the MM direct postings through
Data flows from MM to COPA through account assignments. It can be passed on to automatic
account assignment to profitability segment
Flow from the Product Costing
After finishing the production process (CO production orders), or at the end of the period (product
cost collectors), the production order variances will be settled to a price difference account and to
CO-PA.
It can settle (transfer) the production variances calculated in Product Cost Controlling for product
cost collectors (settled periodically) and CO production orders to CO-PA. The individual variance
categories (such as material price variance, material quantity variance, etc.) are transferred
separately.

Business Process
When SD billing data are generated, values of line items will be posted to CO-PA. Corresponding
sales deductions like cash discounts, rebates that may arise also will be transferred to COPA.
Any other cost related to sales will also be transferred to the profitability system. Product cost that
is standard cost of material will be transferred to CO-PA.
All production variances will be settled to CO-PA at the month end.
The market segments will be defined in terms of characteristics such as products, product
groups, customers, customer groups, geographic areas, etc. For example, you may wish to
analyze profitability for a specific group of products that you sell to a particular customer (or group
of customers).
COPA Provides flexibility to choose whichever characteristics are relevant for defining your
company's market segments

Each unique combination of characteristic values (e.g. sales of product A to customer Y) defines
a profitability segment.

CO-PA provides a multidimensional reporting tool that can be used to design reports that analyze
data for any selected market segments, and any defined measures of profitability.
All gross revenues and sales deductions like freight, discounts, commissions etc., will come from
sales order condition types to CO-PA.
Total standard cost relevant to inventory valuation will flow from product costing cost components.
Variances from the process orders will flow from product costing to CO-PA. This will happen at
the month end after settlement of process orders. These variances are relating to total production
quantity.

Total administrative cost not related to inventory valuation will flow from cost center accounting to
CO-PA directly through month end allocations.