8/17/2015

5StepstoUnderstandingProductCostingPart...|SCN

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tanya.duncan

5StepstoUnderstandingProductCostingPart2
ActivityRateCalculation
PostedbyTanyaDuncanintanya.duncanonNov5,20121:40:33AM
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ProductCosting,partoftheControllingmodule,isusedtovaluetheinternalcostofmaterialsandproductionfor
profitabilityandmanagementaccounting.ProductCostingisanicheskill.Duetocosting'shighintegrationwithother
modules,manypeopleavoiditduetothecomplexity.This5partblogwillseektosimplifyProductCosting.

Nowthatyouunderstand CostCenterPlanning,thenextstepinunderstandingthebasicsofproductcostingis
ActivityRateCalculation.ThegoalofActivityRateCalculationistocalculatetheplanactivityratesforeachactivityin
eachCostCenterinaPlant.

Prerequisites:
CostCenterPlansareentered:
PlanCostsinKP06
PlanActivityunitsinKP26

Overview:
NowthatourCostCenterdollarsandactivityquantitiesareplanned,weneedtocalculateActivityTypeRates.Activity
TypeRatesareusedtovalueinternalactivitiestoproduceproducts.

Ifyoumanuallyenteredactivityratesbasedonlastyear'sactualvaluesinsteadofplanningtotaldollarsandunits.You
canskipmostofthisblog,andsimplyreviewactivityratesinTransactionKSBT.Notethatyoucanuseamixed
approachandplanratesforsomeactivities/costcentersandcalculateratesforothers.
Ifyouplannedallcostsinproductioncostcenterswheretheywillbeallocated,youcanskipthenextstepofplan
allocations.
Ifyouplannedcostswheretheyareincurredinoverheadcostcenters,youwillneedtouseplanassessmentsand/or
distributionstoallocatecosts.ThespecificdetailsonAssessmentsandDistributionscouldbeanentirebloginitself.
Themaindifferencebetweenassessmentsanddistributionsisthatdistributionsmaintaintheidentity(primarycost
element)ofthecost.AssessmentsuseSecondaryCostElementswhichactascostcarrierstomovecosts,and
thereforelosetheidentity(primarycostelement)ofthecost.YoucanchoosetouseAssessmentsorDistributionsonly,
oruseamixedprocess.PlanAssessmentsandDistributionsarecreatedinTransactionsKSU7andKSV7and
executedinTransactionsKSUBandKSVB.
Aftercostsareallocated,itisimportanttoreviewtheCostCenterActual/Plan/Variancereport,Transaction
S_ALR_87013611.Ensurethatallocationscreditedsendingcostcentersanddebitedreceivercostcenters.

Next,executeplancostcentersplittingwhichsplitscostswhenyouhavemorethanoneactivitytypeinacostcenter
andyouwanttosplitthecostsbetweentwoactivitiesbasedonactivityqtyorsomeotherbasis.Thisisagreatplaceto
useCostCentergroupstoeasilyselectdesiredcostcenterssinceyoucannotenterarange.Costsplittinguses
TransactionKSS4.

Finally,ActivityTypeRatesarecalculatedusingTransactionKSPI.Ifratesareundesirable,youcanreviseyourcost
centerplansandrecalculaterates.Ratesarenotfinaluntilyouusethemtocalculateandreleaseproductcosts.Thisis
aniterativeprocess,anditisexpectedthatyouwillmakeseveralattemptsatdesirablerates.

AftercalculatingActivityTypeRates,youcanreviewratesinTransactionKSBT.

RelatableExample:
Let'ssayweareusingProductCostingtovalueourinventoryinacookiebakingshop.Thiswillhelpusvalueour
cookies(finishedgood),frosting(semifinishedgood),andbakingitemslikeeggs,milk,andsugar(rawmaterials).

Inordertocalculatecosts,weneedtocomeupwithratesforeachactivity,suchasmixingbakingitems,ovenbaking,
andcookiecooling.Weplannedoverheadcostslikeourbuildingrent,electricity,andbakerwagesatanoverhead
costcenter.Weneedtoallocatethosecoststoourproductioncostcenterinordertoincludethosecostsinourproduct
cost.

http://scn.sap.com/people/tanya.duncan/blog/2012/11/05/5stepstounderstandingproductcostingpart2activityratecalculation

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8/17/2015

5StepstoUnderstandingProductCostingPart...|SCN

Priortocalculatingcosts,let'sassumetherearesomeoverheadcostsinacostcenterthatshouldbesplitintomultiple
activities.Oncewesplitthesecosts,thenwecalculateratesforactivities.Nowwehaveadollarperunitforactivities
likeindirectlabor,directlabor,setup,andoverheadtouseinproductcosting.

Furtherinformation:
YoucanuseCostCenterGroupsandCostElementGroupstosimplifyselectingCostCentersandCost
ElementsinKSBTandKSPIandinotherCostCenter/CostElementReports.
Youmayfindthatyourratesarenotappearingforcertainmonths,orthattheyareaveragedover12months.
Makesureyoureviewthe'PeriodOverview'screeninCostCenterplanningTransactionsKP06andKP26.This
screenshowscostsandunitsbyeachmonth.
YoucanreverseAssessmentsandDistributionsifresultsareundesirable.
Intheory,yourplanAssessmentsandDistributionsshouldmatchyouractualAssessmentsandDistributions.

ThenextblogintheseriesexplainshowproductiondatalikeBOM's(BillsofMaterial),Routings/MasterRecipesand
WorkCentersintegratewithProductCosting.
http://scn.sap.com/people/tanya.duncan/blog/2012/11/11/5stepstounderstandingproductcostingpart3quantity
structure

Ifyouenjoyedthisblog,youcanlookforwardtomynextbook,PracticalProductCostingGuideforCOPC
(ProductCostControlling)comingoutthissummer.Youcanstayuptodatebysubscribingto
TanyaDuncanBlog.com.

Ifyoumissedmypreviousblog,usethelinkbelow:
Part1CostCenterPlanning

9488Views
Topics:business_process_managementTags:scn,sap,beginner,erp,business_process_expert,controlling,fico,co,finance,
product_costing

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2Comments
LucaPalumboNov5,201211:49AM

HelloTanya,thankyoualotforyourinterestingpost.
Ilookforwardtoseeyournextoneon"productiondatalikeBOM's(BillsofMaterial),Routings/Master
RecipesandWorkCentersintegratewithProductCosting.".

Luca.
Like(1)

TanyaDuncanNov5,20124:55PM(inresponsetoLucaPalumbo)

ThanksLuca!Iwillplantopostpart3inthenextfewdays.Staytuned..
Like(0)

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