TATA SPONGE IRON LTD December 10, 2014

TATA SPONGE IRON Ltd

SAP CO (Controlling) Module
Implementation

1
DINAKAR SARMA CHAVALI
TATA SPONGE IRON LTD December 10, 2014

Cost Center Accounting

TSIL requirement:-

The controlling area should not be disturbed. And the maintenance cost centers also must not be disturbed. Some
of the cost centers have to be pooled into single cost centers such as Admin, Accounting etc...

SAP CO System Recommendations:-

 The cost centers are created department wise.

 The maintenance cost centers are not disturbed.

Note: - Since the management is insisting on not disturbing the maintenance costs we cannot create new
controlling area and the Configuration changes have to be made in the existing Controlling area. But we recommend
creation of settings under new controlling area.

2
DINAKAR SARMA CHAVALI
TATA SPONGE IRON LTD December 10, 2014

Cost Center hierarchy:-

TSIL COST CENTER
GROUP

ADMINSTRATION ACCOUNTING OPERATIONS

HR ADMIN KILN1 KILN2 KILN3

3
DINAKAR SARMA CHAVALI
TATA SPONGE IRON LTD December 10, 2014

Cost Center Planning:-

TSIL Requirement:-

 Activity cost and overhead cost must be allocated to finished material.

SAP CO System Recommendations:-

 The cost center planning has to be done periodically for the production cost centers.
 The plan activity price has to be calculated for the production cost centers (Operation Cost Centers).

Allocation cycles:-

TSIL Requirement:-

 Maintenance cost has to be allocated to the material.

SAP CO System Recommendations:-

 Allocation cycles are created as per the logic given by the costing department for allocation of maintenance cost to
the final product.
 The allocation basis has to be provided by the department.
4
DINAKAR SARMA CHAVALI
TATA SPONGE IRON LTD December 10, 2014

 The allocation of the cost is carried out periodically.

Profit center accounting:-

TSIL Requirement:-

 Balance sheet, P&L statement, budget etc... Reports have to be executed at the profit center level.
 Required segment level reporting separately for sponge and power.

SAP CO System Recommendations:-

 Find the below flow chart that shows the profit center hierarchy.

5
DINAKAR SARMA CHAVALI
TATA SPONGE IRON LTD December 10, 2014

PROFIT CENTER
GROUP (TSIL)

PROFIT CENTER PROFIT CENTER

JODA OTHER LOCATION

SEGMENT SPONGE SEGMENT

IRON POWER

 Profit centers are created at the location wise.

 The segments will be created as per the business.
 The required reports will be available at profit center or segment level.

6
DINAKAR SARMA CHAVALI
TATA SPONGE IRON LTD December 10, 2014

Product Costing:-

TSIL Requirement:-

 Sponge production cost and the Power production cost has to be updated in the system.
 The standard cost of the sponge iron has to be executed.
 Power consumption cost has to be absorbed by the sponge business.
 Overhead cost has to be captured to the final product.
 Month end activities have to be executed in SAP.

SAP CO System Recommendations:-

 The activity type “Power” is created for allocating the power cost to the finished product.
 Creation of new production process for capturing of power production cost in the system from the PP module is
required.
 Change in the master data of PP module (Changes in the production version are mandatory) for the Sponge Iron
production.

7
DINAKAR SARMA CHAVALI
TATA SPONGE IRON LTD December 10, 2014

 For the capture of the power cost into the production of sponge it has to be created as activity and has to be
maintained in routing. Since Routing is not maintained in the present config, instead of that master recipe is
maintained. Due to that we cannot assign any activity if we use master recipe.
 New production cost centers has to be created for capturing the cost of power separately.
 The production of the power is captured under new plant in the SAP system.

Cost flow chart for TSIL:-

The Raw materials of the
sponge iron will go with the
moving average price (MVP).
Plan activity prices are
calculated and updated in
the production cost centers
and from there the activity
prices flow to the product.
Overhead cost flow from
the overhead cost center on
the basis that is decided by
the management using the
cost sheet functionality

The difference between the Final product is valuated at

target cost and actual cost the standard price which is
will flow to profitability executed periodically.
analysis and also posted to
price difference account.

8
DINAKAR SARMA CHAVALI
TATA SPONGE IRON LTD December 10, 2014

Profitability analysis:-

TSIL Requirement:-

 Profitability analysis reports required.

SAP CO System Recommendations:-

 Costing based CO-PA (Controlling Profitability Analysis) will be activated.

 Existing operating concern will be used.
 Using Report painter reports are created as per the client requirement and system limitations.
 Along with the existing characteristics and value fields, new fields will be created as per the requirement.

9
DINAKAR SARMA CHAVALI
TATA SPONGE IRON LTD December 10, 2014

Controlling organizational structure:-

OPERATING CONCERN

CONTROLLING AREA

COMPANY CODE

PROFIT CENTER 1 PROFIT CENTER 2

JODA OTHER LOCATION

SEGMENT SEGMENT
SPONGE IRON POWER

10
DINAKAR SARMA CHAVALI
TATA SPONGE IRON LTD December 10, 2014

Budget control:-

TSIL Requirement:-

 Budget control is required at element level.

SAP CO System Recommendation:-

 The Budget Control System for the TSIL will be provided through “Fund Management module”. It is the separate
module in present SAP system which is not coming under CO module, By Internal Order it can be done through CO module
and Fund Management consultant is required For Implementations.

Points to be considered:-

 The Power production process is not configured in the present SAP system.
 New PP consultant is required for the Power Production implementation as not implemented in current system.
 For sponge iron production, in the production version instead of Master recipe we need to take BOM and Routing
for allocation of activity Power.
 New SD process need to be implemented for the power sales, and new SD consultant is required Power Sales having
Knowledge in Power sales.

11
DINAKAR SARMA CHAVALI
TATA SPONGE IRON LTD December 10, 2014

 Along with the standard report if any customized reports are to needed by the client, The developments will be
discussed in the later stage.

12
DINAKAR SARMA CHAVALI