Controlling - CO

Training for Recruiters

Sub-modules of Controlling
Module Cost Element Accounting Cost Center Accounting Internal Orders Activity Based Costing Product Costing
Product Cost by Period Product Cost by Order Product Cost by Sales Order

Skill
Generic

Generic
Generic Hot (Very Specialized) Hot For repetitive manufacturing industries For make to stock and process industries Make to order industries Hot (Very Specialized) Hot Generic

Actual Costing/Material Ledger

Profitability analysis Profit center accounting

Controlling (CO)
Controlling provides information for management decision-making. It facilitates coordination, monitoring and optimization of all processes in an organization. This involves recording both the consumption of production factors and the services provided by an organization. As well as documenting actual events, the main task of controlling is planning. Variances can be determined by comparing actual data with plan data. Variance calculations enable to control business flows.

Cost Element Accounting (CO CEL)

Cost element accounting is the part of accounting where you enter and organize costs incurred during a period for cost accounting. Each business transaction relevant to cost accounting provides the (CO) component with detailed information for the cost element, and for the account assignment object itself. Each consumption transaction in Material Management (MM), each billing in Sales and Distribution (SD) (= revenue), and each external transaction for invoice verification flows directly through the G/L Account (= cost element) to the corresponding account assignment object.

Cost Center Accounting (CO-CCA)

Cost Center Accounting lets you analyze the overhead costs according to where they were incurred within the organization If you plan costs at cost center level, you can check cost efficiency at the point where costs are incurred. The "activities" of cost centers represent "internal resources" for business processes in Activity-Based Costing.

Internal Orders
Internal orders are normally used to plan, collect, and settle the costs of internal jobs and tasks. The SAP system enables you to monitor your internal orders throughout their entire life-cycle; from initial creation, through the planning and posting of all the actual costs, to the final settlement and archiving When the job has been completed, you settle the costs to one or more receivers (cost center, fixed asset, profitability segment, and so on).

Activity-Based Costing (CO-ABC)

Activity-Based Costing provides a process-oriented, cross-functional view of overhead, in contrast to the traditional location-oriented view provided by Cost Center Accounting. Activity-Based Costing thus complements and enhances Cost Center Accounting. Activity-Based Costing also complements and enhances product costing by assigning costs to the business processes where they originated. Cost center resources can allocate to business processes based on their true utilization of activities

Product Cost (CO-PC)

The following graphic illustrates the aims of Product Cost Planning, which are: Calculation of the cost of goods manufactured (COGM) and the cost of goods sold (COGS) of a product Analysis of the costing results using the various reports available Provision of information for other SAP applications

Profitability Analysis (CO-PA)

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 business areas, with respect to your company's profit or contribution margin.

Profit Center Accounting (EC-PCA)

A profit center is a management-oriented organizational unit used for internal controlling purposes. The main aim of Profit Center Accounting is to determine profit for internal areas of responsibility. It lets you determine profits and losses using either period accounting or the cost-of-sales approach EC-PCA lets you set up your profit centers according to product (product lines, divisions), geographical factors (regions, offices or production sites) or function (production, sales).

The profit center differs from a cost center in that cost centers merely represent the units in which capacity costs arise, whereas the person in charge of the profit center is responsible for its balance of costs and revenues.

Basic Terminology and Questions

Controlling - CO
Controlling Area: Organizational unit in an organization that represents a closed system used for cost accounting purposes. Fiscal year Variant: The fiscal year variant contains the number of posting periods in the fiscal year and the number of special periods. You can define a maximum of 16 posting periods for each fiscal year Chart of Account: This is a list of all G/L accounts used by one or several company codes. You have to assign a chart of accounts to each company code.

Standard Hierarchy: A special type of cost center/ profit center group. The standard hierarchy is a tree structure which contains all cost centers/profit centers in a controlling area and reflects the organizational l structure used in Cost Center / Profit Center Accounting.

Controlling
Cost Elements: A cost element corresponds to a cost-relevant item in the chart of account Cost Centers: Organizational unit within a controlling area that represents a clearly delimited location where costs occur. You can make organizational divisions on the basis of functional, settlement-related, activity-related, and/or responsibility-related standpoints. Activity Types: Activity types classify the activities produced in the cost centers within a controlling area.

Controlling area - CO
Can we assign multiple company codes to a single controlling area? YES Points to consider: The operative fiscal year variants in company codes must match the fiscal year variants in the controlling area. The company codes within a controlling area must all use the same operational chart of accounts How is controlling areas derived for a Plant ? Each plant is assigned uniquely to a company code and the company code is uniquely assigned to a Controlling Area. In turn, the relationship between plant and controlling area is determined

Cost Element Accounting CO - CEL

What is a Primary Cost/Revenue Element? A primary cost or revenue element is a cost or revenue-relevant item in the chart of accounts, for which a corresponding general ledger (G/L) account exists in Financial Accounting (FI). Examples include: Material costs, Personnel costs, Energy costs

What are Secondary Cost Elements? Secondary cost elements can only be created and administrated in cost accounting (CO). When you create a secondary cost element, the SAP System checks whether a corresponding account already exists in Financial Accounting. If one exists, you can not create the secondary cost element in cost accounting. Example: Assessment cost elements, Cost elements for internal activity allocation, Cost elements for settlement

Examples of Cost Element Categories

Primary cost element categories 01: Primary cost element 11: Revenue elements 12: Sales deduction Secondary cost elements categories 41: Overhead rates 42: Assessment 43: Allocation of activities/processes

Cost Center Accounting (CO-CCA)

Explain allocation methods in CCA 1. Distribution Is used to allocate the primary costs of a cost center. The original cost element (that is, the primary cost element) is retained. 2. Assessment Is a method of allocating primary and secondary costs in Cost Center Accounting and Activity-Based Costing. The original cost elements are assigned cumulatively, or in groups, to assessment (secondary) cost elements. The original cost elements are not recorded on the receivers

Period-end closing activities

Name few period end activities in cost center accounting?

Distribution of primary costs Overhead Calculation Settlement of overhead orders and projects Assessment of primary and secondary costs Balance-effective settlement of orders to fixed assets, material stock or the balance sheet account Calculation and analysis of the variances between target and actual costs Locking the period for all cost accounting business transactions

Internal Orders
Examples of Internal Orders: Overhead cost orders are used for the time-restricted monitoring of overhead costs (that are incurred when you execute a job) or for the long-term monitoring of parts of the overhead costs. Investment orders let you monitor investment costs that can be capitalized and settled to fixed assets. Accrual orders enable you to monitor period-related accrual calculation between expenses posted in Financial Accounting and the costingbased costs debited in Cost Accounting.

Orders with revenues let you monitor costs and revenues that are incurred for activities for external partners, or for internal activities that do not form part of the core business for your organization.

Internal Order Settlement

What is order settlement? Order settlement enables you to transfer the costs incurred by an order to the appropriate receivers. You can settle the costs collected on the internal order to a cost center, or a G/L account under a settlement cost element. You can also settle costs to a wide range of receivers (project, sales order, profitability segment, and so on).

What are different types of internal orders? Real and statistical What are the differences between real and statistical orders? Unlike real internal orders, you can neither settle statistical orders, nor apply overheads to them.

Product Cost Controlling CO-PC

Standard Cost: A cost that is based on an activity unit and that remains stable over a relatively long period of time. The standard cost of a material can remain stable for a year. It is essentially a norm that should not be exceeded Standard Price: A constant price at which a material is valuated without taking goods movements and invoices into account

Product Cost Controlling CO-PC

Explain parameters in the costing variant : Costing type: Specifies the valuation view, the price update Valuation variant: Specifies which prices are used to valuate the materials, activity types, processes, subcontracting, and external activities Specifies the costing sheet (overhead, overhead key, template) Price factors for inventory costing Date control: Controls the validity period of the cost estimate, the quantity structure date, and the valuation date Quantity structure control (applies only to material cost estimates with quantity structure) Specifies the master data in Logistics (BOM and routing or master recipe) Transfer control : Controls how existing cost estimates are used in other cost estimates Reference variant Controls how an existing quantity structure that has already been costed is used in the cost estimate

Product Cost Controlling CO-PC

Different types product cost controlling: Product Cost by Period is used for recurring periodic cost control of products that are manufactured in the same way over an extended period of time.

Product Cost by Order is mainly used to control the costs of individual production lots.
Product Cost by Sales Order is used to control costs in complex maketo-order production or customer-specific services, for example.

Profitability Analysis (CO-PA)

Different forms of profitability analysis: Two forms of Profitability Analysis are supported: Costing-based Profitability Analysis is the form of profitability analysis that groups costs and revenues according to value fields and costingbased valuation approaches, both of which you can define yourself. Account-based Profitability Analysis is a form of profitability analysis organized in accounts and using an account-based valuation approach.. It provides you with a profitability report that is permanently reconciled with financial accounting.

Profit Center Accounting EC-PCA

Account groups: You can define any number of hierarchical structures of accounts for use in the information system, allocations and planning. These structures are called "account groups". Can we copy account groups from CCA /FI? Yes account groups of CCA can be copied to PCA. Also balance sheet account groups of FI can be copied to PCA

Thank You!!