Ac040 13 PPT

R/3 System
Instructor
Guide
Level 02
AC040 Cost Management and Controlling
Thomas Release 4.6c

Zuerker
Febr., 20th, 2002
SAP AG AC040 Cost Management and Controlling
Contents Page:
SAP Contact(s)............................................................................................................4
Walldorf:............................................................................................................................................. 4
Subsidiaries....................................................................................................................................... 4
Revisions to the Previous Instructor Guide.............................................................4

Course Details.............................................................................................................5
Duration:............................................................................................................................................ 5
Course Materials and other Materials (Training Manual):...................................................................5
Country-Specific Units........................................................................................................................ 5
Course Instructor Profiles.........................................................................................6

Level of Knowledge Required:........................................................................................................... 6
Courses Recommended as Preparation:........................................................................................... 6
Online Help Recommended as Preparation:......................................................................................6
Hints on Preparing This Course......................................................................................................... 6
Training System: Training Master.............................................................................7

Data Required.................................................................................................................................... 7
Preparation in the System.................................................................................................................. 7
Other Suggestions:............................................................................................................................ 7
Example ABAPs................................................................................................................................. 8
CATTs................................................................................................................................................ 8
Technical Hints................................................................................................................................... 8
Goals and Objectives:................................................................................................9

The Main Course Goals are:.............................................................................................................. 9
The Main course objectives are:........................................................................................................ 9
Course Structure and Flow................................................................................................................ 9
Course Schedule:.....................................................................................................10
Day One........................................................................................................................................... 10
Day Two........................................................................................................................................... 10
Day Three......................................................................................................................................... 11
Day Four........................................................................................................................................... 11
Day Five........................................................................................................................................... 12
Additional notes:............................................................................................................................... 12
Unit: Introduction......................................................................................................13
Unit: Navigation 4.6..................................................................................................14
Unit: Overview of Controlling..................................................................................15
General Tasks of Controlling............................................................................................................ 15
The Components of CO Overhead Management.............................................................................16
The components of Product Cost Controlling...................................................................................18
The components of Profitability Management..................................................................................19
R/3 Integration.................................................................................................................................. 19
Describe the purpose of Transfer Prices.......................................................................................... 21
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Unit: Reflecting your Business in CO.....................................................................22

Organizational Units and Structure.................................................................................................. 22
Basic Data & Structures................................................................................................................... 23
Unit: Reporting Tools...............................................................................................34

Name the different reporting tools.................................................................................................... 34
Explain the purpose and capability of each reporting tool................................................................34
Unit: Planning and Plan Integration........................................................................37

Introduction to Planning................................................................................................................... 37
Planning on Different Costing Options............................................................................................. 38
Planning in Cost Center Accounting................................................................................................. 39
Integrated Planning Cycle................................................................................................................ 43
Planning with ABC............................................................................................................................ 55
Unit: Postings to CO from Other Modules.............................................................57

Postings from other modules........................................................................................................... 57
Statistical & Real Postings............................................................................................................... 61
Unit: Event-based Postings in CO..........................................................................64

Transactions related to Overhead Management..............................................................................64
Transactions related to Cost Object Controlling...............................................................................70
Transaction related to Profitability Management..............................................................................76
Transfer Prices Concept................................................................................................................... 78
Unit: Period End Posting.........................................................................................79

Period-end postings in Overhead Management...............................................................................79
Period-end postings in Cost Object Controlling:...............................................................................86
Period-end postings in Actual Costing/ML........................................................................................ 92
Period-end postings in Profitability Management.............................................................................94
Schedule Manager........................................................................................................................... 95
Reconciliation Ledger....................................................................................................................... 95
Unit: ASAP.................................................................................................................98
Explain the benefits of ASAP........................................................................................................... 98
Unit: Course Review.................................................................................................99

What were the Course Objectives?.................................................................................................. 99
Recommended Follow Up Courses.................................................................................................. 99
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SAP Contact(s)
Walldorf:
Thomas Zrker (mail: zuerker)
Uwe Lebefromm
Subsidiaries
US: Lawrence Fisher, Gary Fullmer
Revisions to the Previous Instructor Guide

(visible in detail by using the functionality toolstrack changeshighlight changes... in Word)
Version Febr., 20th, 2002

The previous version of the trainer guide is enhanced by providing now a demo process, showing the
entire integrated planning cycle for unit 6 planning and plan integration. If you would like to
shorten this in your course (like it was in the guide for release 4.6a/b and the previous guide for 4.6c),
you may do so. But show at least the demonstration of creating and releasing the product cost
estimate, because this is important to the next course days and also to an exercise for the participants.
Based on the integrated planning you can derive the PP- Production order from the SOP- Plan in order
to show again integration aspects in unit 8. However the demo will work also, if you just create the
production order manually as it is described in the exercises.
In unit 9 an optional demo for actual costing was added.
Version March, 18th, 2001

This 4.6 Instructor Guide is based on the guide 4.6a. A demo process has been added to deal with
Easy Cost planning/ execution services. The menu paths have been reviewed and adjusted to 4.6c.
However there may be slight differences between the given menu path and 4.6c, since the system may
have been changed. Especially it may be, that the original Report Writer reports have been substituted
by ALV- Reports. In this case you have to select or define an appropriate Layout. We will try to fix
this in a later version of this guide.
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Course Details
Duration:
This is a full five-day course
Course Materials and other Materials (Training Manual):

Training Guide, Exercises, Solutions
Country-Specific Units
None
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Course Instructor Profiles

Level of Knowledge Required:
The instructor needs to have a solid understanding of the R/3 Controlling module. A basic
understanding of general ledger accounting and material management is of benefit. This course
touches on all aspects of the CO application, with emphasis on the following applications:
Overhead Cost Centers
Overhead Cost Orders
Product Cost Planning
Make-to-stock and Make-to-Order Cost Object Controlling
Profit Center Accounting
Profitability Analysis
Activity-Based Costing
Courses Recommended as Preparation:

AC410 Overhead Cost Controlling
AC415 Overhead Cost Orders
AC420 Activity-based Costing
AC505 Product Cost Controlling
AC610 Profit Center Accounting
AC605 Profitability Analysis
AC010 Overview of Financial Accounting
Online Help Recommended as Preparation:

Controlling Overhead Cost Controlling
Controlling Product Cost Controlling
Controlling Profitability Analysis
Enterprise Controlling Profit Center Accounting
Financial Accounting General Ledger Accounting
Material Management Inventory Management section on master data and goods movement
Hints on Preparing This Course
Work through the course exercises and/or instructor guide demos. About 70 percent of the scripts
follow the student exercises.
Attend the class at least once to get a feeling for the course flow, timing and student questions.
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Training System: Training Master

Data Required
The data necessary for the course are maintained centrally by the global course owner, especially at
the beginning of a new year. Since the data is maintained in one client of the master system and has
then to be copied to the training systems and from there to different clients, be aware, that in the first
4 weeks of the year some data may miss.
In addition you need:
User ID and Passwords for Course Participants
Preparation in the System

Perform goods receipt postings for materials T-B100 T-B400 and 100-130 for storage location 0001,
plant 1000 in order to have enough semi finished materials in stock. You will consume them in the
demo of the production process.
It is recommend that the instructor creates the student user IDs prior to class. It is a simple process,
just use the transaction code ZUSR. E.g.: you will need 18 users if your class provides 18 work
places and therefore 18 participant groups. Note: Before you copy the user Ids, you wish to change
the default user profile settings. Or you can wait and make that demonstration part of the navigation
unit.
Be aware, that costing sheet COGM surcharges only cost elements 400000 to 410000. If you wish to
demonstrate the application of overhead on raw material costs you will need the complete an FI
journal entry debiting you production order for costs using account 410000.
Other Suggestions:
You can generate all standard reports used in this class this will make them run faster during your
demos.
In order to lesson the confusion in the planning unit change the distribution key in planning profile
SAPALL to DK = 1 and set the SAPALL planning profile as the default by assigning to the user
parameters (PPP = SAPALL).
Set your own user ID up as the budget manager for Order Type 0400.
Set the Date Control for costing variant PPC1, date control PC01 to default the FROM date to todays
date that will ensure that everyone can mark and release their standard cost estimate.
You may wish to perform goods receipt postings for materials T-B1XX T-B4XX ahead of time for
the cost object controlling exercise. But you dont need, since the exercise shows up the goods receipt
posting as prerequisite for the exercise. So you can leave the posting to the participants.
To run the reconciliation ledger successfully, you need to DELETE the Cross-system company code
from the global settings for company codes 1000 through 2300. This is done in the IMG for financial
accounting, Global settings.
Attention: there is a difference, if your system is running with enqueue on or off.

With Enqueue On: The participants may lock each other
when they post the cost centers, created by doing the exercise we cannot avoid
this
when they release the result of the standard cost estimate to update the standard
price in the material master record we cannot avoid this
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when they run their assessment cycle use parallel processing

when they post the goods receipt in order to have a sufficient amount of materials
on stock you may decide to do the goods receipt yourself before the
participants do the exercise
With Enqueue Off: You may see some strange results when your students run their
allocation cycles. If this occurs, the students have to reverse their cycles and rerun them.
Example ABAPs
None
CATTs
Technical Hints
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Goals and Objectives:

The objective is of this course is to give a broad overview of the R/3 Controlling module. Since
Controlling encompasses aspects of a wide variety an extensive number of topics are introduced in
this course.
The Main Course Goals are:
Understand the components of the R/3 Controlling Module
Understand the Integration between CO and other R/3 Modules
Use of the different costing/planning functions and options available in Controlling
Help the students decide what R/3 tools to use within their business.
Understand the SAP terminology and vocabulary
Identify additional training needs
The Main course objectives are:
Execute core CO functions
What parts of CO will address different business requirements
Show and explain integration within CO
Show and explain integration with other R/3 modules
Define various costing/planning options
Course Structure and Flow
Refer to the course diagram.
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Course Schedule:
Day One
Approximate Content: Units and Topics Activities: Instructor and Participant
Times
9:00 9:30 Student Introductions, Course Contents, class logistics, flow
Unit 1
9:30 10:15 Unit 2 Demo navigation, help, new 4.6 features, user
menus, favorites folders & screen settings
Unit 2 Exercises
Break
10:30 12:00 Unit 3 Overview of Controlling, Financial
Accounting, Reporting
Unit 3 Exercises
Lunch Break
1:00 4:30 Unit 4 Organizational Units, CO Master Data
Unit 4 Exercises
Day Two
Times
9:00 9:30 Review Day 1 Review key points from previous day
9:30 10:15 Unit 5 Reporting Tools, Overview of reporting tools
including Drilldown, List viewer, and Painter
Break
10:30 12:00 Unit 6 Unit 6 Begin Lecture Planning
Lunch Break
1:00 4:30 Unit 6 Planning and Plan Integrations, Introduction
to Cost Center Planning, Production Cost
Planning, also planning with ABC Process
Costs
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Day Three
Times
9:30 10:15 Unit 6 Contd Continue lecture and Demonstrations
Planning
Break
10:30 12:00 Unit 6 Push to complete Unit 6 by lunch. If
completed start introductory lecture on Unit 7
Lunch Break
1:00 2:15 Unit 7 Postings from other modules
Break
2:30 4:30 Unit 7 Try to complete all of unit 7 by the end of
day 3.
Day Four
Times
9:30 10:15 Unit 8 Event-Based Postings
Break
10:30 12:00 Unit 8 Unit 8 Finish Lecture and Exercises
Lunch Break
1:00 - 2:15 Unit 9 Period End Postings in CO: Overhead Cost
Controlling, Cost Object Controlling & other
period end topics
2:30 4:30 Unit 9 Try to complete lecture and student exercises

for the Overhead Cost Controlling and Cost
Object Controlling Topics. The exercise
calling for the creations of service sales order
to install the pump can be optional if time is a
problem.
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Day Five
Times
9:30 10:15 Unit 9 Unit 9: Continue Lecture remaining topics
Break
10:30 12:00 Unit 9 Wrap up Lecture and remaining exercises
Unit 9
Lunch Break (Note: You may wish to shorten lunch break to 30 to 45 min)
1:00 2:00 Unit 9 Unit 9 Exercises: Students finish Unit 9
Exercises
Break
2:30 3:30 Unit 10 ASAP Overview
Additional notes:
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Unit: Introduction
30 minutes
In this unit you should explain the typical characteristics of the course:
No customizing
Process oriented
Overview of controlling using standardized processes like:
Creation of master data
Planning and plan integration
Producing a product to stock (Controlling by order)
Selling a product from stock
Selling (providing) a service to a customer (Controlling by sales order)
Period-end closing processes
Controlling and analyzing results
Ask the customers about their interests and expectations
Focus on integration within CO and with other modules of the R/3- system
Excursions to other modules to provide some additional knowledge for the participants. Beginners
should not get worried or frustrated about all the information of the non-CO modules.
The goal of the course is for the students to know about functionality, integration, tasks and
philosophy of CO. The goal is not, that the participants can do everything they have seen by
themselves after the course or that they are specialists now. The doing and customizing will be
learned in Level3- courses. We cannot teach everything of CO in detail in only five days.
We provide exercises and sample solutions in this course. However, not all exercises have to be
carried out. The participants should understand the instructor will select which exercises will be
completed and which exercises will be declared as optional. According to the rules for a level 2-
course, we have included more exercises than can normally be completed in the time allowed
during a 5 day course
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Unit: Navigation 4.6
45 Minutes including Exercises
List of Topics in the Unit
Putting the Unit in Context
<Unit Objectives>
Topic: <Name>
<Approximate Duration of Topic>
Putting the Topic in Context
< Topic Objectives>
<Slide Title>
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Unit: Overview of Controlling
90 Minutes
Exercises allow 15 Minutes
List of Topics in the Unit:

General Tasks of Controlling
The Components of CO
Integration
Transfer Prices
Putting the Unit in Context:
This chapter is an introduction to Controlling in R/3 and the differences that exist between FI and CO.
Position the chapter as such and dont go into too much detail. Note: It may take longer that 90
minutes to complete this topic. If so, suggest lunch break prior to Transfer Pricing topic.
Putting the Topic in Context:

General Tasks of Controlling
Differences between Internal and External Accounting
Explain some of the ways Controlling can help manage a business
Examples of Standard CO Reports
Accounting Architecture
This slide depicts the different accounting and business processes found within SAP
Accounting. Discuss the slide in general terms reviewing the Enterprise Controlling
(PCA and EIS), move to Treasury, Financial Accounting and then Controlling review
what business processes are found in each module. Finally explain FI-IM provides a
base for the entire Accounting Structure.
Standards versus Flexibility
Depending on the country specific legal reporting requirements, customers may be
using the period accounting or cost of sales accounting method when analyzing their
financial data. Bother methods are available for profitability reporting in the
Controlling module. Should the question arise, cost of sales accounting is
accomplished with the use of Function Areas which are used to identify SG&A
type expenses.
Reporting Requirements
Highlight the different reporting requirements for companies. Good place to ask
overhead questions to the students. Let the students explain where and when their
companies will require both types of reporting.
Controlling Architecture use this slide to introduce the students to the different parts
of CO. Briefly explain the concepts of Cost Element Accounting, Overhead Cost
Controlling, Product Cost Controlling, and Profitability Management. Also, note the
cost flow arrows depicting cost flows into and out of CO.
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Introduction to the Controlling Method

Briefly discuss the different parts of the Controlling Module. Highlight the typical
activities that take place in Overhead Cost Controlling, Cost Object Controlling and
Profitability Management/Analysis
Demonstrate some of the Basic Reports which can be obtained in Controlling and
compare them to a Financial Statement obtained in FI (after page Providing
Flexibility to Suit)
10 Minutes
Run a Balance Sheet/P&L report in Financial Account. Emphasize the use of

company codes as the legal balancing entity.
AccountingFinancial AccountingGeneral Ledger Information
SystemGeneral Ledger Reports Balance Sheet/Profit and Loss Statement/Cash
FlowGeneralActual/Actual ComparisonsSAP minimal variant
Company Code: 1000
Fin Statement Version: INT
Language: EN
Reporting Year: Current
Comparison Year: Previous Year
Explain major components of the report, such as business area sort, expense and
revenue account.
To compare this report to a typical CO report, run a Cost Center Report to highlight
drill down reporting and explain that this drill down ability allows the Cost Center
Managers to access detailed source documents charged to their cost centers. In
addition demonstrate variation reporting.
AccountingControllingCost Center AccountingInformation systemReports
for cost center accountingPlan/Actual ComparisonsCost Centers: Actual/Plan
Variance
Controlling Area: 1000
Fiscal Year: 2000
From Period: 1
To Period: 12
Plan Version: 0
Cost Center Group: H1
The Components of CO Overhead Management
Overhead Management (Overhead Cost Controlling)
Product Cost Controlling
Cost & Revenue Element Accounting
Profitability Management (CO-PA & PCA)
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The Components of CO
Explain the CO is broken into 4 different groups. These groups contain the various
CO tools. The remainder of this unit will review each of the CO groups and the
various found within each group.
CO Components
: This slide outlines some typical questions each CO component is designed to
address. Emphasize the role of cost elements in identifying various
expenses/revenues , OH cost review and control and finally how and where profits
are reported in CO
Cost & Revenue Element Accounting

This part of the CO application provides the basis for all the other CO modules.
Explain that this is not a stand-along module but rather provides the bridge between
FI and CO. It classified costs and revenue.
Explain that in many legacy systems the cost account code looks like to following
example: XXXXYYYY123456ZZ
Where XXXX is the company code, YYYY is the department/cost center, 123456 is
the account number, and ZZ the business area. In SAP cost elements typically
represent just the core account numbers or type of costs.
Also point out that the FI G/L chart of accounts will have dramatically less numbers
than in the typical legacy systems.
Cost element examples: Direct labor, rent expense
Revenue element example: Domestic Revenue
Overhead Management
The next series of slides reviews the Overhead Management component of CO.
Again point out OH Management uses the following CO tools: Cost Centers,
Internal Orders and ABC
Cost Center Accounting
Cost centers are controlling objects that can be used to monitor costs. They may
reflect the departments within a company and are organized in a hierarchical
structure for reporting, planning and allocation purposes. In a manufacturing
environment cost centers may be roughly divided into overhead and production cost
centers, in a service environment into service and administrative cost centers. Cost
Centers also require a formal structure called a hierarchy. This slide depicts the Std.
Hierarchy for the Cost Centers used in IDES.
Internal Orders
Internal orders are a new concept for many customers. Differentiate the Internal
Order from a cost center as an alternate way to monitor costs below the cost center
level. Using the trade fair example, explain that the cost for the trade fairs could be
monitored on the Sales cost center, but one would loose that transparency of costs of
each individual trade fair. Also, the costs of the trade fair would be intermingled with
recurring period costs, and it would become difficult to break out which expenses
where related to the trade fair. Eventually costs can be settled to the cost center
while preserving a record of the individual trade fair costs.
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SAP Comprehensive Approach to ABC

Activity-based costing is a relatively new cost accounting method used by some
companies to monitor costs by business process rather than cost centers. ABC as of
release 4.0 was fully integrated, meaning that ABC costs can be included in product
costing. The goal of ABC is to determine the cost of performing a business process.
This process cost can than be analyzed at the product or customer level by
determining how much of the process was used or consumed by an ABC cost object.
Costs which were previously hidden in various overhead expenses can now be
clearly identified and addressed. Cost Center costs are allocated to business
processes to determine process costs. Once the cost of a process has been determined
that cost is allocated based on resource drivers to ABC cost objects.
The components of Product Cost Controlling
Product Cost Planning
Cost Object Controlling
Actual Costing
Product Cost Controlling Actual Costing (4 slides)

Product cost controlling is now divided into three major portions in R/3. The first
section is product cost planning, and is used to determine standard costs; the second
part is cost object controlling which focuses on monitoring the planned costs versus
the actual costs found in production processes. The third part of CO-PC is the actual
costing/material ledger which is used to calculate actual product costs for inventory
valuation at month end. For example actual costing will include in the inventory
total value variances that were incurred during the prior month.
.
Product costing can be tightly integrated with PA for Profit Planning and continuing
contribution margin analysis. In addition, product costing is used to update costs
within the material master.
.
Overall this series of slides present a lot of information. It is best to keep the lecture
and discussion at a very high level while reminding the students that more detail will
be coming later in the class.
Demonstration of Cost Object Controlling Report
5 Minutes
Demonstrate a plan/actual comparison report at the order level to illustrate a simple
plan/actual variance report.
ControllingProduct Cost ControllingCost Object ControllingProduct cost by
orderInformation SystemReports for Product Costing by Order Detailed
ReportsFor OrdersVariance AnalysisPlan Actual Comparison:
Order Number If you choose to demo this report use the search function to find
a current Production Order starting with 6000xxxx
Select: Cumulative
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The components of Profitability Management

Profitability Analysis (CO-PA)
Profit Center Accounting
Profitability Accounting (6 slides)

Analysis of profitability can be accomplished in Controlling.
Explain that PA is typically focused on market segments. Typical reports would
include a contribution margin report by customer. No balance sheet information is
available in PA. PA is a multidimensional report tool.
Profit center accounting is focused on internal organizational units defined as Profit
Center. Examples for profit centers include product groups, plants or departments.
Profit center accounting reports typically profit and loss as well as a limited balance
sheet by profit centers. Profit center reports are two-dimensional.
Demonstration of a Profitability Report after Analysis with Profit Centers
5 10 Minutes
The intent is to give a brief preview of a drill-down report in profitability analysis. If
time allows, you may also want to show a profit center report to distinguish sales
oriented contribution margin reporting and P&L oriented profit center reporting.
AccountingControllingProfitability AnalysisInformation SystemExecute
Report: IDES-012
Operating Concern: IDEA
Plant: 1000
Fiscal Year: 2000
Periods: 1 to 12
Type of Report: Classical Drill Down or 4.6 view Graphical Report Output
This report was written for plant 1000 and sorts by division, product and customer.
Briefly tie the report back to the presentation around drill-down reporting.
For the drill down report view: Select the Overview icon, and product from the drill-
down list. This will show results for all products in plant 1000. Next, select product
P-100 and click on the magnifying class to demonstrate the Detailed List. Click on
Customer, and point out that you are now looking at customer results for product P-
100.
For the graphic report: Demonstrate the drag and drop functions of 4.6

R/3 Integration
Integration Points between the components of CO
Integration between CO and other modules
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Integration within CO Value Flows

The next 3 slides show the integration of all CO modules. Integration in this context
means values (cost and revenues) and quantities (labor time) flow between the
various applications. These transactions take place only in CO. Profit Center
Accounting will always be updated in the background. Explain that individual
applications in CO can be configured separately and can also function as stand alone
applications.
Integration with other modules (4 slides)
Primary costs are posted to CO through various R/3 modules For example, vendor
invoices that are processed in A/P will update costs in a cost center. Asset
management may calculate interest or depreciation at the same time a posting can be
made to a cost center. Revenue may be posted directly to FI and then update a
profitability segment in CO-PA. Profit Center Accounting will receive a statistical
posting for every transaction affecting CO.
HR may provide payroll expenses and timesheet data, which in turn can be posted to
a cost center or an internal order.
Materials management has a close integration with production orders (material
consumption), but emphasize that materials can also be issued to cost centers and
internal orders.
Revenue related postings are generally produced in the SD module, each time a SD
posting occurs, profitability analysis and profit center accounting are normally
updated with revenue and sales discounts. In addition a cost-of-goods sold posting
also occurs.
Production planning provides CO with bill of materials and routings information,
which are required in product costing.
If you have an experienced class, you may want to quiz them about the sources for
costs and revenues postings.
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Describe the purpose of Transfer Prices
Transfer Pricing Concepts (3 slides)
The following three slides discuss the need for companies to look at their business
from a global view, a legal definition and a local or Profit Center view. This includes
the measurement of profitability at several different levels or views. For example
the President of a Corporation has a need to view the results without the effect of
internal transfer pricing. Another view would be the legal view for balance sheet
reporting which would by law require the addition of goods movements between
different company codes. And finally another view would be required for the
various Profit Center managers, who require the addition of values for those goods
transferred within various Profit Centers. It is important to note that each view is
available at any given level of management within the corporation it just depends on
the managers current reporting requirements. Also, if your students ask how the
currency views are selected the currency view is tied to the planning version in the
planning version configuration in the IMG.
Exercise for Unit: Overview of Controlling, Topic 1 - 4
10 minutes
The exercises are a series of questions. You may elect to work through them with
the students by leading a discussion.
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Unit: Reflecting your Business in CO
240 Minutes
Organizational Units and Structures

Basic Data and Structures

This unit focuses on organizational and master data used in conjunction with CO. Usually students try
to link the master data to terms they know from their companies. Try to give many examples
throughout the presentation. Often they also struggle with the links between the individual master
data elements, for example how do the cost center and the cost element fit together.
Putting the Topic into Context:
Organizational Units and Structure
CO Organizational Structures
Define the relationships between the various organizational structures
Organizational Units
Point out that organizational units are used throughout the system to provide for the
highest reporting level of each R/3 application. In addition as each of the
organizational units are configured it is vital that the links between the various units
are considered in order to avoid severe problems. The controlling area therefore
represents the highest reporting level in an organization from a costing standpoint
(roll-up reporting). The operating concern allows for the combination of several
controlling areas and is only for required CO-PA. Most customers strive to have only
one controlling area; this makes good business sense since there is no tool to allocate
costs between controlling areas.
The controlling area in itself would not be very meaningful. Explain that one or
many company codes (legal balancing units) configured in FI must be linked to a
controlling area. They have to share the same operating chart of account and fiscal
year variant. Briefly explain what each term means. At the controlling area an overall
currency setting must be maintained. Other currency levels (legal, group & PCA)
are also tracked. Explain the links between organizational units as they are
configured in the IMG.
Multiple Assignment
Highlight the requirements for the company code link to the controlling area. Note
that Company Code 1000 uses the same COAs and the same currency as the
Controlling Area, however Company Code 2000 uses two COAs plus a different
currency. The settings within the Controlling Area configuration allow for the
conversion of data from Company Code 2000
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Demonstration of Controlling Area Configuration in IMG.

You may wish to show the configuration settings for the Controlling Area 1000. You
can use the transaction code OKKP to find the correct table. Be aware; if you
choose to review the configuration for the Controlling area it should be completed be
a very high level. This table is covered in detail in the AC410 class.
Exercise for Topic: Organizational units and structures
10 Minutes
You may elect to split up the class into two groups to work on the organizational
structure and then report out to the group. This is a good way for the class to find out
more about their classmates.
Putting the Topic in Context: Basic Data & Structures
Basic Data & Structures
Name the types of CO Master Data
Purpose of CO master data
List three ways Master Data groups are used in CO
Accounts and Cost Elements

Explain the difference between primary and secondary cost elements. Make sure
students understand that secondary cost elements exist only in CO but not in the FI
chart of accounts. Primary cost elements have to exist in the FI chart of accounts
before they can be created as primary cost elements in CO. Begin explaining that
primary cost elements create the link to Financial Accounting. Secondary cost
elements are used in conjunction with the various allocation techniques in CO. The
cost element category determines what cost elements function will be once it is
created.
Dont spend too much time on this subject rather tie it back to later discussions on
the concept of primary and secondary cost elements.
Demonstration of Cost & Revenue Elements
10 Minutes
Note: Prior to the demonstration ensure Controlling area 1000 is set as the current
Controlling Area.
Before beginning the demonstration it may be helpful to outline the storyline of
what will happen with the master data later on. How t will be used for planning,
actual postings and allocations.
Primary Cost Element
R/3 MenuAccountingControlling Cost Element AccountingMaster
DataCost ElementInd. ProcessingCreate Primary
Enter: Cost Element 430100
Dates: Use default dates
Note: An error message will result reflecting need to set up G/L account first in the
FI ledger
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After the error message appears and you have explained the requirement to first set
up the FI G/L number first you may wish to demonstrate the FI configuration of a
G/L number. As part of the demonstration you should emphasize the new 4.6 button
which allows for the configuration of the CO Cost Element from within the FI
screen.
AccountingFinancial AccountingGeneral LedgerMaster RecordsIndividual
ProcessingCentrally
Note: Highlight Create Cost Element Button
Secondary Cost Element:

Master DataCost ElementInd. ProcessingCreate Secondary
Enter: Cost Element 620020
Dates: Valid from 1/1/XX Current year
Valid to 12/31/XX Current year
Check Green Button
Select Basic Screen (Overview button)
Enter Data: Cost Element Name: DAA Check Assets
Cost Element Category: Type 43
Save the Cost Element - Note You will need this cost element for additional
instructor demonstrations in following units.
Mater Data in Overhead Controlling

The following six slides review the necessary steps in creating CO master data.
Cost Center Purpose Master Data

Explain the generic purpose of a cost center and some of the relevant parts of the
master record. Also discuss the cost center standard hierarchy at this point, as it is
required prior to creating any cost centers. Its main purpose is to aid in reporting,
planning and allocations. You may also want to explain the standard hierarchy
concept is also found in PCA and ABC.
Demonstration of Cost Center Master Data
10 Minutes
Demo Standard Hierarchy:
Explain the purpose and importance of the standard hierarchy.
ControllingCost Center AccountingMater DataStandard HierarchyDisplay
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Demo Create a Cost Center

ControllingCost Center AccountingMaster DataCost CenterInd.
ProcessCreate
Enter Data: Cost Center: SERV-20

Enter Data: Name: Service-Inst. 20

Person responsible: Your name
Dept: Service
Cost Center Category: H
Hierarchy Area: HAC040
Company Code: 1000
Bus. Area: 9900
Profit Ctr: 1400
Save the Cost Center
Green Arrow back Cost Center Ind. Process Create
Copy basic data from Cost Center SERV-20 to new Cost Center Prod-20
Enter Data: Cost Center: Prod-20
Reference Cost Center: Serv-20
Change Data as Reqd: Name: Production-Inst. 20

Person Responsible: Your Name
Dept: Production
Cost Center Category: F
Hierarchy Area: HAC040
Company Code: 1000
Bus. Area: 1000
Profit Ctr: 1010
Save the Cost Center
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Activity Type Purpose Master Data

Activity types are considered the productive output of a cost center, which are
usually measured in a time or unit increment. Provide some examples such as labor
hours measured in hours, machine time measured in terms of output quantity,
engineering hours.
Explain that activity types are typically used to allocate costs only from cost centers.
These costs can flow to other cost objects such as cost centers, internal orders,
production orders, ABC processes, etc.
Demonstration of Activity Types
10 Minutes
Position the use of activity types as the productive output of the cost center.
Activity Types
ControllingCost Center Accounting Master DataActivity TypeInd.
ProcessCreate
Enter Data: Activity Type: REP-20
Enter Data: Name: Repair Services

Activity Unit: H
Cost Ctr Cats: *
Act. Type: 1
Cost Element 615000
Save the Activity Type
Green arrow backActivity TypeInd. ProcessCreate
Copy basic data from Activity Type 1421
Enter Data: Activity Type: CHK-20

Copy Frm Act. Type: 1421
Change Data as Reqd: Name: Check Assets- Inst 20

Activity Unit: H
Cost Ctr Cats: *
Act. Type: 1
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Cost Element 620020*

Note: Cost Element 620020 must be configured in the earlier cost element
demonstration.
Save the Activity Type
Statistical Key Figure

Give some typical examples of key figures. For example Stat. Key Figure Square
Footage may be used to allocate facility-related expenses such as rent expense. The
number of employees per cost center may be used as an allocation base for various
HR expenses.
Demonstration of Statistical Key Figure
5 Minutes
Statistical Key Figures
Controlling Cost Center Accounting Master Data Statistical Key
Figures Ind. Process Create
Enter Data: Stat. Key Figure: EMPL20
Enter Data: Name: Number of Employees-20

St. Key Fig. Unit of Measure EA
Stat. Key Fig Category Fxd. Val.
Save the Statistical Key Figure

Internal Order
Explain the many uses of an internal order. They can capture project-related cost and
revenues for Trade Fair, Product Promotions, Facility Maintenance, Repair Services
etc. Make sure you distinguish the internal order from a cost center as a cost
collector:
a) Usually used to break costs out below the cost center level such as repair costs
b) Used for tracking individual or recurring events such as trade fairs.
c) Several cost centers may share the expense such as product promotion
expenses may be shared between the Marketing and the Sales department, but
you want to track the expense on one cost collector.
d) Usually short-term duration, for example trade fairs.
Explain the concept of order settlement.
Demonstration of Internal Order
10 Minutes
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Tie this demonstration back to the purpose of the order, in this case to capture costs
for the individual trade fairs, which later on will be settled to the service cost center.
Menu Path: R/3 Menu AccountingControllingInternal OrdersMaster
DataOrderCreate
Enter Data: Order Type: 0400 Trade Fair
Select Order Master Data Screen Green Check

Enter Data: Short Text: Trade Fair Instructor
Company Code: 1000
Bus. Area: 9900
Obj. Class: Default
Profit Ctr: 1400
Resp. Cst. Ctr. SERV-20
Explain the purpose of order settlement as outlined in the presentation

Set up the Order Settlement Rule Button Settlement Rule Button
Enter Data: Cat. Field CTR

Receiver SERV-20
Percent100%
Sett. Type PER
Save the Internal Order

Note: Save order number for further demonstrations in later units
Business Process
Position ABC as a relatively new costing tool. The difference to the traditional
approach of cost center accounting is a business process will collect overhead cost
from a cost center and then distribute those overhead costs more efficiently. Some
examples of business processes to collect the cost of Purchasing process, the Sales
Process, Presales etc. The goal of ABC is to collect total costs for each identified
process, and later allocate these costs (based on a cost driver) to various cost objects,
which is typically a product or customer record. Cost Centers are considered to be
process resources, and will contribute only those costs relating to a business
processes. Resource drivers will be established to allocate costs from the cost center
to the process.
Demonstration ABC Business Process
Since the students are not required to configure an ABC process in their exercises
you may wish to show them a configured process. You may pick ABC process
300900 for your review.
ControllingActivity-Based CostingBusiness ProcessInd.ProcessingDisplay
Master Data Groups
Emphasize the use of master data groups throughout the course, when talking about
planning, allocations and reporting. They can be created for any type of CO master
data.
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Demonstration of Master Data Groups
5 Minutes
Explain that this master data group will later on be used for allocations, reporting and
planning in the upcoming student exercises.
Cost Center Groups
Menu Path: R/3 Menu AccountingControllingCost Center Accounting

Master DataCost Center GroupCreate
Enter Data: Name: CENTERS-20
Select Hierarchy: Push the Green Check button
Enter Data: Description Field: Centers Group 20Production Services
Select: Insert Cost Center Button
Enter Cost Center Names: Prod-20

Serv-20
Explain the difference between adding values, or ranges, and adding a node. Save the
Cost Center Group
If time allows, create a cost element group as well.
Exercise for Master Data: Reflecting Your Business in CO
30 Minutes
The master data set up here will be used later; so make sure students use their correct
group number and complete the exercise correctly.
Master Data in Product Cost Controlling

Master Data in Cost Object Controlling
Explain that COC aids in the control of actual production costs as they incur,
variance analysis, and order settlement.
The various production order types shown in this slide can be used concurrently or to
meet individual customer industry requirements. Examples include:
Production cost by period (repetitive manufacturing): Automotive industry, PC
industry = continuous production runs
Product cost by order (make-to-stock manufacturing): Paper industry, apparel
industry = individual production orders to replenish stock.
Product cost by sales order (make-to-order manufacturing) : Product manufactured
based on customer specification, such as printed business forms, brand name apparel
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= sales order linked to production order

General cost objects can include any of the above
The Master Data Structures (BOMs and Routings) used in Production
Planning are normally complied product engineers. These structures provide
the quantities of the material and labor required for each product.
The work center is the physical location where work is performed. An example is a
machine work center which provides the quantity machine hours required for mixing
or bottling a product. Work Centers are directly linked to cost centers and activities.
This link provides the quantities of activities required in Product Costing.
Routings define the manufacturing individual steps required to turn a raw material
into a semi finished or finished product. With each step, (operation) the required
labor, machine and material resources are defined. You may want to draw the
following chart to tie the pieces together:
Bill of Material + Routing + Overhead = Base for product cost
Example: Routing:
Operation 10 >>> Work Center 1234 Activity: Machine time 10 minutes
Work Center:
Activity Machine time >>> Cost Center 2222: Rate 50.00
Or you may want to refer back to these integration points later when talking about
product costing.
Demonstration of Bill of Material (optional)
5 Minutes
Typically the BOM is part of a product cost estimate. It is configured in the Logistics
module. Point out that not all Booms are used for costing.
Show the BOM for material T-F100 in plant 1000.
LogisticsProductionMaster DataBills of MaterialBill of
MaterialMaterial BOMDisplay:
Material: T-F100
BOM Usage: 1
Demonstration of Work Center (optional)
5 Minutes
Explain the link of work centers to cost centers and activities
Display work center 1310 which is linked to cost center 4230
LogisticsProductionMaster DataWork CentersWork CenterDisplay
Workcenter: 1310
GotoCosting or select costing tab
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Demonstration of Routings (optional)
5 Minutes
LogisticsProductionMaster DataRoutingsRoutingsStandard
RoutingsDisplay
Product: T-F100
Select Operations Tab
Show Operations View. Here the individual steps performed when manufacturing the
product are linked to work centers, which in turn will perform the activities required
for the operations step.
It may be helpful to draw the relationships between cost centers, work centers and
activities at this point:
Cost Center : Production Work Center: Production Operation
Activities: Set-up 100.00/hr 10 Minutes 10
Tooling 120.00/hr 5 Minutes 10
Machine Time 50.00/hr 15 Minutes 20
Product Cost Controlling by Order
The first production cost tracking option presented is using the individual production
order as the cost object. This is most often selected in those industries where the
number of production orders each month is low and the cost tracking is important for
each production orders. Another reason is each production order may be for a
slightly different product and it is not possible to group the production costs together
for summary review at month end. Note: This is the production cost tracking
method used in the following student exercises in later units.
Product Cost Controlling by Period

The second production cost tracking option is by period. This option summarizes all
production cost incurred during the month in a product cost collector. By using the
product cost collector the CO view of production costs is highly summarized and
much easier to analyze for CO. This option is often used by industries that have a
very high number of production orders that make the same product. Often used in
repetitive production, which produces the same product at a high volume. Note: cost
collectors are configured in CO and the individual production orders assigned to the
cost collector are created in PP.
Product Cost by Sales Order

Companies wishing to track production costs using the Sales Order as the cost object
select this costing option. Most often it is used in a make-to-order environment.
Also, additional costs can be included that would not be a normal part of the
production costs. Examples include special handing expenses, installation expenses,
or any other special type costs.
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Master Data in Profitability Management
Master Data in Profitability Analysis differs from all other CO application, since
profit segments are dynamically created by the system.
Characteristics in PA represent the report dimensions, such as customers, products or
product groups. Value fields exist in costing-based PA based only, and represent the
key figures used in reporting, for example revenue, discounts. Values are
summarized by profit segment.
Profitability segments are created when the system encounters a unique combination
of characteristic values. For example, a sales order with two line items is posted for
customer 1000. The following profit segments are created:
Line item 1 Product A Customer 1000 = Segment 1
Line item 2 Product B Customer 1000 = Segment 2
The concept of derivation implies that certain characteristics are derived when a
transaction is posted. For example the customer group can be derived from the
customer number entered on the sales order.
Valuation refers to the concept that certain values cannot be found on the original
document and therefore can be estimated or found in CO-PA only. An example
would be estimated freight which is not known at time of sales order entry.
Discuss that profit centers are internally focused organizational units, which are
definable by the customer they could be product lines, business units, plants,
distribution centers, or department.
Profit centers can exist above the company code level, and one or many cost centers
can be linked to a profit center. A profit center needs to belong to a profit center
standard hierarchy.
Emphasize that the focus of profit center reporting first of all affords balance sheet
items not available in PA, but typically focuses on internally focused profit
accounting.
Types of Profitability Analysis
SAP offers two views of profitability: The cost based view (cost based CO-PA) and
the account based view (account based CO-PA & PCA) This slide highlights the
differences in the two views. Note that cost based can not be used for estimated
costs and its attraction is its ability to tie back to FI. The advantage of the cost based
view is the excellent reporting flexibility available.
Basic Concepts of CO-PA
Highlights the three components of CO-PA. The characteristic, the characteristic
values and the PA value fields. Without all three components in place CO-PA will
not be able to function, as all three are necessary for reporting in CO-PA. Use the
slide to highlight the CO-PA terms, as most students are not aware of the definitions
of characteristics and the link to values. Also, mention the role of the value fields as
the collectors of expenses and revenues that are mapped into CO-PA during PA
configuration.
Profit Center
Review the purpose of profit center accounting. In other words where it is used.
Answers the question: Did I make money last month at my location. Profit center
managers ask this type of question. A good example of a profit center mgr. would
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be a mfg. manager who would like to know the financial results at month end. Also,
note these financial results would include certain balance sheet items relating to
working capital issues.
Demonstration of Profit Centers (optional)
10 Minutes
Show the profit center standard hierarchy:
AccountingEnterprise ControllingProfit Center AccountingStandard
HierarchyDisplay
Remind the students how similar the Profit Center and Cost Center hierarchies are
Create a profit center, Sales Pumps in Profit Center Accounting. Point out that
profit centers exist independently of the company code and that one or many cost
centers can be assigned to a profit center. Mention the profit center standard
hierarchy.
AccountingEnterprise ControllingProfit Center AccountingIndividual
ProcessingMaster dataCreate
Profit Center: AC04000
Valid from 1/1/20XX to
Name: Sales Pumps
Description: Sales Pumps
Person in Charge: Miller
Department: Sales
Profit Center Group H1020
Profit Center Assignments
Outlines the importance of mapping all cost objects into PCA. There are several
ways to accomplish this task. More detail is presented in the AC610 class. If there
is time you may want to discuss the role of the PCA monitor tool. It is found under
the PCA master data menu path and helps in the assignments of cost objects for the
proper Profit Center.
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Unit: Reporting Tools
45 Minutes

Which reporting tools are available in CO
Explain the purpose and capability of each reporting tool
Putting the Unit in Context

This unit provides the students with a broad overview of the reporting tools available in the CO
module. It should be presented as an introduction to the CO reporting capability and referenced as the
reporting tool that will be used by the students in reviewing the results of their exercises. It is
important that the students understand the concept of drill down reporting and the option of changing
the report format by using the ABAP list viewer.
Topic Objectives:
Name the different reporting tools
Explain the purpose and capability of each reporting tool
Which Reporting Tools are used in CO?

This slide highlights the three different reporting tools available in CO. Mention the
fact that many reports and layouts found in CO are designed using the Report Painter
& Report Writer tools. Also one of the most valuable reporting options is the drill
down concept found in CO-PA and CO-PC. Remind the students of your
demonstration of the CO-PA report earlier in the class. Also highlight the ALV
feature and explain they will have the opportunity to use this feature later in class.
the
Reporting Options (5 slides)

The next five slides cover report trees, a report formatted using report painter &
writer, reporting options found within painter and writer formats, a drill down
example using a CO-PA layout and options within the drill down report view.
Present these slides at a very high level with the promise of exercises to follow.
Demonstration of Line Item Report
10 minutes
Run a line item report from the report tree:
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AccountingControllingCost Center AccountingInformation SystemReports

for Cost CentersLine ItemsCost Centers: Actual Line items
Cost center: SERV-20
Cost element group: OAS
Posting data: Current Period/Year
Select the Current Display Variant button
Remove the Total Quantity Field by selecting it and clicking on the right pointing
arrow.
Add the user and the original transaction to the display list. Select the relevant fields
and then click on the left-pointing arrow. Save your settings by clicking on the
Copy button. Point out how the display has changed.
Next, subtotal the report by cost element.
Select the cost element column and the Subtotal button. At the same time you can
sort the cost element and choose a divider character.
Interactive Information System
Highlighted on this slide is a very useful reporting option available to all Cost Center
Mangers. The ability to find detailed information concerning expense posting to
their cost centers by drilling back to the original source document postings
Demonstration of the Interactive Reporting System
Run a cost center report and link back the source data.
Menu path:
for Cost Center AccountingPlan/Actual ComparisonsCost Centers:
Actual/Plan/Variance
Create a report for Cost Center 4230.
Enter the following Data:
Controlling Area: 1000
Fiscal Year: 2000
To/From Periods: 1 to 12
Plan Version: 0
Cost Center: 4230
Double click on an actual cost values and tracks back to the original FI posting.
After reviewing the FI posting click on the header icon to display when and who
completed the posting in FI.
Line-Item Reports (ABAP List Viewer)
Briefly explain what the ABAP List Viewer (ALV) is and how it helps the end users
change the report formats for the individual needs.
Demonstration of the ABAP List Viewer

A good way to demonstrate this reporting option is to review the student's master
data they created in the last unit. You can do this by selecting the Master Data Index
report found under the same menu path as the cost center reporting systems.
09/tt/jj Page 35
Menu Path:
for Cost Center AccountingMaster Data Indexes
Select: Cost Centers
Enter the following:
Cost Center Group: HAC040
Valid dates: Current year.
Demonstrate the ABAP list viewer by changing the report format and displaying
different information about the master data of the students cost centers. As a
suggestion pull up the validity dates for the cost centers for review.
Using the Report Painter

The last slide in the Unit reviews the Report Painter tool and the fact it is widely
used throughout CO.
Exercise for Reporting Tools: Reporting Overview
15 Minutes
In this exercise the students will first generate a FI balance sheet/P&L report. It will
be in summary format. Then the students will be ask to move into CO reporting in
order to compare the CO report capability with the FI reporting tool. They will run a
CO-PA report, a cost center report, and practice drill down reporting. Emphasize the
differences between the FI report tool and the CO tool in your introduction to the
exercises.
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Unit: Planning and Plan Integration
360 Minutes

Introduction to Planning
Planning Based on Different Costing Options
Planning in Cost Center Accounting
Integrated Planning Cycle
Planning With ABC

This unit covers a breadth of typical plan activities. It introduces simple cost center planing, plan
versions, and settings for each of the CO applications. It talks about cost objects and their integration
in CO Planning, plan allocations and product cost planning. Overall it is one of the more difficult
units in the entire course. To be successful you should keep the lecture at a high level and try to avoid
going into too much detail. Remember planning is taught is all level 3 classes. If you students have
advanced questions beyond the scope of AC040 it is best to reference the level 3 class that will
address the question, or as a last resort take the question off line. When you reach the section of this
unit that deals with Product Cost planning remember that some of your students may come from
service organizations and will have little or not interest in this part of the class.
Introduction to Planning
Plan Versions
Copy Plan Data
Planning Layouts
Planning: Goals
Explains why planning is required. Also, you might discuss the fact planning
techniques within SAP vary according to the requirements of each cost center
manager. In other words the planning technique used by an Accounting Cost Center
Mgr. will be quite different for a Production Cost Center Mgr. who is required to
plan the quantity and cost of several Activities.
Versions
Versions are easily explained as what-if scenarios of a plan. Mention that SAP offers
an easy to use tool to revalue & copy plan data systematically, based on user-defined
parameters. Briefly review Planning Aids as a help tool for the cost center planners.
Copy planning
Highlight the fact actual values can be transferred into a new plan version. This will
serve as a base for the new plan.
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Planning Layouts
Remind the students that planning layouts are set up using Report Writer and Painter.
Layouts allow for certain planning requirements. One layout will allow from
planning cost elements and another will allow for activity type planning.
Organization of the Planning Screen
Review the role of the planner profile in linking the plan layouts to the plan areas.
Also discuss the SAPALL and SAPEASY profiles, as they are an aid to the planners.
Demonstration of Planner Profile and Layouts attached
10 Minutes
Select SAPALL planning profile and show the various planning activities available
and the various layouts that are used with this profile.
AccountingControllingCost Center AccountingPlanningSet Planner Profile

Select Planner Profile: SAPALL
Select information button: I
Display various activities and attached layouts
Planning on Different Costing Options

Identify the most important costing options
Explain the difference between the costing options
Perform some basic planning functions
Focus of the Different Costing Options
Call the students attention to the bullet points on this page in the workbook. They
provide an excellent discussion of the slide. Also, this is a good point to begin work
on the SAP planning terms & techniques. The slide breaks apart planning into costs,
activities and fixed and variable cost planning. Also, shown are activity-independent
and activity-dependent planning terms.
Cost allocations
Cost planning is the simplest of all of the planning methods. The cost center
managers simply plan cost amounts against cost elements and then if required can
allocate those planned costs via planning allocation cycles to other controlling
objects. Most cost centers will have at least this level of planning. This technique
can be used for salary, rent, wages, etc.
Activity type allocations
Emphasize the need for this type of cost center planning in conjunction with
production planning activities. Routings are linked to work centers, and, in turn,
work centers are linked to cost centers where activity is found. The hourly rates
associated with an activity can be politically assigned or calculated. Also, mention
that this type of planning can be used only within CO with no reference to PP.
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Planning in Cost Center Accounting

Explain planning requirements for Statistical Key Figures
Explain the goals of activity planning
Describe the cost allocation planning methods
List the typical planning steps
Describe some of the more advanced planning options
Perform some basic planning functions
Planning Statistical Key Figures
Remind your students that setting up the statistical key figures in Master Data in
only half the job. They still need to plan a quantity for the statistical key figures
within each cost center.
Primary Cost Planning
Review simple planning using primary cost elements. Again most cost center
managers will use this technique.
Cost Allocations in Planning

This slide introduces the students to the cost allocation techniques available in
planning. You should not go into detail at this point as each of the cost allocation
methods are discussed in greater detail in the period end unit. Just review the idea
that these techniques are automatic in nature and can aid the cost center mgrs. in
their planning efforts.
The next two slides review activity type planning. Again point out what type of cost
centers will produce activities. Also, if activities are produced they need both a
quantity and a value to be planned correctly. If more than two activities are
produced by one cost center then planned costs must be identified as act. indep. and
act.dep. type costs.
Secondary Cost Planning
Highlights the fact that costs can also be planned using 2nd cost elements. Also, point
out that activities can be consumed between cost centers.
Typical Planning Steps for Cost Centers

The following three slides highlight the suggested planning steps in cost center
planning. Briefly review while overview and discussing the following instructor
demonstrations.
Demonstration of Cost Element Planning
10 Minutes
Start with this fairly basic demonstration of primary cost planning.
Note: Check your planner profile is set to SAPALL
AccountingControllingCost Centers AccountingPlanningCost and Activity
InputsChange
Plan some primary costs
Enter the following Data:
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Version: 0
Period: 1 12, 20XX (current year)
Cost Center: SERV-20
Cost Elements Range: 415000 to 420000 Select: the free and then form-based
buttons to show the students what each button does, and then click on the overview
icon (annual planning).
Plan Costs: Cost Element 417000 value 36,000 with a DK of 1
Post your plan entries
Run a Planning report for cost center SERV-20 to illustrate what has been planned so
far. You may also draw the attached map to pull all the pieces together.
Cost Center AccountingInformation SystemReport SelectionPlanning
Reports Cost Centers: Planning Overview
Explain the concept of plan over/under absorption.
Demonstration of Manual Activity Price Planning (optional)
15 Minutes
Remind the students that they have already manually planned activity costs for their
cost centers in the master data exercises.
Start with this fairly basic demonstration of activity rate planning.
First, plan activity in-dependent costs. Tie the demonstration back to the master data
created in the previous exercise. The two cost centers you will plan are the service
and production cost centers.
Explain the importance of setting planner profiles.
ControllingCost CentersPlanningSet Planner Profile: SAPALL, Layout 1-101
Plan activity-independent costs.
Cost CentersPlanning Cost elements/Act. input: Note: you may have already
planned costs on Serv-20 if so skip this step
Version: 0
Cost Elements: 417000 36,000 DK = 1
Select form-based, and click on the overview icon (annual planning).
Post your plan entries and create the plan for the production cost center from the
same screen.
Version: 0
Cost Center: PROD-20
Cost Elements: 420000 19,200 Fixed Cost DK = 1
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Post your plan entries.

Now manually post your activity rates:
AccountingCost Center AccountingPlanningActivity output prices
Enter the following data:
Version: 0
Activity Type: REP-20
Select form-based, and click on the overview icon (annual planning).
Planned activity: 1000 hours DK 1
Fixed Activity Price: 60.00
Post your plan entries.

Activity Type: CHK-20
Planned activity: 500 DK 1

Activity Type: 1421
Planned activity: 120 DK 1
Run a Planning report for cost center PROD-00 and SERV-00 to illustrate what has
been planned so far. Cost Center AccountingInformation SystemReport
SelectionPlanning Reports Cost Centers: Planning Overview
Explain the concept of plan over/under absorption.
Demonstration of Automatic Activity rate calculation (after page Typical

Planning Activities (2)
15 Minutes
Demonstrate how the system can automatically calculate the activity rate based on
cost element and activity input planning.
Plan activity-dependent costs for the service cost center and explain what makes
them activity dependent.
Use Layout 1-101
Plan activity-dependent costs.
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Cost CentersPlanning Cost elements/Act. input:

Version: 0
Period: 1 12, 20XX current year)
Cost Elements: 403000 6,000.00 Fixed 18,000 Variable DK = 1
In the next step, plan activity independent secondary cost. The idea here is that the
service cost center provides 100 repair hours for the production cost center, and the
related costs should be included in the Production cost centers plan.
ControllingCost CentersPlanningSet Planner Profile: SAPALL, layout 1-102
Sender Cost Center: SERV-00
Sender Activity Type: REP-00
Planned fixed consumption: 100 DK 1
Run a Planning report for cost center PROD-00 and SERV-00 to illustrate what has
been planned so far. You may also draw the attached map to pull all the pieces
together.
Cost Center AccountingInformation SystemReport SelectionPlanning
Reports Cost Centers: Planning Overview
Calculate the activity price for both cost centers. Explain that initially the price was
manually planned, but now that detailed planning has been completed, the activity
price can be calculated automatically by dividing planned costs by planned activity.
This will ensure that the cost center plan cost will be fully absorbed.
Cost CentersPlanningAllocationsPrice Calculation
Cost Center Group: Centers-00
Explain the price unit settings, and that the screen will display individual periods.
Post the results of activity price calculation and run the planning report for cost
center SERV-00 and PROD-00 again.
Display the activity price. ChooseGotoDisplay Activity Price
The following map may provide a good overview as far as what is happening
in this exercise.
Cost Center SERV-00 Cost Center PROD-00
Act. Indep. Prim. Costs 417000 Purch Serv. 36,000 420000 Direct Labor 19,200
Activities/Prices REP-00 1000 hrs @ 60.00 Eq 2 1421 120 hrs @ 180.00
CHK-00 500 hrs @ 40.00 Eq 1
Act. Dependent Costs REP-00 403000 Operating Supplies
Fixed 6,000 Variable 18,000
Activity Allocation REP-00 100 hrs @ 60.00 615000 Repair Hrs 6,000
Activity Price Calculation:
Split act. Independent Costs based on Equivalence Number: REP-00 24,000 CHK-00 18,000
REP-00 CHK-00 1421
Act. Independent Costs: 24,000 18,000 19,200
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Act. Dependent Costs: 24,000

Subtotal 48,000/1000=48.00 18,000/500=24.00
Act. Dependent Sec. Costs 100 hrs * 48.00 4,800
Total 48.00 24.00 200.00
Exercise Planning Based on Different Costing Options
30 Minutes
During the review you may want to emphasize why it may be beneficial to have the
system calculate the rate. .

Integrated Planning Cycle
Identify the application components in the Integrated Planning Cycle

Explain the impact in planning on each application component
Explain how the integrated planning cycle is used in manufacturing and service
!!! Hint: we provide in this trainer guide a demo process, showing the entire
integrated planning cycle. If you would like to shorten this (like it was in the
guide for release 4.6a/b and the previous guide for 4.6c), you may do so. But
show at least the demonstration of creating and releasing the product cost
estimate, because this is important to the next course days and also to an exercise
for the participants.!!!
Plan Integration Manufacturing
Review the planning flow of data. Sales Planning provides quantities of product
forecast to be sold to PP. Once PP reviews the sales forecast they will then convert it
to a production plan. Using MRP planning PP is able then forecast and pass along to
Cost Center planning the quantities of Activity Types required for the production
plan. Note: The activity quantities are derived from the quantity structures or master
recipes found in PP. Using the information from PP the production cost center
managers are then able to reconcile their planned activity quantities with what is
required by the PP production plan. Once activities are reconciled, activity prices
are then calculated and passed along to CO-PC. CO-PC will re-cost the products
based on updated costs and then pass the cost along to CO-PA for review and match
up with the forecast revenues.
Planning integration Sales Planning (1)
Planned sales quantities can originate in SIS, LIS or CO-PA. Either sale planning
technique will result in a sales quantity forecast. This quantity forecast can be
passed along to PP either at the product group or product level.
CO-PA: Planning (2)
This slide shows a typical planning screen used in CO-PA planning. Note the need
to plan product quantities. You may review the need for planning versions and the
fact that CO-PA planning also relies on planning layouts defined in report painter.
CO-PA: Top-Down Planning (3)
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This slide highlights one of planning techniques available in PA planning. Review

how the 3000 will be spilt according to the pervious year volume of product sold.
Demonstration of a sales plan in CO-PA
10 Minutes
AccountingControllingProfitability AnalysisPlanningEdit Planning Data
Operating concern: IDEA, select costing-based
Select planning level AC040, T-F100 (double-click on T-F100)
Select planning method AC040, enter planning data, T-F100 (double-click on T-
F100)
Alternative 1 (easy):
Enter the following data manually:
Revenue: 2.000.000
Quantity: 1200
Press push button valuate and save the plan data
Alternative 2 (advanced):
Derive the plan data by using the functionality forecast and ratio (x represents
the actual year):
Put the cursor on the field invoiced quantity for plan 200x and press push button
forecast. Enter the following data:
Forecast data: From period: 001.200x to 012.200x
Archive data: from period: 001.200y to 012.200z (previous two years)
Version 100, record type F
Mark plan data
Enter forecast profile: AC40 and press enter
In the next screen mark invoiced quantity (this is the field you want to forecast
for) and press enter
you will get a quantity of about 1200 pcs. Feel free to change the figure manually
to 1200.
Now put the cursor on the field revenue for plan 200x and
use menu path: Editplanning methodsratios
Enter ratio scheme AC040 from period 001.200z to 12.200z (previous year only)
Version 100, record type F and mark plan data. Press enter.
you will receive a planned revenue of about 2.000.000. Feel free to change the
figure manually to 2.000.000.
Press push button valuate and save the plan data
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Planning in PP
In this step, emphasize that the sales quantity plan can be transferred to Sales and
Operation Planning (SOP) in Production Planning. Here the sales plan is checked
against capacity. If the plan cannot be met, additional resources must be obtained or
the sales plan changed. Results are used as a basis for running LTP (Long Term
Planning) and/or MRP (Material Requirements Planning)
Demonstration of creating a SOP-Plan using the data of the prior planned sales
plan
15 Minutes
In order to not loosing participants, you should now explain material master
record, BOM, routing and work center, if you did not already earlier in this
course.
Show material master record for T-F100. It is sufficient to focus on the views
accounting 1 and costing 1.
Logistics production master data material master material
display display current
Material: T-F100, choose view accounting 1 and enter in the next screen plant
1000.
After you explained the most important fields (e.g. valuation class, price control,
standard price) show view costing 1, explaining e.g. overhead group, variance key,
profit center.
Show Bill of materials for T-F100.
Logisticsproductionmaster dataBills of materialbill of material material
BOMdisplay
Material: T-F100, plant 1000, BOM usage 1
Explain, that the four materials are semi-finished goods which are also produced in
our company.
Show Routing for T-F100.
Logisticsproductionmaster dataroutingsstandard routingdisplay
Material: T-F100, plant 1000 and press enter.
Doubleclick on operation 0010, explain the activity types and press push button
work center. Via the tab costing you can show the assigned cost center.
this is the integration between Cost Center Accounting and PP.
!! Hint: In order to be able to show the integration very well, assign the work center
T-M00 to cost center AC040, which is already available in the system !!
Logisticsproductionmaster datawork centerswork centerchange
Plant 1000, work center T-M00
Go to TAB costing and enter:
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Start date 01.01.2000, cost center AC040, save

now you can show the integration effects of the ongoing integration process on
cost center AC040.
Set up the SOP Plan for our material T-F100.

LogisticsproductionSOPplanningfor materialchange (since the active
version A00 already exists)
Material T-F100, plant 1000, press active version
In order to derive the production Plan from the sales plan, you can get the sales plan
from CO-PA (instead of entering it manually)
editcreate sales plantransfer CO-PA plan.
Version 100, from 1. of the recent month 200x to 31.12.200x (you cannot get data
from the past periods, since PP cannot plan or produce in the past. Of course this
means for the course, that e.g. in November you can only derive 2 months. However,
the principle will become clear to the participants). In the next screen mark
invoiced quantity.
the sales plan data will show up.
you see, if you dont do something, your company will have a lack of materials in
each month. So you should purchase or produce. Therefore you set up a production
plan.
editcreate production plansynchronous to sales
Save the production plan.
Based on the integration between PP and cost center accounting, you can use the
production plan to derive the required quantity of activity types of cost centers. This
information you can transfer to cost center planning in order to get scheduled
activities.
Planning Integration Cost Centers ( 2 slides)
Planning Integration-Cost Centers (1)

Once PP a compiled a production plan. The activity requirements can be passed
along to Cost Center planning. When this transfer takes place it is necessary to
insure the proper planning version are referenced in the transfer set up.
Transferring Plan Values to Cost Centers (2)

Other planning data can also be transferred into Cost Center planning. The slide
highlights other planing data from outside CO. The transfer feature is found under
Planning Aids if you wish to display the option.
Demonstration of transfer of production plan data to Cost Center accounting

and plan reconciliation
15 Minutes
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Transfer the data by using the menu path:

AccountingControllingCost Center Accountingplanningplanning
aidstransfersscheduled activity SOP/LTP
Enter:
Plant 1000, version 0, period 1 to 12, fiscal year 200x
Deselect test run
Select material/plant
Execute
!! Hint: before execution you may show the transfer control:
Push button transfer control, detail of the entry for the actual year
you see, that we address the SOP plan version A00, which is the active version in
SOP !!
Look up the result in the information system:
AccountingControllingCost Center Accountinginformation systemreports
for cost center accountingcost centers: planning overview
Execute the report for cost center AC040
the appropriate quantity of activity type 1421 is scheduled for the latter
production process.
!! Hint: since we will need this report more often, you should add this report to the
favorites !!
Show in comparison the scheduling of activities by the planning of other cost
centers:
1. planning for cost center Prod00
AccountingControllingCost Center Accountingplanningcost and activity
inputschange
Planner profile: sapall
Choose Layout 1-102
Enter:
Version 0, from period 1 to 12, fiscal year 200x, cost center PROD00
Sender cost center AC040, sender activity type 1420 to 1422
Select form-based and press the icon overview screen
Enter plan fixed consumption 200 for each activity type and save
2. planning for cost center AC040-serv
Enter:
Version 0, from period 1 to 12, fiscal year 200x, cost center AC040-SERV
Sender cost center AC040, sender activity type 1420 to 1422
Select form-based and press the icon overview screen
Enter plan fixed consumption 200 for activity types 1420 and 1422
Enter for activity 1421 an amount, that will be together with the scheduled activity
from SOP about 200, e.g. if the transferred quantity from SOP was 150, then enter
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now 50.
Look up the result in the report planning overview (look to your favorites).
in the second part of the screen you see, that about 400 hours of each activity are
scheduled. In the first part you see in addition the requesters of the activities.
After this planning step, the cost center responsible person sees, which quantities of
which activity types are requested by others. He should now decide to plan the
activity output of his cost center. In the ideal case, he will plan exactly the quantities,
which are already scheduled. This can also be done automatically:
aidsplan reconciliation
Select cost center group and enter HAC040
Select no business processes
Version 0, from period 1 to 12, fiscal year 200x
Deselect test run, select detailed list and execute
the planned activity quantities have been changed to meet the scheduled activity
quantities.
Demonstration of transfer of planned personal costs from Human Resources
15 Minutes
Now its time for the cost center responsible person to think about the costs incurred
by providing the requested activity types.
However, using the integration, many cost types are not planned by the cost center
responsible person himself, but are transferred from other plans.
Lets do some examples.
Show the master data records for our staff and transfer the plan data from HR, where
already a plan version exists.
Human Resourcespersonnel ManagementadministrationHR Master
Datadisplay
Personnel number 40
Look to infotype personnel data: mark the item and press push button show.
Return.
Look to infotype organizational assignment: mark the item and press push button
show. Return.
Ms. Johnson is assigned to cost center AC040
Press TAB Gross/net payroll
Look to infotype basic pay: mark the item and press push button show. Return.
Ms. Johnson earns usually 4400 uni per month.
Leave the master data record.
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Human Resourcespersonnel Managementpersonnel cost planning

Administration
In the current plan you find the scenario Sollbezge 200x for AC040 (Sollbezge
= projected pay).
Put the cursor on group zuerker and press the icon show. Drill down by
doubleclick on the name and then on the cost object and you will see the cost items.
!! Hint: the difference between basic pay and plan group is, because we created the
plan by using the functionality projected pay and not based on the basic pay !!
In order to transfer the plan data, you have to release the plan scenario first:
Human Resourcespersonnel Managementpersonnel cost planningrelease
plan scenario
Put the cursor on the item Sollbezge 200x for AC040 and press icon release.
The system will bring up a warning, that the release is not reversible, but confirm.
aidstransferspersonnel costs
Version 0, from period 1 to 12, fiscal year 200x, execute.
In the pop up, put the cursor on the item (released scenario) and confirm.
Demonstration of transfer of planned depreciation and interest from Asset
Management
15 Minutes
Look up the asset 2390 in FI-AA:

AccountingFinancial AccountingFixed AssetsAssetDisplayAsset
Asset number 2390
Show the data on tab general, tab time-dependent (cost center assignment to
AC040) and tab depreciation areas. Area 20 for cost-accounting uses a linear
depreciation over 10 years. The index indicates, that we have a value adding for each
year (depreciation based on the estimated replacement value). The percentage rate is
maintained in the customizing of FI-AA. Then show the asset values by selecting the
asset value button, select area 20 and show the planned values. You see the
depreciation, the depreciation on the revaluation and the depreciation on the
revaluation for the last years. The last item shows the interest.
Leave the master data record of the asset.
Transfer the planned depreciation and interest to cost center accounting:
AccountingControllingCost Center AccountingPlanningPlanning
AidsTransfersDepreciation/Interest FI-AA:
Enter planning periods: fiscal year 200x, from 1 to 12
Press icon all selections
Select: Select Assets, Asset number 2390
Scroll down to the selections
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Delete the values for business area and plant

Depreciation Area: 20
Further Settings for planning:

Plan version 0, activity-type-indep. Planning, activity-type-depend. Planning,
include interest, planning on cost centers.
Remove test run button. Check Display Summary Record
Planning Scope on Internal Orders

This slide outlines the 3 planning methods available using Internal Orders. They are
Overall Planning, Cost Element planning and finally and Unit Costing. Explain
overall as the easiest and the least detailed. Cost Element planning looks and feels
the same as the planning the students completed in their cost center planning sets.
Unit costing is an entirely different planning technique than anything now available
in cost center planning. It can be used for many purposes such as small construction
projects and machinery repair projects. Again remind the students that AC415
covers IO planning in detail.
Demonstration of transfer of planned costs on internal orders
15 Minutes
AccountingControllingInternal ordersmaster dataorder manager

Press icon create and enter order type 0400
Enhance the short text by plan integr. Order
Go to tab control data and mark plan-integrated order.
Press push button settlement rule, press push button plan settlement and select
version 0.
Enter Category CTR, settlement receiver AC040, % 100 and save the order. Note
the order number.
Plan cost on your internal order and settle them to AC040:
AccountingControllingInternal ordersplanningchange
Version 0, from period 1 to 12, fiscal year 200x, order number ..... (of the just created
order). Cost element 400000 to 419000.
Select Entry free and press icon overview.
Enter cost element 400000 and total plan. costs 12000
Enter cost element 415000 and total plan. costs 6000 and save.
AccountingControllingInternal ordersplanningallocations
settlementindividual processing
order number ....., version 0, from period 1 to 12, fiscal year 200x, deselect test run
and execute.
Go to the detail list, put the cursor on the item CTR .... and press push button
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Receiver.
the plan data was settled to cost center AC040 by using settlement cost elements.
After this planning by integration, the cost center responsible person may now plan
additional cost manually.
AccountingControllingcost center accountingplanningcost and activity
inputschange
Version 0, from period 1 to 12, fiscal year 200x, Cost center AC040, delete the value
for cost center group, cost element 400000 to 419000, entry free.
Cost element 400000, fixed plan costs 42000 (enter an appropriate value. The total
cost amount on AC040 should result in cost of about 125000).
Now lets assume, that all data on our cost center is planned. We will finish by
calculating the activity type prices. First check the equivalence numbers. They
should be 1 for each activity type.
AccountingControllingcost center accountingplanningactivity
outputchange
Version 0, from period 1 to 12, fiscal year 200x, Cost center AC040, activity type
1420 to 1422, form-based. Press icon overview.
AccountingControllingcost center accountingplanningallocationsprice
calculation
Select cost center group end enter HAC040, select no business processes, Version
0, from period 1 to 12, fiscal year 200x, deselect test run. Execute.
!!Hint: the price of 1421 is different (except in January), because we couldnt
transfer the SOP plan for the previous months. This results in a different activity
quantity per month and therefore in a different price per period. Put the cursor on
activity type 1421 and press icon periods !!
the cost center has now a balance of zero.
Integrated Product Cost Planning ( 2 slides)
Planning Integration Product Cost Planning (1)

Once the cost center managers have posted the new activity rates these rates are now
available in CO-PC for cost estimating. If time permits the role of the costing
variant in selecting the forecast values for activity values could be discussed at this
point.
Product Cost Planning (2)
This slide highlights the link between PP and CO-PC. Remind the students that the
quantity structure/recipe is defined by PP and it is the source of the quantities of
materials and activities consumed. This information is coupled with the value
structure which is made up of costs for materials and activities. The value structure
09/tt/jj Page 51
falls under COs responsibility. Once the quantity structure/recipe is combined with
the value structure CO-PC can generate a costing result. The costing results can be
reviewed in three views. The most detailed is the itemization view, which is then
summarized into the cost element view, and finally the most summarized view is the
cost component view. The costing information is then passed along for use in other
application components.
Demonstration of Creation of a Product Cost Estimate (after The Costing

Process slide)
15 Minutes
Remind the participants to the material master record, the BOM and the routing they
have seen before we did the SOP plan.
Create a standard cost estimate for material T-F100:
ControllingProduct Cost ControllingProduct Cost PlanningMaterial
CostingCost Estimate with Quantity StructureCreate
Material T-F100, Plant 1000, Costing Variant PPC1, Costing Lot Size 500
Press enter.
Costing date from today.
Note: In order to mark and release this cost estimate later during the course, make
sure you change the costing date reflects todays date. Accept all other dates as
suggested.
The result should show costs of goods manufactured of about 1170. (Dont
worry, if you have less or more in a range of about plus/minus 5%).
Once the cost estimate is completed you may wish to demonstrate some of new 4.6
features available in CO-PC. For example: Show the three views of the costing
results (the itemization view can be selected by the icon found next to the box
showing the cost component view cost of goods mgfd, the cost component view
icon is next to the itemization icon). Switch back to the itemization view. The cost
element view can be found by changing the display variant to SAP109 on the icon
bar directly below)
You may wish to display the cost of the various components of the product T-F100.
By moving to the left section a double clicking on the calc icon each components
cost will be displayed in this item (perhaps you have to enlarge the left section) and
in the detail section of the screen. The left section shows in addition a fully cost
BOM with all costs displayed (Show/Hide all items, expand/collapse subtrees).
Save the cost estimate. Mark in the pop up Itemization and Log.
Product Cycle
Highlights the typical life cycle of any product. You may wish to discuss the use of
Unit Costing to track costs during the first three stages of the product cycle.
09/tt/jj Page 52
Overhead
Briefly discuss what role a costing sheet will play in Product Costing. The ability to
add costs for material and production overheads plus costs based on an estimate for
Administrative and Sales overheads allows for the calculation of the COGS value.
The following example may illustrate the costing sheet configuration:
Production Order XYZ
DR: Material cost element 400000 10,000 (goods issue posting)
DR: Overhead cost element 655110 1,000 (Overhead calculation)
Cost Center 4130:
CR: Overhead cost element 655100 1,000
Cost Rollup in Product Cost Planning

Self-explanatory. Key point here is that all costs of all materials used in the estimate
are rolled up into the cost of the product to be produced. If one of the materials is a
semi-finished good, its BOM and routing can be exploded and viewed in the cost
estimate. An example could be that in order to produce a Personal Computer, various
sub-assemblies are involved, i.e. the hard drive, the CD ROM drive, the disk drive.
When costing the PC a complete cost of all subassemblies is desired
Cost rollup based on the cost component structure defined in configuration for CO-
PC. Note that costs are added at the T-F100 level. Labor =s 50+30 (added at top
level), OH =s 10 + 5 and Process =s 10 =10
Update Standard Cost Estimate
Updating requires two separate steps, the first is release and the final step is marking.
Prior to updating any prices a marking allowance must be issued. (See below)
Point out to the students that the mark and release function will update cost fields
found in the Material Master. The cost fields that will be updated are controlled by
the selection of the correct costing variant.
Mark and release the Product Cost Estimate
10 Minutes
Now mark and release the cost estimate:

ControllingProduct Cost ControllingProduct Cost PlanningMaterial
Costingprice update
Posting period/fiscal year 2 200x, company code 1000, plant 1000, Material T-F100.
Deselect test run and execute.
!! Hint: it may happen, that you first have to do the marking allowance. Therefore
press the push button on this screen. Then press icon issue marking allowance and
enter in the pop up the costing variant PPC1) !!
Look up the result in the material master record by clicking on the material number
in the list screen. Focus on the view accounting 1. Press push button Std. cost
estimate.
the result of the standard cost estimate is now shown as future price.
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Return to the previous screen and leave the display list of marked materials.
Press the push button release.

Posting period/fiscal year 2 200x, company code 1000, plant 1000, Material T-F100.
Deselect test run and execute.
Look up the result in the material master record by clicking on the material number
in the list screen. Focus on the view accounting 1. Press push button Std. cost
estimate.
the result of the standard cost estimate is now shown as current price. You see
the price as new standard price in the view accounting 1.
Planning Integration Update Sales Plan/CO-PA (2 Slides)

Detailed product cost planning information can be accessed in costing-based CO-PA
by mapping the individual product cost components to value fields in PA. Together
with revenue planning a contribution margin plan can be compiled which will break
product cost down into its individual components.
The actual mapping of CO-PC costs into CO-PA is set up in CO-PA configuration
found in the IMG. (Valuation)
Update sales plan
10 Minutes
AccountingControllingProfitability AnalysisPlanningEdit Planning Data

Operating concern: DIEA, costing-based
Select planning level AC040, T-F100 (double-click on T-F100)
Select planning method AC040, enter planning data, T-F100 (double-click on T-
F100)
Put the cursor in a field in the column plan 200x
Press push button valuate.
the cost in the sales plan are updated by using the cost component split of the
released standard cost estimate.
Now you can compare the forecasted revenue with the cost calculated on the base
of this sales plan. The result is a forecasted (plan) business result of this market
segment.
Plan Integration Service

For those organizations that do not require a production plan (service organizations)
it is still possible to use SAP integrated planning. The link is the process template in
ABC.
Plan Integration in Profit Center planning
Again remind the students of the importance of mapping all cost objects into correct
profit centers. If this is completed correctly it is possible to automatically plan the
profit centers, as any planning data posted elsewhere will be statistically posted into
09/tt/jj Page 54
the profit centers.
Exercise for Integrated Planning Cycle:
20 Minutes
Emphasize to use todays date as the costing date. This part of the exercise has the
students review the integration of the activity price and the product cost estimate and
it has them create a product cost estimate. When the exercise is complete remind the
students that a NEW standard price was just set for their products. It is important
that controls are in place to prevent an inadvertent price update.
Planning with ABC
Product cost planning using ABC
Push versus Pull Approach to Planning in ABC Overhead Discussion: ( 2 slides)

In addition to planning overhead costs on cost centers, costs can be planned on ABC
processes and if desired, included in product cost estimates. In release 3.X, ABC was
available, but only in form of a statistical planning version, which allowed an
alternate (= business process) view of overhead cost only.
The goal of ABC is to determine what drives which overhead costs in an
organization and to determine where and how resources are consumed. Cost Center
accounting typically focuses on departmental cost controlling.
Business Process costs are determined by allocating cost center costs to the process
based on reasonable resource drivers. An example here could the Pre-sales Process. A
number of departments/cost centers are involved in supporting this process. The cost
of the Inside Sales Department is allocated to this process using the number of order
quotations as a cost driver. Cost drivers can be as simple as percentages, but also use
statistical key figures or even activities.
The operational view of ABC implies that ABC is used as a costing method and part
or all of the overhead costs are allocated to product costs using process allocations.
Push versus Pull (1)
Slide Highlights two methods of planning ABC costs. The traditional is the push
view (top down) SAP offers another option of push (bottom up).
Push versus Pull (2)
Outlines the advantages and disadvantages of each planning approach.
Remind the students that the AC420 class will review ABC planning in detail.
Integrated ABC cost planning in the Manufacturing Industry: ( 2 slides)
The message here is that business process costs, such as Pre-sales expenses, are
included in product costing. Traditionally this has been using overhead cost
percentages. Now ABC allows for the detailed analysis how much of the business
process, in our example pre-sales activity, is consumed by a product.
The process template allows for a detailed breakdown of individual process tasks,
their planned costs, time spent to determine cost drivers.
The pre-sales process could include the following tasks:
Order Quotation = Activity Type 1423 Planned Activity : 2000
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Inventory Inquiries = Stat Key Figures # of Inquiries: Planned Quantity: 1200

Based on Sales and Operations or Long-term Planning of production quantities in
production planning, the process requirements can be calculated and transferred to
ABC. The assignment of a process to an individual material is made by linking to an
overhead-costing sheet.
The ultimate goal is to determine how many resources the product consumes. For
example in the above example, the cost driver for inventory inquiries could be the
number of inquires by product. In profitability analysis the information can be
compared with anticipated revenues, to evaluate bottom line results.
The Process Template
The process template is the key to ABC costing. It identifies the processes, finds the
quantity of the processes and then determines the cost assignment of the processes.
Exercise for Costing with ABC 4-1
15 minutes
Make sure that students select the Cost of Goods sold cost component view.
Otherwise only process costs for material handling can be found.
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Unit: Postings to CO from Other Modules
180 Minutes
Unit Objectives: Postings from Other Modules
Postings to CO from Other SAP Modules

Commitment Management
Real versus Statistical Posting and Controlling Objects

This unit explains the integration of actual transactions performed in other modules of the R/3 system
and how they integrate with CO. The scope of this chapter is limited to overhead-related expenses and
how they flow into the CO module. Commitment management, which allows for the posting of
purchase orders to a controlling object is also discussed. In addition you will introduce the concept of
a real and statistical posting and explain options as it relates to the various controlling objects.
Postings from other modules
Name the typical feeder system that post data into CO

Explain Commitment Management
Review the following postings:
Financial Accounting
Asset Management
Human Resources
Material Management
Posting Logic
This slide demonstrates the posting entries that place with a simple FI posting.
Discuss the Debit/Credit posting in FI (required) and the single debit post in the CO.
This concept will be new to your students. Also highlight that the FI posing must
have a CO cost object included as a reference. Additionally, review the link between
the FI expense number and the CO primary cost element.
Real versus statistical Objects in CO
Again a new concept to most students. The fact that CO can accept multi postings
from only one FI transaction. Point out one posting will always be real and the
others will be statistical.
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Example Posting from FI,AA,HR, and MM to a Cost Center ( 5 slides)

A series of 5 slides highlighting posting logic. While the transactions differ, the
concept is the same the entry is always posted to Financial Accounting and CO
simultaneously, if the FI account posted to is also set up as a CO primary cost or
revenue element. The transaction will require a CO cost object assignment reference.
The following links exist:
FI Posting: Cost accounting assignment is keyed at entry
AA Posting: Cost accounting assignment can be made to the asset master, and
assignment happens automatically during depreciation run
HR posting: Employee master data can be assigned to a cost accounting object, the
assignment of costs to CO object will happen automatically during payroll run.
MM posting, the movement type determines which fields will require entries as the
goods issue posting proceeds. The combination of material number and movement
type will determine which inventory and cost accounts will be affected.
Demonstration of a journal entry from FI to a cost center

Demonstration of a goods issue posting from MM to a cost center
20 minutes
Start your demonstration with a simple two-sided journal entry in FI and explain the
effect on CO.
AccountingFinancial AccountingGeneral LedgerDocument EntryGL
Account Posting
Note: if prompted by the system enter Company Code: 1000
Document Date: Todays date
Select Screen Variant: Cost Center
Enter the Debit Posting:, Debit

Account number: 400000
Debit or Credit: DEBIT
Doc. Currency: 5,000.00 Note: for further discussion you may wish to Press the
enter key prior to posing the cost center point out the error message which
indicates that an assignment to a CO object is required. ( A warning message
regarding tax may appear, press enter)
Briefly re-iterate that the link to CO is create through the expense account and its
existence as a primary cost element in CO.
Enter cost center SERV-20 Enter the Credit Posting:
Account number: 113100
Debit or Credit: CREDIT
Doc. Currency - 5,000.00
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Post the FI document. You may want to display the document after posting in FI and
show the accounting documents which were created with this transaction.
DocumentDisplayEnvironmentAccounting Documents
Display the posting in Cost Center Accounting by running a Plan/Actual
Comparison Report for Cost Center SERV-00
for Cost Center Accounting Plan/Act comparisonsCCtr: Actual/Plan/Variance
Drill down to the original document. Explain the sequence of first drilling down to
the CO line item, and then to the financial accounting document. Show the line item
detail screen to display the cost center assignment.
Issue materials to a cost center. A practical application here is the R & D cost
center requests materials stored in the warehouse for the development of a new
product prototype.
Logistics Materials management Inventory management Goods

movement Goods Issue
Use movement type 201
Plant: 1000
Storage Location: 0001
Enter Key
Material: T-T200 20 pieces
Post the goods issue.

Explain that there is configuration behind the movement type that drives which
fields will appear on the goods issue posting screen, and which determines which
material consumption and inventory accounts will be updated with this transaction.
Display the goods issue within MM and show the accounting documents created by
this transaction.
The FI entries would look as follows:
CR: Inventory account (Balance Sheet)
DR: Material consumption account
Goods IssuesDisplayOverview IconAccounting docs button In cost center
accounting, display the goods issue posting on your cost center, running a
Plan/Actual Variance Report.
for Cost Center Accounting Plan/Act comparisonsCCtr: Actual/Plan/Variance
Drill down to the individual line item for the material issue.
Posting from Asset Management to a Cost Center (if time allows)
Show the asset master for asset 2122 in the Assets Management module. Point out
the cost center assignment to the asset on the time dependant tab.
AccountingFinancial AccountingFixed AssetAssetDisplay:
Asset number 2122, sub number 0, company code 1000
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Example MM Purchase Order Posted to Cost Center & Commitments

(2 slides)
Explain that purchase orders do not generate an entry in Financial Accounting.
However, a cost center manager may want to see the funds he or she has committed
to a project or cost center. Example: The Engineering department has placed an order
for 10 custom-built PCs with a vendor which will not deliver until November (or
some other date in the future). A commitment line item will display the funds tied
up in the intended purchase.
The concept of commitments works for purchase requisitions, and scheduling
agreements as well. Commitment line items can be created against project, cost
centers and internal orders.
Emphasize that the account assignment category on the purchase order determines
where the commitment line item will be created. Not all purchase orders should
create commitments example purchase of raw materials for production stock. If a
PO is placed for a non-stocking item, the system will automatically require an
account assignment category. The delivery date will determine in what period the
commitment line item appears on controlling object.
A commitment line item is reversed through the actual goods receipt, the invoice
receipt (if customer uses GR/IR) or by cancellation of the purchase order.
Demonstration of Commitments to Cost Centers
15 minutes
LogisticsMaterial ManagementPurchasingPurchase OrderCreateVendor
supplying plant known.
Vendor: 1000
Open Header Data and Check the following info:
Purchasing Organization:1000
Purchasing Group: 000
Company Code: 1000
Open item overview if required:
Account Assignment Category: K (hint column headed with A)
Material: T-T200
PO Quantity: 10
Delivery Date: Today
Net Price: 50.00
ENTER KEY Item Screen
Enter Cost Center SERV20
SAVE Record the PO number
Run a cost center commitment line item report, and drill down to the purchase order.
Accounting ControllingCost Center AccountingInformation
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SystemsReports for Cost Center Accounting Plan/Actual

ComparisonsAdditional Key Figures Cost Center: Actual/Plan/Commitment
Explain that commitments are reversed by goods receipt, cancellation of the entire or
part of the purchase order, and are updated by changes to the PO.
Receive your purchase order: (Optional but completes the whole point)
LogisticsMaterials ManagementInventory ManagementGoods
MovementGoods ReceiptFor Purchase OrderPO number known:
Enter PO number
ENTER KEY
The details of your purchase order should be displayed.
OPEN the Item Details section:
Click the OK button at the bottom of the details section
Save the Goods Receipt, display it and show the accounting documents now created
.
Exercise for Posting from other Modules
20 minutes
Statistical & Real Postings

Name some real and statistical objects
Explain the differences between real and statistical postings
Statistical & Real Postings
Posting to a Cost Center Posting to a Statistical Order (1)

Offer the concept of statistical posting as an additional tool to track costs on an
alternate cost collector. For example:
The Marketing Department has decided to participate in an industry trade fair.
Expenses for the trade fair so far are: Rental for Booth, Telephone, Overtime and
Outside Services for Booth Design.
Mktg. Cost Center 3200 Trade Fair Expense Cost Center Debits w/out
Recurring Expense Internal Order Stat. Post stat posting in IO
Rent 470000 $ 10,000 $ 3,000 $ 13,000

Phone 473120 $ 1,000 $ 300 $ 1,300
Salaries 430000 $ 5,000 $ 5,000
Overtime 431000 $ 1,000 $ 3,000 $ 4,000
Outside Service 417000 $30,000 $ 30,000
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The options here could be:

Real posting to cost center, statistical posting to internal order
Real posting to internal order, statistical posting to cost center
Real postings to cost center only
Point out that there is no such thing as a statistical cost center Order and projects
can be statistical. Also emphasize that statistical postings cannot be allocated.
Mention that profit center accounting will always receive a statistical posting if
configured. Explain it as a Statistical Database, which is updated in the background,
and can be manipulated without affecting any other data.
Posting to a Profitability Segment (2)
Explain that this type of posting may occur if the SD module is not operational.
Another example is extra costs or revenues that are not passed through SD, but still
need assignment into a PSG.
Review bullet points as they summarize the slide very well.
Demonstration of Real versus Statistical posting
15 minutes
Create a statistical order for a service truck which is operated by the Service cost
center:
AccountingControllingInternal OrdersMaster DataOrderCreate:
Order Type: 1000
Enter Key
Order Description: Truck-20
Change Business Area To: 9900
Enter Responsible Cost Center: SERV-20
Select Control Data tab and point out the Statistical Order switch. Explain that
statistical orders are never settled. Save your order and note the order number.
(should be Truck-20)
Next post a FI journal entry against the internal order, use account number 475000
for the debit side of the entry, account 113100 for the credit entry. When pressing
enter point out that the system issues an error message regarding an assignment to a
CO object. Now enter the service cost center number and complete your posting.
Note: You may have to change the screen variant to Standard 3 to see both
the cost center and IO posting options. Also, you will have to scroll the right to
see both options
Process the Order Actual/Plan/Variance report for the current period.
Accounting ControllingInternal OrdersInformation SystemsReports for
internal Orders Plan/Actual Comparisonsorders: actual/plan variance
Drill down on the IO posting and show the cost accounting doc.details to highlight
the double posting in CO.
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Exercise for Statistical & Real Postings:
20 minutes
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Unit: Event-based Postings in CO

240 minutes
List of Topics in the Unit:

Event-based Postings in CO
Transactions related to Overhead Controlling
Transactions related to Cost Object Controlling.
Transactions related to Profitability Management.
Example of Transfer Price Concept.
This chapter focuses on actual transactions, which happen in CO only. Emphasize these transactions
do not update nor change FI. A wide array of functionality will be touched on in this chapter, such as
time sheets, and budget management, availability control and lastly production orders. Dont rush
through the topics but also keep in mind that you may run into time constraints if you get too detailed.
Transactions related to Overhead Management
Post CO Reporting documents.
Explain the purpose of a direct Activity Allocation.
Post a Direct Activity Allocation.
Explain the purpose of entering time sheets.
Describe the steps in time sheet processing.
Reporting Line Items

Reposting is an option to make correctional postings in CO only without effect on
FI. For a customer that is always a hard concept to visualize since usually entries
should be reversed and correct in FI.
Examples where this technique might be used are postings to incorrect internal
orders or work break down structure elements, or corrections, which need to be made
after the FI period has been closed. Another example is simple month allocations in
which case there has been a decision made to by-pass cost allocations using cycles.
Briefly explain the two different reporting options: Reposting and Reposting with
Line Items.
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Demonstration of Reposting
10 minutes
Enter a GL entry (you may want to do this ahead of time) and note the document
number. Use the service cost center SERV-20 and account number 403000. Run a
plan/actual comparison report for the cost center and drill down to the original
document. Suggest a FI posting of at least 500 to help illustrate the point more
completely.
Enter the reposting screen and repost some costs from cost center SERV-20 to cost
center PROD-20.
AccountingControllingCost Center AccountingActual PostingRepost Line
items Enter:
Enter you FI Doc. number:
Company Code: 1000
Fiscal Year: 20XX
Press: Execute button
You will see the original amount posted to cost center Serv-20
To redistribute the cost highlight the line and overwrite the original amount
with 100 Unis and Serv-20 cost center with the new cost center Prod-20
Press the enter key
The screen will change to show the new posting to Prod-20 and the remaining
balance in the Serv-20 cost center.
Note: If you have a real order and it is in release status you can repeat the process
and post an amount to the IO.
Run the plan/actual comparison report again, this time for cost center PROD-20 and
drill down to the actual line items for cost element 403000. In addition you may
want to show the original FI entry which has not changed.
Direct Activity Allocation

Explain that the purpose is to charge a cost center for services provided using an
hourly rate. An example here would be the above created Production Cost Center
which has consumed repair hours from the Service Cost center due to machine
failure.
Tie this demonstration back to the planning part of this course where the rate for one
hour of Repair provided by the service cost center was calculated at 50.00 each. As
cost centers require repair hours, they are charged based on the actual hours
consumed times the planned rate.
You may want to illustrate the concept by drawing the debit/credit entries:
Cost Center:
SERV-20 PROD-20
DR: Misc. Primary Expenses
CR: 615000 Repair Hours 500.00 10hrs REP-00 DR: 615000 Repair Hours 5000.00
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Demonstration of Direct Activity Allocation
10 minutes
Note: Be sure you have an activity price assigned to SERV-20 and REP-20 prior
to this demonstration. the activity allocation:
AccountingControllingCost Center Accounting Actual PostingsActivity
AllocationEnter
Sender: Cost Center SERV-20
Receiver: Cost Center PROD-20
Activity: REP-20
Total Quantity : 50 hours
Run a plan/actual comparison report for each cost center.
Time Sheet
Instead of using the above process to allocate costs for services performed for
various departments, cross-application time sheets provide another way to charge
activities directly to controlling objects. The concept is that the employee who
performed the repair hours logs these directly into an electronic time sheet. The debit
to the cost center who received the service and the credit entry to the cost center who
provided the services are automatically performed in the background.
Demonstration of Cross Application Time sheets
10 Minutes
AccountingControllingCost Center AccountingActual PostingsTime
SheetTime dataEnter Times
Data Entry Profile: CO
Personnel number: 1020
Select Enter Times
Sender Cost Center: SERV-20
Receiving Cost Center: PROD-20
Enter 8 hours in todays date column and press the enter key.
Select the Release View button from the bottom of the screen, which changes the
screen to a different status.
Mark the row with the data you entered and select Release View (Icon looks like a
lock) from the top icon bar. Save.
To transfer the data to CO, move back the SAP Easy Access menu
AccountingControllingCost Center AccountingActual PostingsTime
SheetTransferAccounting
Enter Personnel Number: 1020
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Enter Todays Date:

Enter Posting Date: Should be todays date
Select Execute:
If no data is transferred check to insure the TWO release steps were completed.
Also, check the dates to insure you used the correct dates on all screens.
Now run the current period cost center plan/actual comparison report for cost center
PROD-20.
Budget Management & Availability Control (2 slides)

Plan versus Budgeting Availability Check: Settings
Re-emphasize that budgets exist at an annual and/or overall level only. Budgets for
cost centers, internal orders and projects are not in cost element detail. Budgets can
be combined with the investment management module, where budgets can be
approved and released.
The concept of an original budget suggests that these are funds originally approved
to a cost center, project or order.
Supplements mean that an addition was made to the original budget.
Returns imply that part of a budget was left over and the funds can be released.
Using the combination of all budget options allows the budget manager or, at the
corporate level, the corporate controller, to manage and address fund overruns.
Availability control is another setting, which can be used in conjunction with budget
management only in Internal Orders and Projects. Tolerance limits can be set which
will trigger a message to the user posting a transaction which takes the order over
budget or over the threshold set with the tolerance limits. Messages vary from
simple warning messages, to message with mail to the budget manager, to an error
message.
Control parameters configure whether availability control should be automatically
invoked when an order is placed, and whether the check is applied toward the annual
value or overall values. Business events are transactions such as posting an invoice
or a purchase order.
Exercise for Reposting, Activity Allocation, Time Sheets and Availability

Control
30 Minutes
If you are running into time constraints you may want to make the time sheet
exercise optional.
Demonstration of Availability Control on Internal Orders
10 minutes
The concept here is to use budgets for an order to control and manage the cost
incurred during the orders life. Each time a posting is made to the order the system
09/tt/jj Page 67
will validate that sufficient funds are available.

Availability control for order type 400 has been set as follows
95% within budget = Warning message
105% within budget = Warning message with mail to budget manager
115% within budget = Error Message
First enter the order budget for your trade fair order:
Accounting Controlling Internal Orders Budgeting Original
Budget Change
Enter 20,000 in the current year column for your trade fair order (created in unit 3)
and save.
Accounting Financial Accounting General Ledger Document Entry GL
Account Posting:
Post a journal entry for account 400000 for 19,500 to your internal order and explain
the budget-warning message.
Post another journal for the same account number for 2,000, which will bring the
budget slightly over 100%. A warning message will appear saying that the budget
has been exhausted. Make sure you are listed and the budget manager for order type
0400. This will allow messages to flow into you mail box to highlight the messaging
feature of availability control.
After the students have completed their exercise, display the mail messages created
by displaying the Inbox for your ID.
Easy Cost Planning & Execution Services (1)

Easy Cost planning provides a way to enter plan data for an internal order
based on a template defined prior.
It is only necessary to enter plan values for the variables in the template. All
the resources defined in the template will be planned in adequate quantities.
Template for Easy Cost Planning

You may define a template (costing model) in the menu of Product Cost
Planning, which contains all the resources to be planned in dependency on the
value of variables (cost drivers). The used variables are user-defined
characteristics, which you may define by using the menu path
Cross-Application Components -> Classification System -> Characteristics
Easy Cost planning & Execution Services (2)

You select a service and based on the planned data the system propose the
resources to be posted. You may change Quantities and prices, you may add
items or remove items. You may select the items to be posted and press the
push button post.
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Demonstration of Easy Cost Planning & Execution Services
20 min.
Check: the assigned planner profile for order type 0400 is 000001. The
costing variant PC02 is assigned to that planner profile.
Enter execution profile 1300 in the appropriate field of the order type. You
can use the item maintain planner profile for overall planning maintain
planner profile for order type.
Easy Cost planning:

Use the order manager to create an internal order with order type 0400. Select
the push button Costing. You will get a selection of costing models. Select
costing model ZPS001, which is called Nellos: IT Concept.
Press show item view and enter
Personnel time: 120 h
Additional costs: 13400
Press confirm and you will get the item view of the resources and the costing
structure to the left.
In the item view:
press append row and enter an item for an internal activity allocation:
E 4290 1420 5 hours press return
Note: the price unit of activities may be shown based on price unit 100 !!!
Press confirm: you will see the updated costing structure to the left.
Use the green arrow to return to the order manager screen and save the order.
Leave the order (so that the details of the order are not shown any more).
Call up the report Plan/actual/variances for the internal order by using the
menu path
Controlling internal orders information system reports for
internal orders plan/actual comparisons
You will see the planned data.
Note: depending on the costing variant it may be, that the plan data will show
up in the next period.
Execution services:
Select your order by clicking on the order number in your personal worklist.
If necessary change to the display mode.
Press costing.
Press show item view and show execution services.
Select Execution Service internal activity allocation.
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You will see the items with item category E and P.

Change the quantity of activity type 1426 to 40 h, mark all items and post.
Call up the report Plan/actual/variances for the internal order by using the
menu path
internal orders plan/actual comparisons
You will see the plan data and the actuals posted.
Note: depending on the costing variant it may be, that the plan data will show
up in the next period.
Select Execution Service goods issue.

You will see the item with item category M.
Mark the item and post.
Call up the report Plan/actual/variances for the internal order.

You will see the actual for the goods issue.
Select Execution Service purchase requisition.

You will see the item with item category M and V.
Select layout 1SAP05 and enter a delivery date (e.g. today + 5 days). Mark
the item with category V and post.
Call up the report Plan/actual/commitments for the internal order by using the
menu path
internal orders plan/actual comparisons additional key figures
You will see the commitment for the purchase requisition.
Transactions related to Cost Object Controlling
Creation of a Production Order

Post Activity and Materials Consumption to a Production Order
Post other costs to a Production Order
Based on the integrated planning in unit 6 you can derive the PP- Production
order from the SOP- Plan in order to show again integration aspects. However
the demo will work also, if you just create the production order manually as it is
09/tt/jj Page 70
described in the exercises.
Product Cost Controlling Methods ( 3 slides)

Product Cost Controlling (1)
Explains three methods of collecting production costs in CO. First the Period view,
all production costs are collected for review in CO in a Product Cost Collector.
Summarized view.
Second view is Product Cost by Order. This is the method the students will follow in
their exercises. Collects costs for review in CO at the production order detail view.
Last view is using a Sales order as the cost collector. Make to order environments.
Note: this comes up later in the unit.
Again reference the bullet points and the follow on classes: AC505, AC510 &
AC515 for more details
Controlling by Production Order (2)
CO is able to review costs at the production order view. Allows for detailed review.
The PP production orders are visible in CO at month end. Refer to bullet points.
Periodic Controlling (3)
Using the Product Cost Collector. This is called the lean controlling view. All
production orders for the same product are grouped and summarized into the
production cost collectors for review in CO. The individual production orders are
not visible in CO only the cost totals found within the PPC. This costing technique
is often found in repetitive industries that make the same product over and over
again on many production orders.
Order Related Manufacturing Process Chain

This example illustrates just one of the many production order types available in the
R/3 System. Clearly explain that in the following demonstrations a product is made
for inventory, independent of requirements. Since you usually have cost accountants
in your class, I like to explain the posting steps which occur, and also the debits and
credits that are posted.
You may want to map out the typical production order flow, since customers may not
be familiar with the process. Some of the steps presented here can be executed
automatically. Note: If you choose to map this out for your students make sure you
have practiced it and have written notes to follow as it is very easy to loose your
way. Also, try not to mention the postings flowing into PCA as it too confusing for
most students.
Enter & Release PP Order - What happens?
Availability check and reservation of material based on bill of material
Scheduling of resources based on routing
Preliminary costing based on production order cost estimate, which may be different
from standard
Issue Goods to the Production Order What happens?
Credit to Inventory Balance Sheet account - FI
Debit to material consumption account on production order - CO
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Decrease balance on hand for materials - MM

Confirm Operations What happens
Credit cost centers for activities consumed - CO
Debit production order with activities consumed CO
Confirm scrap if applicable
Calculate Overhead What happens
Credit cost center for overhead CO
Debit production order CO
Delivery to Stock (partial or full) What happens
Credit production order (at standard) CO
Debit Inventory Balance sheet account FI
Increase balance on hand MM
Calculate & Settle WIP (optional) What happens
Credit WIP production expense account on P&L FI
Debit WIP account on Balance sheet FI
Calculate & Settle Variances What happens
Credit production order CO
Debit price difference account P&L - FI
Delivery to Stock
Use this slide to introduce the students to the goods issues, confirmation postings
and the delivery to stock postings. You can describe the typical cost that are
posted with each posting activity. Since they will be doing these posting in the
upcoming exercise sets it is a good place to provide an overview of the upcoming
demonstration and exercises. Also, highlight the remaining balance on the order.
Point out this could be treated WIP or production variance depending on the
confirmation status of the order.
Demonstration of Cost Object Controlling for manufacturing to stock
30 minutes
This part of the demonstration illustrates the concepts of cost object controlling and
simultaneous costing.
IMPORTANT: Prior to this demo you will need to add stock to inventory
for the following materials:
T-B100, T-B200, T-B300 & T-B400
Use movement-type 561 and add 300 each.
LogisticsMaterials ManagementInventory Managementgoods
movementgoods receiptother
Movement type 561, plant 1000, storage location 0001, then press enter
In the item overview, use menu path:
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Other goods receiptcreate with referenceto BOM

Enter material T-F100, quantity 300, press enter.
Save (if warnings occur, just press enter. They do not matter to us)
Creation of the production order:

Alternative 1 (easy):
LogisticsProductionProduction ControlOrderCreateWith Material
Material: T-F100, plant 1000, order type PP01, enter
Total quantity 100, scheduling type current date.
Alternative 2 (advanced) (Needs the SOP plan created in Unit 6):

!! Hint: in order to get better results, you should delete all requirements for T-F100
in the system, before you show the demo:!!
LogisticsProductionMRPevaluationsstock/requirements list
Material T-F100, plant 1000
If you see an existing plan order delete it:
Go to the detail of the line item (glass in the first column) and press in the pop up
change.
Press icon delete plan order and confirm.
Back in the item overview press icon refresh.
Transfer SOP to Demand Management

LogisticsProductionSOPplanningfor materialtransfer material to
Demand Management
Material T-F100, plant 1000, version A00 (this is the active version of SOP)
Press push button transfer now.
this results in a requirement for T-F100. We require about 100 pcs in each month
according to the production plan created in SOP. Look it up via
MRP Planning
LogisticsProductionMRPPlanningsingle-item, multi-level
Material T-F100, plant 1000, press enter (2 times)
Look up the result via
the system has created planned orders to cover the requirement.
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Convert a planned order to a production order

Doubleclick on one of the first planned orders, which has a quantity of 100 pc.
In the pop up press the push button -> Prod.order
Check, that the total quantity is 100. If not, change it to 100.
For both Alternatives go ahead as following:

As the production order is placed, an actual cost estimate is created. Create a
standard production order for 100 pieces of material T-F100
Note: for the menu path follow the exercise in the student work book, as they will be
repeating the same exercise.
Show the assignment to a profit center in the assignment tab.
Explain the most important fields in the control data tab, especially focus on the
meaning of the costing variant like you did already when doing the standard cost
estimate in unit 6 (same tool, but the costing type defines to do the cost estimate now
for a production order and defines, which data is going to be updated by the result of
the cost estimate).
Show the component and operation overview. Explain, that BOM and routing have
been copied into the production order. You could now change data in the order
without changing the data in BOM and routing.- On the other hand, changes in BOM
and routing will have no effect on the existing production order.
Show the settlement rule for the order and point out that the settlement rule to
material was created automatically by the system. Of course, we have to explain this
in more detail in unit 9 period end closing).
Header Settlement Rule
Optional: you could calculate the plan costs for the production order
functionscost and look them up via GotoCostsAnalysis. But you need not to
do, because the plan costs will be calculated anyway when you save the order (refer
to tab control data).
Release the Order: Icon release (flag)
Save your order.
If you used Alternative 1, you are now finished.

If you used Alternative 2, you come back now to the stock/requirement list. Here
press icon refresh and you see, that the planned order is now substituted by the
production order.
Note the order number.
Show the planned costs for the production order:

ControllingProduct Cost ControllingCost Object ControllingProduct Cost by
OrderInformation SystemReports for Product Cost by OrderDetailed
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Reportsfor orders
Enter your order number and execute
Select layout 1SAP02 Cost trend.
In order to have this layout as default, save it as /AC040, select default setting and
enter.
you see the planned costs calculated when you saved the production order. The
planned quantities are valuated with the prices according to the valuation variant.
The goods receipt quantity is valuated with the standard price.
!! Hint: Since we will need this report more often, copy it to your favorites !!
Goods issue from stock

Issue Materials to your order. Typically the warehouse or production staff would do
this, also this transaction can be automated.
LogisticsMaterial ManagementInventory ManagementGoods
MovementGoods Issue
Movement Type: 261
Plant: 1000
Storage location: 0001
Select the to reservation button and enter your order number on the pop up
window. Mark all materials and press icon adopt. In order to get variances for the
latter variance analysis, change the quantity for T-B200 to 101 pieces. Save your
goods issue. Ignore the warning message if one occurs.
Look up the result in the order report. Drill down to the line item and from there to
the accounting documents: environmentaccounting documents
Show the original document, the accounting document and the profit center
document.
Confirmation
Now confirm your order with a partial confirmation of 80 pieces. Operation 60 has
been set up as a milestone operation, which means if it is confirmed, all preceding
operations will be confirmed as well. The way the system has been configured, a
goods receipt posting will be executed at the same time (movement type 101).
ProductionProduction ControlConfirmationenterFor OperationTime
Ticket
Enter your Production Order number:
Oper:/activity: 60
Confirmation type: confirm partial flag set
Press enter
the planned quantity and the target activity type quantity show up
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Confirm 80 pieces
Press Enter
the target activity type quantity is adjusted.
Enter Time: 18 hours in labor block
Save
Note: There may be several warning messages by pass them by using the enter key
repeatedly. Also, you may not see a posting doc. number.
Show the original document, the accounting document and the profit center
document.
Direct posting in FI
Post a direct FI journal posting against the production order the example here may
be that an external service had to be purchased to produce the pumps on time.
AccountingFinancial AccountingGeneral LedgerDocument Entryenter GL
Account Document
Use account 415000 and post 1000.00 assigning it to your production order. Enter
the credit entry and post your document.
Show the accounting document and the profit center document.
Exercise for Transactions relating to Cost Objects
30 Minutes (minimum)
Make sure all the students load the inventory of the components that make up their
pumps. i.e. T-BXXXs,
.
Transaction related to Profitability Management
Create and Sales Order

Issue goods to the Sales Order
Bill the Sales Order
Customer Order Management
This slide reviews the ability the track the customers order through its life cycle.
From the time it is created, shipped, billed and then when payment is received in FI.
Document management is SD allows this overall view.
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Transferring Incoming Orders

Discusses the fact that an incoming sales order can be reviewed in CO-PA. Note:
this is one reason why the cost based view of PA will not tie to the FI sales totals.
When the SD sales order is created three is no FI transaction at that point.
Delivery & Billing
Once a delivery has taken place it is recorded in FI and again passed along to CO-PA
& PCA. Now both views of PA are posted and any differences from the first posting
when the sales order was created and the delivery posting are reconciled in the cost
based view of PA.
Selling Goods & Services (3 slides)
Selling Goods & Services (1)
Highlights that SAP can sell goods from inventory stocks and in addition sell
services. The students will be performing this task in the upcoming exercises so it is
a good idea is to use this slide as a lead into the sales order exercises. Without Sales
Order Controlling (2)
Items sold directly from inventory do not use a controlling sales order. Note that the
COGS value is pulled from CO-PC. Remind the students they posted and updated a
standard cost for the pumps they just made and are about to sell.
With a Sales Order Controlling (3)
In this case we will provide a service to our customer. This service will be set up as
a sales order in CO. Actual costs can be charged to it and it will settle back to CO-
PA for review.
Demonstration of Cost Object Controlling for Selling Goods and Services
20 Minutes
Create a sales order line item for the pumps manufactured in the previous exercise:
LogisticsS&DSalesOrderCreate:
Order Type: OR
Sales organization: 1000
Distribution channel: 10
Division: 00
Enter>
Sold-to-Party 1000 Ship-to Party 1000
PO Number 1000##
Material T-F100 for 80 pieces
Enter
Show the pricing for the item by selecting the item and the Item Condition button
at the bottom of the screen (looks like a coin).
Select the Schedule lines button to show when the item will be delivered. The
delivery date defaults from either customer master or material master settings.
Select Account Assignment. The profit center is driven (in this case) by the
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material assignment to a profit center. By selecting the PSG box you demonstrate
the profit segment this item will be posted to. Point out that a profit segment is a
unique combination of characteristics and characteristic values.
Process a delivery of the pumps to your customer:
LogisticsS&DSalesOrderSubsequent FunctionsDelivery
Shipping Point Enter: 1000
Date Field: Todays date + 2 weeks
Confirm you sales order number:
Enter
Select the Picking Tab
Confirm Delivery Quantity of: 80
Enter Picked Quantity of: 80
Select Post Goods Issue button: confirm SD document number
Now bill the order per the menu paths and instructions in the student exercise set.
Finally you may wish to go back into your sales order in display mode. Once there
move to the environment option and display the document flow option. This shows
all the documents created and ties back the first slide in this topic, Customer Order
Management
Exercise Selling Goods
20 Minutes (minimum)
Transfer Prices Concept

Explain parallel valuation in EC-PCA
Discuss transfer pricing
Transfer Pricing in EC-PCA (2 slides)

Dont go into detail in this class. Remind the students there are courses that cover
transfer pricing in much greater detail
Transfer pricing is the transfer of goods between two profit centers. This often takes
place as different manufacturing locations sell goods to each other. The concept is
each profit center manager should have the ability to reflect some profit on these
transactions.
The first slide shows PCA 1 selling material to PCA 2 for a transfer price of 150.
What is assumed is the cost at PCA 1 is less than the selling price. Also, shown but
not detailed are the three currency views available to review this transaction.
(Group, Legal & PCA view).
The second slide points out in more detail in fact PCA 1 did make a small profit on
the transaction 30 Unis.
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Unit: Period End Posting
300 Minutes
List of Topics in this Unit:

Overhead Cost Management
Cost Object Controlling (Order Related)
Actual Costing/Material Ledger
Profitability Management
PeriodEnd Closing Process /Schedule Manager
Reconciliation Ledger
Putting the Unit into Context:

Typical period end closing steps for both overhead cost controlling and cost object controlling are
described in this chapter. Not every step in this chapter will be performed at all customers, and some
of the steps illustrated here may happen outside the regular period end closing cycle.
Period-end postings in Overhead Management
Post Statistical Key Figures

Perform an Assessment of Costs
Settle an Internal Order
Statistical Key Figures ( 2 slides)

In order to use statistical key figures as a basis for an allocation they need to be
either entered in a cost center in this example. Stat. Keys are either enter manually
(type 01 fixed) such as the number of employees, or can be transferred from the
LIS system (type2 totals). The Stat. Key figure master will allow a link to an LIS
info structure. Typical values which could be transferred from LIS: Number of
Purchase orders as an allocation base for Purchasing costs, number of sales orders to
allocate sales territory expenses.
Demonstration of Entry of Statistical Key Figure
5 minutes
Associate this demo with the purpose of statistical key figures discussed in the
master data chapter.
AccountingControllingCost Center AccountingActual PostingsStatistical
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Key FiguresEnter
Enter: Dates: Doc. Date: Current Date
Posting Date: Current Date
Enter Data: Rec CCtr: PROD-20
StatKF: EMPL20
Quantity: 5
Save the Statistical Key Figure Posting
Periodic Activities in Overhead Cost Controlling This is a key slide in the

students understanding of the different types of cost and activity allocations
available in CO.
Start you discussion by pointing out the sender and receiver sections of the slide and
further highlight the cost based side and the quantity (activity) side.
Give high level overview of each type of cost & activity allocation referenced on the
slide.
Explain more detail will follow in this unit.
Accrual Calculations Cost Centers ( 2 slides)
Accrual Calculations (1)

Cost center accounting offers its own mechanism for estimated costs, which are
typically accrued in financial accounting. Two accrual methods are available the
percentage and target. The percentage multiplies an amount by a percent as posts to
a cost center. (next slide shows this as the example) The second method is the
target/actual method. This can be a posting made for a fire insurance premium that
is paid only once a year. It posts a hard amount and does not require a percentage
calculation to post. (More detail in AC412)
Accrual Calculation Percentage method: (2)
A good example to use is employee bonuses. As production salaries are planned
and/or posted an estimated 10% surcharge is applied to account for benefits. Since
costs are used in activity rate calculation and it is much easier to have the system
perform the calculation than planning and or posting each individual cost element for
benefits. This concept is often hard for US students to visualize in the context of
actual postings. First emphasize that you can post accruals in FI and have the posting
update cost centers. However you are limited to accrual entries with a fixed amount.
The advantage of CO accruals is that a percentage rate can be used, the calculation
can be automated, and the CO accrual posting can be easily reconciled with FI when
the actual expense has been incurred.
Demonstration of Accrual Posting (optional)
5 minutes
Enter a GL posting for cost center SERV-20, cost element 420000 for 10,000 for the
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current period.
Execute the Accrual cost calculation:
AccountingControllingCost Center Accounting Period-end ClosingSingle
FunctionsAllocationsActual Overhead
Period: Current
Fiscal Year: 20XX
Remove test run button, select Detailed List
Explain the cost center was debited, the credit entry went to an internal order. When
the actual FI expense has been incurred, that expense will be posted to the internal
order instead of the cost center. Any balances left on the internal order can then be
settled periodically.
Cost Allocation Cycles: (3 slides)

Explain the components of an allocation cycle a number of segments can be
combined into an allocation cycle, which is typically executed in a batch job at
month end. It is recommended that the number of segments in a cycle should be kept
below 30. The segments indicate the cost sender usually a cost center, the cost
elements to be allocated, the receivers, and weighting factors called tracing factors
and tracing factor rules. Segments within a cycle are usually processed in the most
efficient manner the system determines; therefore they are not necessarily processed
in numerical order. Allocations, with dependencies, should therefore be set up in
separate cycles. For example, you want to first allocate corporate administration
expenses before allocating since each department in your company will receive a
portion of that expense. Then you want to allocate cafeteria expense. Two cycles are
needed.
Explain the differences between Distribution, and Reposting both use primary cost
elements when crediting the sender, and debiting the receiver, but Reposting allows
for senders to be Cost Centers, Internal Orders or WBS elements. Distribution allows
for cost centers as senders only and will consume more system resources, but will
provide more detailed information as the trade off. There are differences in line items
written as well probably too much detail to mention in this class. Example for
Periodic allocation: Rent allocation or Deprecation allocation. Example for
Distribution allocation: Employee benefits or Utility allocations
Explain the all debits and credits posted to the cost center will be combined on a
secondary cost element for allocation. Also, mention that the only way to further
allocate secondary costs is to use assessments. Assessment affords a higher level of
summarization for allocations where the receiving cost center manager has no
control over reducing the expense at the sender cost center. Example cafeteria cost
center allocation
Demonstration of an Allocation Cycle
10 minutes
You may want to re-iterate why to use assessment versus distribution or reposting
cost allocation options.
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AccountingControllingCost Center Accounting Period-end ClosingSingle

FunctionsAllocationsAssessment ExtrasCycleCreate
Enter: Cycle: AAC-20

Start Date: 1/1/XX Current Year
Select Header Date Green Check
Enter Data: Text: Assessment

Iterative: On
Obj. Currency:On
Version: 0
Select Attach Segment Button
Enter Data: Segment Name: ASSESS20

Assessment CElement: 631300
Sender Values:
Rule: Posted Amounts
% Field: 100
Act. Values ON
Tracing Factor Table:

Rule: Fixed Percentages
Type Var: Defaults
Scale Neg. Defaults
Select Sender Receiver Tab Sender Cst Ctr: SERV-00

Sender Cst. Ele Grp. OAS
Revr Cst Ctr Grp. HAC040
Select Recvr Tracing Factor Tab
Enter Data: PROD00: 5%

PROD-20: 95%
Select Segment Screen Green Arrow Back
Select Cycle Formal Check on Menu Bar
Run Formal Check program Save the cycle
Note you will get an information message at this point just key through it.
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Demonstrate Execution of Assessment Cycle

Menu Path: AccountingControllingCost Center Accountings Period-end
ClosingSingle FunctionsAllocationsAssessment
Enter Data: Period: Current Period
Fiscal Year: Current Year
Processing Table:
Background: OFF
Test Run: OFF
Det. Lists: ON
Cycle: AAC-20
Start Date: Default
Execute the Cycle Execute Button menu bar
Review various messages: Segment button

Sender button
Receiver button
Review the Results of the Assessment Cycle posting by use of the Cost Center
Reporting Tools
Overhead Cost Allocation to other Cost Objects via Surcharges

Surcharges are a tool to allocate costs to other types of cost objects but often to
orders for overhead cost not debited through other allocations to the order. A very
simple example to use could be storage expenses for materials. Incurred during the
production process. It would be impossible to determine exactly how much storage
expense t was utilized by any given production order so a surcharge costing sheet is
assigned to the order to add a storage factor to the order balance.
The surcharge could be applied to the order based on the materials issued. You may
wish to illustrate the costing sheet with the following diagram.
Material consumption - Cost element 400000 = Base
Material Overhead Rate 10% = Surcharge
Material Overhead Cost element 660000 = Credit
Credit CO Object Cost Center: 4130 = Credit
Assume an Internal Order for R&D prototype has been debited with various
materials:
Int. Order 123
DR Material Cost element 400000 $10,000
DR Overhead Surcharge cost element 660000 $ 1,000
Cost Center 4130
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CR Overhead Surcharge cost element 660000 $ 1,000
Demonstration of Overhead Cost calculation (optional)
10 minutes
Assign overhead costing sheet COGS to the trade fair order you created in the
previous unit. You may have to increase you order budget for this one to work.
Overhead calculation will be explained in more detail later.
AccountingControlling Internal Orders Master DataChange:
Access the Period-end Closing tab and assign costing sheet COGS to your trade
fair order.
Next run overhead calculation:
AccountingControllingInternal OrdersPeriod EndSingle
FunctionsOverhead RatesActuals-Individual processing :
Your order number:
Current Period and Year
Test run: OFF
Dialog display: ON
Execute
Order Settlement
First remind the students that only real orders can be settled.
The allocation technique used in conjunction with internal orders is called
settlement. The order will be periodically credited and a receiver will be debited with
cost. Internal orders are more flexible than cost centers as far a settlement receivers
go in fact settlement can be to balance sheets and P&L accounts if desired.
Parallel to distribution and assessment, internal orders offer settlement with primary
(original) cost elements as well as secondary cost elements. A settlement rule
establishes the sender and receiver relationships as well as how much each receiver
will receive during settlement (analog to tracing factors). Variable portions (i.e. Stat
Key Figures) are not available as tracing factors.
Explain the debits and credits to the senders and receivers using the figures on the
slide, or illustrate the settlement transactions using the trade fair order.
Periodic Cost Allocation Methods

Summary slide pointing out the methods available for the allocation of costs.
Coupled with the techniques for each method. Good for overall review of cost
allocations
Exercise for Overhead Management: 1-1 through 1-4
30 Minutes
There appears to be a problem with everyone executing his or her cycles at the same
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time, even with ENQUE OFF. The best way to proceed seems to be to have students
run cycles one after the other. Make sure students run settlement for the CURRENT
period only, take the test run off, and have a settlement rule set on their internal
order. Also, the students will set up cycle groups per their exercise instructions you
may want to review these steps prior to class.
Activity Allocations (3 slides)
Indirect Activity Allocation (1)

The allocation methods discussed above focus on cost allocations only. The
weighting factors for the most part tend to remain static and dont account for
various levels of activity of a cost center, which may actually cause fluctuations in
the costs to be allocated. Activity allocation assumes that the basis for allocation is
an activity, for example tester hours from the QC cost center, which in turn is
associated with a rate per hour. The combination of the activity consumed by a cost
center and the rate determines the debit to a cost center.
The key to this discussion is having the students understand each type of activity
allocation cycle will allocate activities, but the type of cycle selected depends on
what is known at the sender cost center. In other words can the quantity and value of
the activities be determined or is some form of calculation required to find that
information.
Actual Activity will be entered at the sender (2)
Tester hours are known in this example. They can be determined in a number of
ways, the simplest being time cards or some other form of time records. The tester
hours can be entered in the sender cost center records prior to the allocation.
Another example of this cycle is a hard agreement may exist between the sender
and receiver cost centers. In other words a agreed upon amount of hours will be
transferred each month regardless of the actual activity produced or consumed
Actual Activity can not be entered for the sender cost center (3)
Tester hours are not available in this example. As a result another method must be
found to calculate the tester hours in order to complete the allocation. This type of
cycle will calculate the tester hours based on weighting factors found within the
cycle when it is configured. In this example cost center 4260 Production produced
4000 items (bulbs) the weighting factor is .25 so the total tester hours consumed was
1000. (4000 * .25). The same logic applies to cost center 4270. Combined both cost
centers consumed 2500 hours of tester time. Since the quantity of tester hours is
now know the activity rate will be calculated and the allocation from the QC cost
center can now take place.
Periodic Quantity Allocation Methods
Good summary slide to wrap up the discussion of activity allocations.
The template assignment is used in a number of ways, but the best point is it is used
in ABC costing. The target=actual comes up in AC412. Just focus on the first two
for this class.
Revaluation at Actual Activity Prices
An advanced topic for this class. Explain that most companies use the planned
activity rate for the allocations. This may leave under or over absorbed balances in
the cost center at month end. To some companies this in not acceptable so there is an
option to reset the activity rate based on actual costs. It this option is selected the
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cost centers balances will be zero each month. (AC412)

Variance Calculation
Again another advanced topic slide. Point out that cost center variances are reported
in two general groups: the input side and the output side. Depending upon the side
point out the different categories that variances can be assigned.
Demonstration of Variance Calculation (optional)
5 Minutes
You may want to calculate cost center variances for your services cost center if time
allows and drill down to one of the variance categories. Since variances are
explained again when talking about production orders you may decide to skip this
demonstration.
AccountingControllingSingle FunctionsVariances
Version: 0
Period/Year: Current
Detailed List: Yes
Drill down to the variance category for an explanation how a variance was calculated
the R/3 system provides a very detailed analysis tools which points to the root cause
of a variance.
First select the line items, then the cost element button. Select on of the variance line
items and the variance information button.
Period-end postings in Cost Object Controlling:
Allocate overhead surcharges to an order

Allocate Process costs to an order
Deliver material to stock
Calculate WIP
Calculate Variances
Settle the order balance
Process Chain Order-related manufacturing

Order-related manufacturing implies that a production order is created based on
demand from someone (MPR, production planners) to manufacture stock for
inventory. The slide shows the typical life cycle of a production order. Any of the
steps can be carried out at any time during the orders lifetime. Refer to the earlier
flow chart of what financial transactions take place during each step. Also, note that
the next part of the unit will discuss the left side of the process chain.
How does it Work? Period end Closing?
Good question? The slide depicts the actual month end-closing path in COC. Give a
high level overview of each of the closing steps. Point out the steps that will be
completed in the up coming exercises.
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Allocation Process Quantities

In addition to allocating activities and various overhead surcharges to a production
order, business processes such as order handling can be allocated to production
orders. The idea here is that costs for the business process order handling have been
determined, and are allocated to the production order using a reasonable cost driver
such as perhaps the number of items produced.
Note: the activity allocation for KWH is part of the total cost of material handling. It
can be discussed as the utility cost for the nightly re-charge of the electric fork
trucks.
Demonstration of Process Cost Allocation
10 Minutes
The purpose of this exercise/demo is to allocate process costs, in this case order
handling costs to actual product costs you may want to first display the product
cost estimate for product T-F100 and show the planned process consumption
quantity.
AccountingControlling Product Costing ControllingProduct Cost
PlanningMaterial CostingCost Estimate w. Quantity StructureDisplay:
Product T-F100
Costing Variant: PPC1
Plant: 1000
Select the screen variant SAP01 to group the costs which will highlight the process
costs
Next go to the Production Control menu and execute the process cost allocation.
NOTE: Inform the students that the month end menu path used in COC is
available in both the Logistics and CO applications.
LogisticsProductionProduction ControlPeriod-end closingTemplate
allocationIndividual processing:
Version 0
Test run: No
Detail list: Yes
Execute
Demonstration of Overhead Calculation
5 Minutes
LogisticsProductionProduction ControlPeriod-end closingOverhead
CalculationIndividual processing:
Enter your Production Order number
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Test run: No
Detail list: Yes
After the overhead calculation has been run, show a report which reflects the actual
versus target costs on the production order up to this point:
ProductionProduction controlInformation SystemControlling
ReportsProduct Cost by Order Select: Detailed ReportsFor OrdersVariance
AnalysisPlan/Actual Comparison
Expand the detail for a cost element by double clicking on it (itemization view).
Review the costs posted by the process allocation and the overhead calculation
demonstrations.
Exercise for Overhead Management: 2-1 through 2-3
15 Minutes
Make sure students run overhead calculation for the CURRENT period, and turn the
test run indicator off.
WIP Calculation Based on Actual Costs

The assumption here is that the production run for a product has not been completed
at month end. Explain that at this point all expenses have been posted to the
production order in CO only. No financial accounting entries have been generated.
For U.S customers this is often an unusual concept, since production expenses are
normally booked to a work-in-process account. WIP calculation is a separate step in
SAP, usually performed at month end. The calculation will take all expenses which
can be capitalized and book them to a work-in-process account. In the example used
here 4000.00 were capitalized, the remainder (1,300) is left on the production order.
The configuration behind WIP is called results analysis. WIP calculation is a two
step process first work in process is calculated, then it is settled to Financial
accounting. The process is then performed again at the beginning of the following
period to reverse the WIP entry to the balance sheet.
Posting of Work in Process

This slide presents in a T account format the posting generated in FI & PCA once
WIP has been calculated and the order settled at period end.
It is important to point out that the WIP calculation is a vital part of the closing
process, and the WIP balance does not change unless re-calculated at the next period
end. Tie this discussion into the introduction for the student exercises so they will
understand why it is necessary to calculate the WIP balance twice.
Demonstration of WIP calculation (Period End Order not Complete)
5 minutes
The assumption for this demonstration is that to-date only 80 pieces of our
production order have been delivered, it is the end of the accounting period and still.
20 pumps remain to be completed, and therefore the remaining order balance needs
to be valuated as WIP.
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LogisticsProductionProduction ControlPeriod-end closingWork-in-

processIndividual processingDetermine
Enter your Production order number
WIP to Period: Current Period
Fiscal Year: 20XX
RA Version : 0
Test run: Off
Log Information Messages: Check ON
Execute
Display the WIP log the balance should be the same as the current balance on your
order
Remind students that this step does not create the FI entry.
Show a WIP report in the information system.
ReportsProduct Cost by OrderFor OrdersWork in Process
Finally complete the period end closing demonstration by the settlement of your
production order. Explain to the students this is a vital step at month end as of yet
there have been no posting made to FI. In other words the order balance is recorded
in FI as expense and need to be reclassified as WIP balance to the FI balance sheet.
(Same with PCA)
To post the FI WIP entry, settle the production order.
LogisticsProductionProduction ControlPeriod-end
closingSettlementIndividual processing
Enter your Production order number:
Settlement Period: Current Period Fiscal Year: 20XX
Processing Type: Automatic
Log Information Message: Yes
Select the order number and then Receivers to illustrate the accounting documents
created by this entry specifically FI and PCA.
The credit is posted to P&L account 893000 Inventory in Process on the production
order
The debit is posted to account 793000 WIP on the balance sheet
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Demonstration of Final Confirmation (Order is complete and it is another

period end)
5 minutes
Since the order is now completed and it is period end once again, the same period
end closing steps are repeated. Explain to your students that you will not repeat all
the same steps in the interest of time. However, the new WIP balance will be
calculated, variances analyzed and finally the order will be settled to post the new
WIP balance and variances totals to FI, CO-PA and PCA.
LogisticsProductionProduction ControlConfirmationEnterFor
OperationTime Ticket:
Oper/activity: 60
Confirm type: CHANGE TO FINAL
Yield: 20
Save the confirmation
Run a CO Report for the Production order to show the debits posted to the
production order:
ReportsProduct Cost by OrderFor OrdersActual Costs
Note the remaining order balance and explain these costs will be treated as variance
since the order is now in a final confirmed status.
Demonstration of Reverse WIP
5 Minutes
Since the order in complete now the previously executed WIP balance must be
reversed. The WIP balance posting from the earlier exercise (period) is still in FI
and must be driven to 0 since the remaining balance on this order is all variance.
The calculation is executed the same way as earlier WIP calculation:
LogisticsProductionProduction ControlPeriod-end closingWork-in-
processIndividual processingDetermine
WIP to Period: Current Period
Fiscal Year: 20XX
RA Version : 0
Test run: Off
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Month End Variance Calculation in Cost Object Controlling (2 slides)

Variance Calculation (1)
Almost the same story as you presented in the Cost Center discussion. Only relate it
to the production order. Also, mention the student exercises, as they will get a
chance to review their own variances on their own production orders.
Settlement of Variances (2)
The balance between plan and actual cost (1,500) is settled to the price difference
account in FI (really a cost difference). In addition, if PA is used the individual
variance categories can be mapped to costing-based PA value fields for further
analysis. Since PA is used to perform contribution margin planning, variances and
their impact on profits can be easily recognized. PA should not be used to attempt to
perform root cause analysis on variances
.
Comparison of Methods
Slide outlines the differences between the two production costing methods. In class
we worked through the examples using the Product Cost by Order technique.
Compare this method with the product cost by period. Remember the period method
will require a Product Cost Collector.
Hint Keep it simple
Demonstration of Variance Calculation
5 minutes
closingVariancesIndividual Processing:
Current Period:
Current Year: 20XX
All target cost versions
Test run: off
Select the order number and the cost elements button variances are now broken
down by cost elements.
Alternately, select the order number and the Detail button to view a break down
into the individual variance categories.
Select one of the cost elements and select the I Variances button. Scroll down to
the lower portion of the screen where a detailed explanation is found how the system
calculated the variance.
Demonstration of Settlement
5 minutes
Follow the same menu path and procedure used in the earlier order settlement.
When you have completed the final settlement run another cost report for your order
and discuss the fact that the order balance is now zero.
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closingSettlementIndividual processing
Enter your Production order number:
Settlement Period: Current period Fiscal Year: 20XX
Processing Type: Automatic
Log Information Message: Yes
Select the order number and then Receivers to illustrate the accounting documents
created by this entry specifically FI and PCA and PA.
Exercise for WIP, Variance and Settlement: 2-4 through 2-11
30 Minutes
NOTE : You may wish to have the students complete these two exercises at the same time
Exercise for Selling Goods & Services
30 Minutes
This exercise takes the students back into SD sales order. They are asked to set up
another sales order this time for a service, the installation of the pumps at the
customer site.
Hint- Many students by this time in the class may choose to by pass this exercise.
Period-end postings in Actual Costing/ML
Note objectives indicate the students will have exercises, however there are none.
Keep the discussion of this topic very summarized and remind the students that more
detailed information is available in the level 3 classes
Review Actual Costing
Multi-Level Actual Costing

Review the bullet points and center you lecture around them. Remember actual
costing includes the variances generated. Notice the variance symbols on the slide.
Variances will be included in the actual price calculation of each type of material.
Periodic Actual Costs (3 slides)

These two slides highlight the calculation of the opening and ending values for
inventories. At the beginning of each month the inventories a valued including the
variances from the preceding month.
Preliminary Valuation (1)
Highlights the beginning inventory is valued at 100 per item. Receipts, other
movements and consumption during the month are valued at the 100 rate per item.
However, there were some variances recorded in the Price Diff. Account. Note the
column on the slide.
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Determination of the Periodic Unit Price (2)

Shows the calculation of the month end value. (120) The value per item is now reset
in inventory to reflect the impact of the variances incurred during the past month.
Revaluation Allocation of Price Differences (3)
Shows the adjustment to the price difference account and the increase in stock value
based on the variances.
Single/Multi Level Calculations (2)

Two methods are highlighted. The ability to roll the variances at a single view, but
with no roll up to other products. The second takes into account the variances and is
able to roll the new costs up to related products.
Actual costing: demonstration of the results of a costing run
5 minutes
Optional demo:
You may show the result of actual costing, which was already carried out in the
system.
AccountingControllingProduct Cost ControllingActual Costing/Material
LedgerActual Costingedit costing run
Costing run AC530, period 1 2000, press enter.
Press icon costing results
Put the cursor on the node AC530 31.01.2000 and press icon display material
list. Select layout 1SAP02 Price analysis.
you see, that we have variances between the standard prices, e.g. for ACT-
DCD00 in plant 6000, and the periodic unit prices.
If you want to see, where they come from, just doubleclick on the material number
ACT-DCD00 and you branch down to the material price analysis. By expanding the
nodes receipts and production you can see, which portion of the variance was
caused by which procurement alternative.
Final summary Slides (3)

Keep it simple and quick
Accounts after Closing Entries (1)
T-Account diagram of the period end postings with Actual costing
Price Control & Determination (2 & 3)
Use the bullet points. Discusses the pricing fields in the Material Master
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Period-end postings in Profitability Management
Understand the sources of information flow into Profit Management

Understand data flow into CO-PA
Understand data flow into EC-PCA
Overall Value Flow in Profitability Analysis

Discuss the data flow. Note the direct posting from FI and SD. Remind the students
that PCA is posted in background.
Transfer of Overhead Costs

An important part of PA configuration is the mapping of cost flows into PA value
fields. This slide references a few value fields and the arrows depict the value flow
into the PA value fields.
Assessing Cost Center & Process Costs
In PA it is possible to set up assessment cycles to transfer cost center balances into
PA value fields. This option exists for those companies who desire a fully absorbed
cost view
Order Settlement
Orders also settle to PA. This mapping is found in the order settlement profile. Part
of the order settlement profile contains the PA transfer structure. This structure maps
the cost from the orders to the PA value fields.
Exercise for in Profitability Accounting Reporting
15 Minutes
The exercise takes the students back into reporting in CO-PA. You may wish to
work the exercise in front of the class to save time. Use the AC040 report that is
available in CO-PA. You can demonstrate the 3 views of this report.
Hint- Many students by this time in the class may choose to by pass this exercise.
Value Flow in EC-PCA ( 3 slides)
Overall Value Flow in PCA (1)

Same slide as before, but PCA is now referenced. Again, PCA is posted in
background/Statistical. Note that revenue type posting flow from CO-PA into PCA.
Balance Sheet Reporting PCA (2)
An important aspect of PCA reporting. The ability of PCA to display balance sheets
is often a large point of interest. Remind your students that PCA reporting is for
internal views only, and the legal Balance Sheet is generated in FI.
Distribution & Assessment (3)
Once posting take place in PCA it is possible to allocate those postings using
distribution or assessment cycles. Remind your students that once a posting takes
place in PCA it can not be allocated from PCA to another cost object that is not a
Profit Center. For example you can allocate from a Profit Center to a Cost Center.
09/tt/jj Page 94
Demo of a Profit Center Report

This is a good contrast to the CO-PA report you have just reviewed. Again explain
the differences between PA & PCA, and the profit reporting questions each module
is designed to answer.
AccountingControllingPCAInformation SystemReports for Profit Centers
Plan/Actual Comparison:
Period Current: 20XX
Profit Center: 1010 (Single Value)
Account Group: OAS
Version: 0
Display the Graphical Interface Report
This reporting capability is new in 4.6. It is similar to the graphical report in CO-PA.
Schedule Manager
Explain the purpose and basic functions of the Schedule Manager

Describe Period End Processing using the Schedule Manager
Note: The Schedule Manager is a new feature found in 4.6 release. Your students
may ask you about the Period End Partner which was an earlier version found in 4.5
Schedule Manager ( 5 slides)
The Schedule Manager is found under Period End Closing in cost centers, internal
orders, ABC and Product Costing. The benefits are explained on the first slide in the
topic. In order to discuss this unit; refer to the bullet points for the discussion topics.
Demo of Schedule Manager (Cost Centers)
AccountingControllingCost Center AccountingPeriod End
ClosingSchedule Manager
The schedule manager screen breaks into 3 parts. The far left is the on-screen help
system. (Good place to learn about the schedule manager). The middle is called a
task list. Here you can see the various tasks that have been assigned to a task list.
The displayed task list is set up as the SAP product demo. The section on the far
right is the scheduling section; this is where the tasks from the task list are actually
scheduled. It is possible to use a drag & drop function to pull the tasks from the
listing into the scheduling screen. Choose the Cost Center icon and drag it to a time
in the scheduling section. Just follow the pop up window and enter a day and a time
you wish to schedule the task.
Reconciliation Ledger
Explain the purpose of the Reconciliation Ledger.
Execute some reports to enable the reconciliation between FI and CO
Posting Logic Reconciliation Reports (2 slides)

Explain again that many of the transactions that were processed earlier in class took
place in CO only. Although originally a cost accounting assignment was entered on
09/tt/jj Page 95
the CO external transaction, the costs may have been allocated across business areas
and company codes in CO. Since statutory reporting is compiled in FI, reconciliation
postings to FI may become necessary. You may want to draw the following example.
Original FI Posting: GL Account 400000 Company Code 3000 DR Amount $500
GL Account 113100 CR Amount $500
CO Allocation Posting Cost Element 400000 Company Code 3000 CR Amount $500
Cost Element 400000 Company Code 4000 DR Amount $500
Reconciliation Posting GL Account 400000 Company Code 3000 CR Amount $500

GL Clearing 194500 Company Code 3000 DR $500
GL Clearing 194500 Company Code 4000 CR $500
GL Account 400000 Company Code 4000 DR $500
The GL clearing accounts are balance sheet accounts, which can roughly be
described as inter-company AR/AP accounts. The same accounts are used in
Financial accounting for inter-company postings.
Reconciliation postings are a two step process first you calculate the postings to be
made, then you post. You can also post selected transactions only, instead of making
all reconciliation postings at once.
The information system in cost element accounting offers a variety of reports which
show cost flows across company codes, business areas, and various controlling
object types.
Demonstration of Reconciliation Ledger
5 Minutes
Unless you have made any postings across company code the only meaningful
demonstration of the recon ledger reports would show cross business area reports.
First, run the reconciliation ledger for company code 1000 in test mode.
COCost ElementsActual PostingsReconciliation with FI
On the detail list screen, point out the business area/partner business area logic, as
well as the amount to be reconciled. The GL account is the account number in FI the
posting will be made to.
Next run a reconciliation report to display cost flows across business areas in the
information system:
COCost ElementsInformation systemReport SelectionCost FlowCelem:
Business Area Allocation
Select the variation icon looks like a hierarchy graphic, and select Mechanical
Engineering for current settings.
From the same screen, select TR. Part BA ( the business area costs came from) and
select Corporate Other
The report now displays cost flows between these two business areas.
09/tt/jj Page 96
Exercise for Reconciliation Ledger
10 minutes
09/tt/jj Page 97
Unit: ASAP
Unit Objectives:
Explain the benefits of ASAP
Mapping
Blue paper
Documentation
09/tt/jj Page 98
Unit: Course Review
Unit Objectives:
What were the objectives of the course
Recommended follow up courses
Putting the Unit into Context:

It depends on the remaining time, how much time you will spend with this unit. It gives you and the
participants the chance to review the most important slides of the course to check and remember the
main issues. Based on the interests of the participants, you can describe the contents of follow up
courses and you recommend the appropriate ones.
What were the Course Objectives?

Topic Objectives:
Review the most important slides of the course
Recommended Follow Up Courses

Topic Objectives:
Describe the content of the follow up courses and recommend the appropriate
courses to interested participants.
09/tt/jj Page 99

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R/3 System

AC040 Cost Management and Controlling

Thomas Release 4.6c

Revisions to the Previous Instructor Guide.............................................................4

Course Instructor Profiles.........................................................................................6

Training System: Training Master.............................................................................7

Goals and Objectives:................................................................................................9

Unit: Reflecting your Business in CO.....................................................................22

Unit: Reporting Tools...............................................................................................34

Unit: Planning and Plan Integration........................................................................37

Unit: Postings to CO from Other Modules.............................................................57

Unit: Event-based Postings in CO..........................................................................64

Unit: Period End Posting.........................................................................................79

Unit: Course Review.................................................................................................99

Revisions to the Previous Instructor Guide

Version Febr., 20th, 2002

Version March, 18th, 2001

Course Materials and other Materials (Training Manual):

Course Instructor Profiles

Courses Recommended as Preparation:

Online Help Recommended as Preparation:

Hints on Preparing This Course

Training System: Training Master

Preparation in the System

Attention: there is a difference, if your system is running with enqueue on or off.

when they run their assessment cycle use parallel processing

Goals and Objectives:

2:30 4:30 Unit 9 Try to complete lecture and student exercises

Unit: Navigation 4.6

45 Minutes including Exercises

List of Topics in the Unit

Putting the Unit in Context

<Approximate Duration of Topic>

Putting the Topic in Context

< Topic Objectives>

Unit: Overview of Controlling

List of Topics in the Unit:

Putting the Topic in Context:

Introduction to the Controlling Method

Run a Balance Sheet/P&L report in Financial Account. Emphasize the use of

Cost & Revenue Element Accounting

SAP Comprehensive Approach to ABC

Product Cost Controlling Actual Costing (4 slides)

Demonstration of Cost Object Controlling Report

The components of Profitability Management

Profitability Accounting (6 slides)

Demonstration of a Profitability Report after Analysis with Profit Centers

Putting the Topic in Context

Integration within CO Value Flows

Putting the Topic in Context

Describe the purpose of Transfer Prices

Transfer Pricing Concepts (3 slides)

Exercise for Unit: Overview of Controlling, Topic 1 - 4

Unit: Reflecting your Business in CO

List of Topics in the Unit

Organizational Units and Structures

Putting the Unit in Context:

Demonstration of Controlling Area Configuration in IMG.

Exercise for Topic: Organizational units and structures

Accounts and Cost Elements

Demonstration of Cost & Revenue Elements

Secondary Cost Element:

Enter Data: Cost Element Name: DAA Check Assets