A ‘Segment’ is one processing unit required to complete an automated allocation of distribution or assessment or reposting of planned/actual costs in controlling in SAP. A segment is made up of (a) allocation characteristics—to identify the sender/receiver, (b) values of the sender—plan/actual, type of costs to be allocated, and (c) values of the receiver—the basis for allocation, for example, the tracing factor such as SKF, percentages, etc.
When you combine multiple segments into a single process, then you call that the ‘Cycle.’ A Cycle helps you to process various segments in a chain-like fashion one after another. A Cycle consists of header data (valid for all Segments in a Cycle) and one or more Segments, with summarized rules and settings enabling allocation. The Segments within a ‘cycle’ can be processed iteratively (one segment waits for the results of another) or non-iteratively (all the segments are processed independently) or cumulatively (to take care of variations in receiver Tracing Factors or sender amounts).
Typically, when you start the cycles you will start them in a ‘test’ mode to see the allocations before actual postings. Technically, you can run the cycles in ‘production’ mode at any point of time, but the system will carry out the allocation postings only on the first day of a period. The utility of the cycle lies in the fact that you can run these period after period.
What is ‘Iterative Processing’ of Cycles?
‘Iterative Processing’ is nothing but the repetitive processing of sender/receiver relationships until the sender’s entire cost is transferred to the receiver(s). During iterative processing, you will not be able to use ‘fixed amounts’ as the ‘sender rules’; you will also not be able to define a percentage to remain on the sender. You will be able to use both plan and actual data while using the iteration.
What is ‘Splitting’? Explain the ‘Splitting Structure.’
‘Splitting’ is a process used to assign ‘activity-independent’ plans/actual costs, both primary and secondary, of a cost center to the individual activity types within that cost center. But the important requirement is that you will use this when there is no account assignment to the activity types.
You may either use the Splitting rules or the Equivalence number to achieve this. When you split the costs from a cost center, the cost center temporarily becomes more than one cost center for the purpose of allocation but again becomes a single cost center when posting happens in the subsequent period.
If you need to assign different cost elements or cost element groups to activities in more than one way, then you need to define a ‘Splitting Structure’ containing ‘splitting rules’ to determine the criteria of splitting ‘activity-independent’ costs to an activity type. If you have created the splitting structure in customizing and assigned the same to a cost center, then the system uses the splitting structure for cost apportioning; otherwise, it will use the equivalence number.
The ‘splitting rules’ determine the amount or the proportion of costs to be allocated to various activity types of a cost center and is based on the consumption of these activity types. The costs thus allocated may be a fixed sum, or a percentage, or it can even be based on the tracing factors or SKFs.
The ‘equivalence number’ is a basic method for splitting the costs when you manually plan for each of the activity types. By this, you will plan all activity-independent costs according to the equivalence numbers (the default is 1).
What is an ‘Activity Price Calculation’?
You will be completing the planning process only when you perform the ‘Activity Price Calculation,’ which is based on planned activities and costs. By doing this you are valuating the planned secondary costs at receiving cost centers. If you do not want to use activity price thus calculated, you are free to use the political price for the activity type.
As you are aware, the activity price is used for planned/actual allocation and is determined by using either the political price or the system-calculated activity price.
What is known as the ‘Political Price’ for an Activity Type?
The ‘Political Price’ is the price determined outside the SAP system, which is used in manual input using the required planning layout in planning.
What is ‘Allocation Price Variance?
‘Allocation Price Variance’ is the difference between the ‘political price’ of an activity type and the ‘system calculated activity price’ of the same activity type.
What is ‘Budgeting’?
‘Budgeting’ is used to augment the planning process at the cost-center level. While planning is considered the ‘bottom-up’ approach, budgeting is regarded as the ‘top-down’ method to control costs.
Budgeting usually comes ‘down’ from the ‘top (management)’ and is used to guide the planning process at the cost-center level. Note that budgeting is not integrated with postings; you will get an error when the system comes across a posting that will result in the actual values exceeding the budget for that cost center.
What are the ‘Direct Allocation’ Methods of Posting in CO?
The ‘Direct Allocation’ of posting in CO may be an actual cost entry or a transaction-based posting.
The actual cost entry is the transfer of primary costs from FI to CO, on a real-time basis, through the primary cost elements. You may also transfer transaction data by making the cost accounting assignment to cost objects from other modules such as FI-AA, SD, and MM:
- FI-AA: Assign assets to a cost center (to post depreciation, etc.)
- MM: Assign GR to a cost center/internal order
- SD: Assign or settle a sales order to a cost center or internal order
Transaction-based postings are executed within the CO, again on a real-time basis, enabling you to have updated cost information on the cost centers at any point in time. You will be able to carry out the following transaction-based postings in CO:
- Reposting
- Line items
- Transactions
- Manual cost allocation
- Direct activity allocation
- Posting of Statistical Key Figures
- Posting of sender activities
The ‘Indirect Allocation’ of postings in CO may be used at the end of a period as a periodic allocation. This is done after you have completed all the primary postings. You may post the following periodic allocations using indirect allocation:
- Periodic Reposting
- Distribution
- Assessment
- Accrual Cost Calculation (Inputted Cost Calculation)
- Indirect Activity Allocation
For transferring primary costs to CO, on a real-time basis, you need to have ‘Automatic Account Assignments’ defined in the system. By doing this, you will always be able to post a particular cost to a specified cost center. You can also use this assignment for automatically posting the exchange rate differences (gain or loss), discount, etc., to CO.
You may also have additional account assignment at different levels such as:
- Controlling area/account/Company Code in the customizing
- Controlling area/account/cost element in the master record
- Controlling area/account/Company Code/business area/valuation area in customizing
How does ‘Validation’ differ from ‘Substitution’?
SAP uses validations and substitutions to check the integrity of data entered before posting a document. When you have both substitutions and validations defined, the system first completes the substitution then goes on to validate the entries. Note that only one validation and one substitution can be activated at a time for a controlling area per ‘call-up point.’
A ‘Validation’ uses Boolean logic for checking any type of combination of specified criteria (such as account type/cost center combination) for ensuring the validity before allowing you to post a document.
Example:
- Validation Rule: If the cost element is ‘120000,’ then the cost center is ‘1200.’
- Document: You try posting a document containing the cost element as ‘120000’ and the cost center is ‘1400.’
- System Response: The system will throw an ‘error message’ after checking that the cost center value does not match the cost center value of the criteria for that given cost element value.
Example:
- Substitution Rule: If the cost element is ‘120000,’ then the cost center is ‘1200.’
- Document: You try posting a document containing the cost element as ‘120000’ and the cost center as ‘1400.’
- System Response: The system will replace the entered cost center value of ‘1400’ with that of the correct value ‘1200.’
A ‘Call-up Point’ is a particular point in transaction processing that triggers an action such as substitution or validation.
What is ‘Boolean Logic’?
‘Boolean Logic’ is based on simple logic to determine if a given statement is true or false. The logic works on the basic principle that a statement can either be true or false. In a complex statement (created using operators ‘and’/‘or’/‘nor,’ etc.) with many parts, the logic goes by assigning true or false from part to part, and then determines at the end whether the combination is true or false.
Explain ‘Reposting’ in Cost Center Accounting.
‘Reposting’ is one of the ‘transaction-based postings’ in Cost Center Accounting used to reallocate costs that were incorrectly posted to another cost center earlier. Also called internal reposting, there are two types:
- Line Item Reposting
- Transaction Reposting
You will resort to the entire Transaction Reposting when the original posting was incorrect. Here, the original FI documents are not referenced to in the new CO document created, though the original FI document remains unchanged.
Is ‘Periodic Reposting’ Different from ‘Reposting’?
‘Periodic Reposting,’ a method under ‘indirect allocation,’ is used to correct multiple postings made to cost centers during a particular period. As such, this is similar to multiple reposting under ‘transaction-based postings.’
Periodic reposting is also similar to distribution, when you use this, at the period end, to transfer all costs from a ‘pooled cost center’ to other receivers. (Note that the ‘distribution’ is meant primarily for cost allocation, but periodic reposting is meant for correcting the posting errors.)
Explain ‘Manual Cost Allocation.’
‘Manual Cost Allocation’—one of the ‘transaction-based postings’—is used to post both primary and secondary actual costs (not the planned costs), and also to transfer external data. You may also use this to correct secondary costs that were incorrectly posted earlier. In the process of manual cost allocation, remember that you can use any type of cost element except 43, as this is meant exclusively for activity allocation.
You may use this among cost centers, internal orders, networks, network activities, sales orders, sales order items, WBS elements, etc., identifying these cost objects as senders/receivers.
What is ‘Direct Activity Allocation’?
‘Direct Activity Allocation’—one of the ‘transaction-based postings’—is used to record activities performed by a cost center and to allocate simultaneously to ‘receiving cost centers.’ You will use this ‘direct activity allocation’ only when you know the activity volumes of both the sender and the receiver. If not known, then use the indirect activity allocation at the period end.
You need to input the activity quantity, sender/receiver cost center and date to enable the system to allocate the costs; the system will automatically determine the allocation cost element and the activity price (either the planned price or the actual price). The system multiplies the activity consumed with that of the activity price to arrive at the allocated cost.
How do You Calculate ‘Accrued Costs’?
SAP provides two methods for calculating the Inputted or Accrued Costs in CO:
- Target=Actual method
- Cost Element Percent method
The ‘Reconciliation Ledger’ is used to keep track of all cross-Company Code transactions between FI and CO, as there is every chance that there may be some imbalance between the CO totals and FI totals when more than one Company Code is attached to a controlling area. This is because you may try to allocate costs from one cost center to another assigned to a different Company Code.
The reconciliation ledger records the Company Code, business area, functional area, amount, cost objects, cost element, currency (Company Code and controlling area), etc. You can make reconciliation postings at the end of a period to synchronize FI and CO with the configuration settings to automatically post the differences to FI.
While configuring the reconciliation ledger, you may use extended account assignments besides the normal account assignment for automatic transfer of reconciled postings. The extended account assignment helps make more comprehensive assignments to the relevant reconciliation accounts, with the option and flexibility of specifying any field in the reconciliation ledger (Company Code, cost element, functional area, etc.) for checking the ‘substitution rules.’
To aid in determining possible reconciliation postings, you can opt for selecting individual cost flows from all the relevant cost flows. This is accomplished by running the relevant report and looking for the relevant ‘data block’ (such as total cost flows, basic overview list, and detailed list).
What is ‘Variance Analysis’ in CO-OM-CCA?
‘Variance Analysis’ is the determination and interpretation of the difference(s) between the actual and planned (target) costs (within a cost center/cost center group) in cost center accounting. The analysis is intended to provide important clues to top management to plan better later.
What are the ‘Categories of Variances’ in CO-OM-CCA?
SAP helps to classify all variances into two categories:
- Input Variance
- Output Variance
The ‘Input Variance’ is the result of the mismatch of amounts/quantities of inputs planned and actually used. You will be able to identify the following input side variances in the system:
- Quantity Variance—when there is a difference between planned and actual quantity of activity consumption. The inference is that there is some production inefficiency leading to more consumption or there is some loss/shrinkage in the quantities.
- Price Variance—when there is a difference between the planned and actual price of an activity. The inference will be that you may need to change the suppliers looking for lower prices or it is just a market condition.
- Resource (use) Variance—when there is use of an unplanned cost element or there has not been a posting of a planned cost element. The inference is that there are some unidentified costs that may be planned in the next planning cycle, or just plain errors in postings.
- Remaining (input) Variance—these are all miscellaneous variances where the system is not able to categorize a variance.
An ‘Output Variance’ is the result when the actual costs allocated from a cost center differ from the planned (or target) cost allocation from the cost center. The variances on the ‘output side’ may be any one of the following:
- Volume Variance - This variance occurs with actual and planned activities (in terms of activity quantity and/or the activity itself).
- Output Price Variance - This variance occurs when the activity price used in the actual allocation is a political activity price (manually entered or plan price) differing from the system calculated activity price (target price).
- Output Quantity Variance - This kind of variance occurs only on the actual side, when there is a difference between the actual activity quantity (manually) entered in the sender cost center, and the actual activity quantity allocated from that sender cost center.
- Remaining Variance - This reflects the miscellaneous variance, at the cost center level, identified by the system on the output side but remains not categorized into any of the above three types. The possible reason can be that you have deactivated the output variances in the variance variant configuration or the output variance is less than the ‘minor difference’ you have defined in the ‘variance variant.’
Though the system identifies and calculates variances, they are not automatically dealt with by the system. Hence, these variances will remain at the cost center as a period-end balance and you need to act on that in one of the following ways:
- You may do actual activity price calculation to revalue all internal allocations with a newly calculated price (as against the initial planned activity price), and post the difference to all the cost centers which initially received the allocations. This will help you in clearing all or a portion of output price variances.
- You may ‘transfer’ the variance balance to other modules (such as CO-PA) for further analysis.
- You may make additional automated allocations within CO-OM-CCA to one or more cost center.
SAP comes delivered with a number of ‘Standard Reports’ in the CO module. The reports are grouped under:
- Planning reports
- Comparison reports
- Line item reports
- Report for activity prices
- Reports for variance analysis
- Master data reports
- Document display
What is ‘Summarization’ in CO?
‘Summarization’ helps to condense and store the transaction data at the ‘cost center group’ level. You may do the summarization for the highest node of the standard hierarchy or any of the ‘alternate hierarchies.’ Once summarized, you will be able to create a vast number of reports with report run-time vastly reduced as all the data of the nodes are readily available from the summarized table.
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