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The operating concern is the highest reporting level for profitability and sales and
marketing controlling, and the central organizational unit in Profitability Analysis (CO-PA) used
to segment and structure the market.
Controlling areas structure the internal accounting operations of an organization within
Management Accounting. They represent closed units that are used to calculate costs. All
internal allocations relate solely to objects that belong to the same controlling area
Company codes are independent accounting units within Financial Accounting. They
represent the smallest organizational units for which an account group can be set up for the
purposes of external reporting
Customizing Controlling Area
The controlling area is the organizational unit within a company for which complete, closed
cost controlling can be carried out. You cannot allocate costs outside of controlling areas.
- The controlling area 0001 is created in the SAP standard version. You can use these
as copy templates.
- A controlling area may contain more than one company code and these company
codes can include more than one currency. However, the company codes assigned
to a controlling area must all use the same operational chart of accounts.
- The control indicator can be used to activate or deactivate certain controlling
components and functions for a fiscal year same number of (normal) posting
periods.
Assignment of Organizational Units
Operating concern (0, 1) <- Controlling area (1, n) <- Company code (1, n) <- Plant
(0, 1, n)
Business area
You can use the following currencies in Management
Accounting to perform evaluations in the information
system:
Controlling area currency: If you are using a 1:1
assignment, the controlling area currency must be the same
as the company code currency. In cross-company-code cost
accounting, the controlling area and company codes may
possess different currencies.
Object Currency: When using a 1:1 assignment, an object
currency that is different to the controlling area or company code currency can be defined for
the account assignment object.
Company code currency: In cross-company code cost accounting, you are only free to
choose an object currency if all the assigned company codes have the same currency and this
is the same currency as the controlling area currency. If this is not the case, the object
currency in the account assignment object will automatically be the company code currency.
Transaction currency: The currency in which a document is posted to Management
Accounting is the transaction currency.
! The fiscal year variants of a controlling area and company code can have different
numbers of special periods. The number of posting periods must be the same.
! You have to use the same operational chart of accounts in Management Accounting and
in the assigned company code.
Changes to the assignment should not be a problem provided you have not created any
master data or transaction data. In a productive system, combining company codes that were
previously separate in a controlling area, or splitting a controlling area (1:n) into several new
controlling areas necessitates conversion of data.
structure so that it reflects the internal areas of responsibility and the controlling and
decision-making structures within your organization.
Each level or node of the standard hierarchy is a cost centre group. Cost centres that
are created or changed from within the standard hierarchy have the status Inactive
You can change the assignments of the organizational units, if:
o The currency of the new company code is the same as the currency of the old
company code.
o You have only posted planning data in the fiscal year.
o The cost centre is not assigned to a fixed asset, work centre, or HR master
record.
The cost centre category is an indicator in the cost centre master data, which
specifies the category for the cost centre. Cost centre categories enable you to assign
the same characteristics to similar cost centres.
Cost elements
- Expense and revenue accounts in Financial Accounting
correspond to primary cost and revenue elements in
Management Accounting; In addition, secondary cost
elements are used to record internal value flows like activity
allocations, assessments and settlements.
- To be able to post to a primary cost element, you require an object in Management
Accounting (such as a cost centre) to identify the origin of the
costs.
- ! Revenue elements are primary cost elements. (11, 12
and 22)
- Cost element category:
Activity Types
- The activity type classifies the activities that are to be
performed within a company by one or several cost
centres. Activity types serve as tracing factors for this cost
allocation.
- The activity type category is used to determine whether
and how an activity type is recorded and allocated.
Statistical key figures
- Statistical key figures provide information on non-monetary data for profit centres, such
as the number of employees, number of machines, capacity usage, market information,
and so on. You can group statistical key figures together into statistical key figure
groups.
- ! You can post both planned and actual statistical key figures.
- Statistical key figures are defined either as a fixed value or a totals value.
Global Functions for Master Data
Time-Based Master Data
- You can store master data fields for cost centres, cost elements, and activity types as
time-based. You specify whether individual fields are time-based in Customizing.
- ! The Cost centre assignment to the standard hierarchy area is a non-timedependent field.
Adjustment postings
Manual Postings of Costs and Revenues - primary costs are reposted (under the original
cost element) to a receiving order.
- No reference to the original FI document
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No sender check is made, in other words the system does not check whether the costs
you repost actually exist on the sending cost centre (negative postings may occur).
Reposting line items - is the equivalent of a reversal on the sender object to one or more
receiver object.
- Document must contain a reference to the original FI document.
- The original FI document does not change its account assignment
Direct Activity Allocation
- Activity type represents the tracing factors (AcTy Cat 01 manual entry, manual allocation)
- ! Only one cost centre can be the sender of an internal activity allocation -> receiver any
CO object
- Direct activity allocation uses a secondary C Element category 43 (derived from the
MD of the AcTy)
- Adjustments of activity - You can make adjustments in periods, but not in the same period
from which the document to be adjusted originates. However, the fiscal year must remain
the same.
! You can only repost primary costs. During this process, the original cost element
remains the same.
Line items are posted for the sender as well as for the receiver, enabling the allocation to
be recorded in detail.
Manual cost allocation also lets you correct incorrect secondary postings and import data
from external systems.
! You can use manual cost allocation for all cost element categories. An exception to this is
category 43 (allocation of activities/processes) which may only be used for activity
allocation.
Period Lock
- After ending the period-end closing, the period for postings should be locked so that the
period-end closing can no longer be influenced.
- Use the period lock to lock plan and actual business transactions for a combination of
controlling area, fiscal year, and version.
You can use overhead cost orders to conduct detailed controlling for a particular object or
activity. All costs concerning this object or activity are assigned to the relevant order. When
you create an overhead order master record, you choose whether to create it as a real
order or a statistical order
Real Orders: You use the real order to collect costs and allocate them later to different
recipients. In the primary cost posting, the costs are updated to the real order. In the
periodic process of order settlement, you allocate the actual costs to controlling
objects. You can settle portions of the order costs to many objects. When you create a real
order, you must assign the order to a company code. If you have selected business
area balance sheets in Financial Accounting, you must also assign the order to a business
area.
Statistical Orders: You use the statistical order to evaluate costs which cannot be
itemized in detail in cost element or cost centre accounting. ! You can neither settle
statistical orders nor apply overhead to them. You can change the indicator in the order, as
long as the order was not posted to and you have not yet created a settlement rule for the
order.
! You must activate commitment management both in the controlling area and in the order
When you create or update your budget, the system documents the transaction in a line
item.
- The current budget includes the original budget and all budget updates. You can freeze
the original budget using status management.
In order to create a budget for an order, you must define a budget profile and assign it to
the order type. You must define the following control parameters in the budget profile:
- Time horizon: Budgeting start year, based on the current fiscal year; Number of years
into the past, from the start year, for which budgeting is allowed; Number of years into the
future, from the start year, for which budgeting is allowed
- Budgeting of overall and/or annual values: You can only budget overall values if you
are using a fund.
- Value display parameters: Use the View parameter to determine which values are
displayed, in addition to the budget, when you enter budgeting (such as the distributed
value or the accumulated value). You also define the scaling and number of decimal places
for your budget value display.
- Availability control: Against annual/overall budgets and releases: 0 cannot be
activated; 1 automatic activation during budget assignment; 2 background activation
- Budgeting currency and currency translation: controlling area currency/object
currency/free definable currency; exchange rate type (M, B, C) and value date
Availability Control (Commitments)
Certain business transactions result in actual costs and commitments being posted to the
order. Commitments represent obligations that will lead to actual costs through subsequent
business events. Actual costs and commitments are funds allotted to an order and they can
be checked against the budget using the availability control.
- You use the tolerances to define how the system should respond to a given degree of
budget overrun. (Info, info + mail to the responsible person, warning messages). The
tolerance levels for budgets are defined in the budget profile according to business
transaction groups. Different tolerance levels can be set for different business transaction
types.
Budget Carry forward
- You can transfer unused funds to the next fiscal year using the budget carry forward
function. The SAP system will carry forward the difference between the budget and the
actual amounts for the year specified.
- ! You cannot carry forward budgets for orders that have system status Complete or that
are flagged for deletion, nor can you carry forward negative budget amounts.
- You can execute the carry forward run more than once for a fiscal year.
- Commitments are not considered in the calculation of the unused funds.
Introduction to Planning
Planning goals:
- Planning of future business activities, taking changing business circumstances into
account.
- Forecasting for setting up binding standards for a fiscal year, for the following: valuation of
internal business activities; monitoring efficiency using plan/actual and target/actual
variance analyses.
- Plan the structure of the company's future operations for particular periods.
- Create benchmarks for monitoring the business transactions within a fiscal year.
Planning Views and Functions
- A version is a unique view of planned costs and revenues, given a particular set of
assumptions. In the planning process, many different versions can be created and different
planned values can be created for each version. Each version is independent of all others.
When defining a version you need to make settings in the Operating Concern, for the Profit
Centre Accounting, in the Controlling area
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Version 0 automatically created version. The actual values created when entering
primary costs and allocating costs internally are posted in this version. This version must
be used for plan/actual cost comparisons. Version 0 is the version used for analysing actual
data.
- You can use the copy planning function. This function can also be used to copy actual
data from cost center accounting and use this data as a basis for future planning data.
- Revaluation allows you to increase or decrease the planning results on a percentage
basis. By combining copy planning and revaluation, you can create multiple planning
versions. This can be useful after copying the plan data from the previous year or for
running through best-case and worst-case scenarios.
Planning Layouts and Planner Profiles
- Planning layouts are used to define the planning screen. Standard planning layouts are
available for almost every type of planning area.
- You use entry displays or planning layouts to enter planning data. You can customize
these displays as required.
Organization of the Planning Views
- You can control the planning process using planner profiles. In a planner profile, you can
assign as many planning layouts as required to each planning area. A planning area can,
therefore, contain more than one planning layout. (ex. SAPALL, SAPEASY)
Cost Accounting Methods
Cost Allocations
- Used to plan cost values only; Enable plan/actual comparison
Internal Activity Allocation
- A cost centres activity must be defined; Activity type quantities are planned , scheduled
and reconciled; System can calculate price or you can enter the price manually
Fixed and Variable Costs
- Based on activity-dependent and activity-independent cost planning; Allow fixed and
variable components in the activity price; Enable target/actual comparisons to be made;
Allow marginal costing
Planning Options in Overhead Management Accounting
Planning statistical key figures enables you to:
- Calculate the ratios in Cost Center Accounting (such as costs per employee)
- Create receiver bases (allocation factors) for allocations such as assessment or distribution
- Statistical key figures can be fixed value or totals value
- You can also transfer statistical key figures from the Logistics Information System (LIS).
Primary Cost Planning
- You plan activity-independent primary costs structured by cost element on the cost centers
where you later assign actual data.
Cost Allocation Methods for Planning
- In distributions and assessments, costs that were planned on a cost center with userdefined keys (such as percentages, amounts or statistical key figures) are allocated
Activity Type and Other Planning Methods
- With activity type planning, you manage the performance of a cost center by measuring
and controlling its output.
- You can enter the price for each cost center and activity type manually or calculate the
price using automatic price calculation.
You can set manual activity prices for your cost center/activity type combination
if the activity price is fixed within your company and unaffected by any internal
exchange of activities.
In the automatic calculation of prices, all primary and secondary costs are
contained in the price. These costs are planned as either activity-dependent costs
or activity-independent costs for each cost center.
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If several activity types are planned for a cost center, the activity-independent plan
costs are assigned to these activity types for activity price calculation. You can
accomplish this by entering equivalence numbers with each planned activity type,
or with plan cost splitting.
The unit price for an activity type is calculated by dividing planned costs for an
activity by the planned quantity of activity type units. Alternatively, the capacity of
a cost center to produce a given activity type can be used when calculating the
fixed portion of the activity price.
Planning
Budgeting
Funds-oriented
returns)
Funds required
(original,
supplements,
Availability check
Funds approved
Planning Aids
Copy Plan Data or Actual Data to Plan
You can copy:
- Within fiscal years, versions, and cost centers
- Between different fiscal years, periods, and versions
Revaluation
- Using the plan revaluation function, you can increase or decrease planning data on a
percentage basis.
- You can revaluate costs and consumption.
- ! You cannot revaluate assessment cost elements, imputed cost elements, and cost
elements used in indirect activity allocation.
Transferring Plan Values
- Integrated planning enables you to transfer data from one of the pre-stored systems in
Cost Center Accounting to cost center planning.
Plan Lock
- If the planning process in cost center accounting has been completed, the planning should
be locked to protect it from changes.
TFIN20_2
Unit 1 Introduction to Product Cost Planning
Overview of Product Cost Planning
Goals of Product Cost Planning
- Costing results:
- Cost of goods manufactured
(COGM)
- Cost of goods sold (COGS)
- Pricing
- Productivity
- Comparison of alternatives
- Continuous improvement
- Cost origin
- Influence of primary costs
- Valuation of inventory
Fig. Product Life Cycle
Costing Methods
-
Unit costing
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Multilevel unit costing: Multilevel unit costing uses a highly flexible screen layout for the
editing of material cost estimates without quantity structure and base planning objects.
Structure:
Costing Structure This screen area can be used to display or edit a material cost
estimate or base planning object.
Work lists: This screen area is used to manage and sort information that you require
on a regular basis to edit a material cost estimate or base planning object on a
multilevel basis.
Detail List: This screen area displays detailed information, such as the itemization,
the cost component split or the message log
List Screen or Costing Information: display the costing data for a material cost
estimate both with and without quantity structure
Cost estimate with quantity structure: Costing with a quantity structure is a tool for
planning costs and setting prices for materials without reference to orders. It is used to
calculate the cost of goods manufactured and cost of goods sold for each product unit. You
can use the results of material cost estimates with a quantity structure to valuate
materials at standard prices. (Qty. struct. = BOM + routing)
Costing run: You can use the costing run to process mass data. It enables you to cost,
mark, and release more than one material at the same time.
You can modify this structure to suit your own requirements by creating your own layouts.
Only limited selection of layouts is available for base planning objects.
Costed Multilevel
- The costed multilevel BOM displays the values for all items of a costed material as a
hierarchy, according to its costed quantity structure.
- The costed multilevel BOM is based on the itemization and explodes the total costs for the product
-
The costed multilevel BOM enables you to display the costs for each assembly (halffinished and finished products) and each material component (raw material, trading goods,
purchased parts, and so on) in the BOM of the material costed, as well as all other items
(for example, internal activities, overhead).
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Valuation Variant
- A strategy that is used to determine the prices that are used
to value component materials, activity types, processes,
subcontracting, and external activities.
- The valuation variant searches the various price sources
listed for each strategy. The price sources are searched in
the sequence in which they are entered in the strategy.
Date Control
- Date control can be used to create the quantity and value structures based on various
dates. It specifies the following:
For material costing with quantity structure: The
period of validity of the cost estimate/ The date on
which the quantity structure is determined (quantity
structure date)/ The date on which the quantity
structure is valued (valuation date)
For material costing without quantity structure:
The period of validity of the cost estimate/ The date
on which costing items are valued (valuation date)
Further Settings
- Quantity structure: You specify if the lot size should be passed on.
- Additive costs: Material costs that you can manually enter in a unit cost estimate and
then add to an (automatic) cost estimate with quantity structure (ex. freight).
- Update: Specifies if saving is permitted for the costing variant.
- Assignments: You can maintain the following settings and assignments of the costing
variant: Cost component structure/ Costing version/ If the cost component split is activated
in the controlling area currency/ If you require cross-company costing
Purpose of the Costing Variant
Depending on the purpose of the cost estimate, you can create various results for the same
material by making multiple costing variants with various settings for costing type, valuation
variant, dates, and quantity structure determination.
- Standard cost estimate: Valuation of the planned quantity structure with planned prices.
Calculation of standard prices for the valuation of S-price materials
- Modified standard cost estimate: Valuation of current quantity structure with planned
prices. Costing of material during the fiscal year to analyse cost developments.
- Current cost estimate: Valuation of current quantity structure with current prices.
Costing of materials during the fiscal year to analyse cost developments.
- Inventory cost estimate: Valuation of actual quantity structure with tax-based and
commercial prices. Establishment of valuation approaches for inventory valuation.
Cost Component Split
In multilevel costing structures, the cost component split provides information about the costs
of the original material components, such as the costs for materials in the pump. Each line of
itemization is therefore assigned to a cost component as defined in the cost component
structure.
-
Cost rollup The purpose of cost rollup is to include the cost of goods manufactured of all
the materials in a multilevel production structure within the costs of the material located at
the top of the structure. For costing, you assign the costs in a cost estimate to cost
components in Customizing for Product Cost Planning. The cost components break down
the costs of a material. In the cost rollup process, the data for these cost components is passed
18
on to the costing results of the next-highest material. The data structure is called a cost
component split.
19
20
BOM: Header
BOM usage You can maintain separate BOMs for
different areas within your company, such as
design or production.
BOM status Active (it can be exploded)/inactive.
The BOM status must be active for costing to
enable the BOM to be read for a cost estimate.
Area of validity a certain lot size the BOM is used
for
Alternative BOM describe different product
structures that create a product with the same properties.
BOM: Item
Categories: L = stock item; N = non-stock item; R = variable-size item
Fixed quantity indicator: This indicates whether the quantity entered is dependent
on the lot size.
Planned scrap
! Relevancy to costing indicator: If this indicator is not selected, the system ignores
the BOM item in the material cost estimate.
Bulk material: is usually posted as consumption at production cost centers as soon
as it is procured. ! Therefore, it is not included in the cost estimate in the standard
system.
BOM: Nonstock Materials
Nonstock materials are materials that are not kept in inventory. They are always
procured externally and assigned directly to the order. For nonstock materials
without a material master, data that is relevant to costing (such as prices) is
entered directly in the BOM item (purchasing data). For nonstock materials with a
material master, no prices can be maintained and materials are valuated in
accordance with the strategy specified in the costing variant.
you specify whether and how the operation is confirmed./ External processing: Here you
specify whether the operation is processed internally, externally, or both.
At the same time, the parameter key (in the standard value key) represents the names of
the formula parameters. You can use the formula parameters to represent the standard values
in a formula. Formula: You can use formula parameters to which you have assigned values.
The formulas are maintained in Customizing for the work center.
Production Version
- Combination of task list group, group counter and alternative BOM (BOM + Routing)
- Description of various production technologies
- Restriction of production version: lot-size range, validity period
How Does the System Find a BOM?
Quantity structure control a process by which the system searches for alternatives if
multiple BOMs and/or routings exist for a material. It is defined in the Costing Variant and
determines the priority of BOMs and routings (this process is called BOM application).
Criteria: Period of validity: The BOM must be valid on the quantity structure date. Lot-size
range: The costing lot size must fall within the lot size range. The status allows costing.
How Does the System Find a Routing?
If a production version is found or defined, the routing contained in it is used. The
selection ID for the routing determines which routing is selected first, the parameters
being the task list type, task list usage, and plan status. The criteria are the same as for
quantity structure control.
- ! The process industry uses a master recipe instead of a routing.
Material Cost Estimate
- Steps in the creation of material cost estimate: chose costing variant -> standard costing
values -> check material costing results -> save material cost estimate
Enhanced Efficiency - The costing result, itemization, cost component report and Costed
BOM are now visible from a single screen. You can decide which views should e fist displayed
in the header data and in the detailed reports and which lot size should be displayed (costing
lot size, price unit, free definable (quantity, unit of measure))
Explanation Facilities - Quickly access data and information in the costing environment,
while remain in the cost estimate or the analysis while accessing the costing data: costing
sheet template, material master, BOM/routing, product structure and configuration.
Prices in Material Master
You can update the following:
- The result of the standard cost estimate as the standard price.
- The results of the modified standard cost estimate or the current cost estimate as planned
prices 1, 2, and 3.
- The results of the inventory cost estimate as commercial prices 1, 2, and 3 or tax-based
prices 1, 2, and 3.
The standard price is updated in the material master in two steps: Marking and Releasing a
standard cost estimate
Integration and Procedure
Standard Price and Standard Cost Estimate (St. P in MM; ST. C Est. in CO)
- Price control plays a crucial role in material valuation. When the price control indicator is
set to S, the inventory is valuated at standard price.
- ! If the standard price was updated by a standard cost estimate, it can be used in Cost
Object Controlling.
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The system can use the itemization of standard cost estimates to determine the target
costs for manufacturing orders.
- In Profitability Analysis, you can use standard cost estimates (or other material cost
estimates) to compare the revenues of the billed quantity with the cost component split of
the product.
- A standard price is also required in the Material Ledger to determine the actual price.
Procedure: Update of Standard Price
- Execute material cost estimate: Use a costing variant that is applicable to a standard
cost estimate (costing type).
- Accuracy of costing results: The system can notify the user of possible errors via the
technical status. Content errors, such as incorrect prices or quantities, cannot be detected
by the system.
- Recommendation: In the Product Cost Planning reporting, use object lists which can be
compared with material master prices and set the inspection severity in accordance with
your requirements
- Update allowed: You must grant an allowance once for the business period. This is
carried out for the company code, valuation variant and costing version. Ensure that the
valuation variant is also used in your costing variant.
- Marking: Once the above steps have been carried out, the material cost estimate can be
marked. The future planned price is updated in the material master and linked to the
standard cost estimate. You can mark the cost estimate in December for January.
- Release: You can only release cost estimates once. It can also only be carried out in a
period corresponding to the valid from date.
- Revaluation: If the material has inventory, the inventory can be revaluated at standard
price.
Changing the Standard Price
- Price change without affecting the released standard cost estimate
You change the S price with price change transaction MR21. The standard system
does not allow this type of price change if a released standard cost estimate exists.
The standard price is changed. However, the released standard price and its link to
the standard cost estimate remain.
- Price change with effect on released standard cost estimate
Delete the cost estimate. Use the menu option Delete Test Data for this. When you
delete the current standard cost estimate, the cost component split and itemization
are removed from the database. Similarly, the link to the material master is
deleted, and the current planned price is set to _. The standard price is unaffected.
Execute a new, corrected standard cost estimate and proceed with the price update
process described above.
2. Enter selection parameters for materials: Mat. Number, plant/ BOM usage/ Additional
MMaster fields in the accounting and costing views/ Existing cost estimates/ Materials
included in an existing costing run
3. Execute material selection
4. Manually add or delete materials included in the selection list (transaction CKMATCON)
5. Use the selection list in the Costing run
There is a separate transaction to maintain the parameters to select materials and generate
the selection list (transaction CKMATSEL).
Working with Costing Run
! A costing run is identified by its name and the costing run date.
1. Creating a Costing Run As a rule, you should execute costing runs for the same
plants on a monthly, quarterly, or yearly basis. If you use this function, all the
necessary data and parameters (general data and process flow parameters) are copied.
The important entries are those of the costing variant, costing version, dates of validity,
explosion and valuation.
2. Executing a Costing Run Processing activities are categorized as Change
parameters and Execute. The functions of the Parameters column (Change parameters)
enable you to check or maintain the options of the
activity. By choosing Execute, the processing
activity is initiated or scheduled. Other columns
that are used to execute a function are
Authorization and Log.
3. Costing Results and Analysis Analysis options/ Choice of 3 reports: Costing levels,
Material list, Analysis/ Navigation to cost estimates and Master data
Costing levels: Provides an overview of the number of materials selected and
costing levels created. The lowest level contains the material components,
purchased parts and raw materials.
Material list: Contains the selected materials. You can also check the status of the
cost estimate for the material.
Analysis: This report is generated by the identical processing activity in the
Analysis area. It enables you to compare costing results with the results of other
costing runs or with the prices in the material master.
- Recommendation: SAP recommends the use of the Analysis option to compare new
standard cost estimates with the standard price.
Error handling in the Costing Run
Costing by costing level: When you cost mass data for the first time ad you anticipate
numerous errors or the quality of the master data is poor, it is recommended that you
execute costing by costing level.
Cost estimates with errors only: This procedure is recommended when few errors are
anticipated or for the above situations for one or more selected costing levels.
Management Requirements
Support of cost reduction concepts
Support of strategic decision-making:
- Which products
- Where or how to produce
Support of operative decision-making:
- Pricing
- Manufacturing efficiency
Legal Requirements
Valuation of:
- Raw materials
- Semi-finished goods
- Finished goods
Work in process
Reserves for imminent losses
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Sales-Order-Related Production is used when the activity output does not take place until
after a sales order has been received. With sales-order-related production, they are first sold,
and then manufactured. If the sales order alone does not provide all functions or options for
integration that you desire, you can combine the sales order with other cost objects, such as
projects or networks. This is especially recommended for complex make-to-order production
scenarios, such as: Make-to-order production to customer specifications/ Complex products
like structures, ships, etc./ Large-scale variant manufacturing
-
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When you are manufacturing in-house with reference to a sales order in complex make-toorder production
When you are purchasing customer-specific trading goods with reference to a sales order
and reselling them to your customers
When you are providing services whose costs are assigned to a sales order
When you want to collect the sum of the actual costs incurred for the sales order item on
the sales order item (standard cost of goods manufactured of sales plus variances).
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If you are using the controlling level Production version, the product cost collector is created for the
characteristics material, production plant, planning plant, and production version. ! SAP recommends this
controlling level whenever you are using production versions. In repetitive manufacturing, you should always
use this controlling level.
If you are using the controlling level BOM/Routing, the product cost collector is created for the characteristics
material, production plant, planning plant, BOM, and routing. ! BOM/Routing should only be used if the material
does not have any production versions.
If you are using the controlling level Production Plant/Planning Plant, the product cost collector is created
for the characteristics material, production plant, and planning plant. These product cost collectors have a
number of features. For example, it is not possible to create a preliminary cost estimate for a product cost
collector. This affects subsequent functions. Problems may arise if you make changes to the reporting points of
the production versions.
A product cost collector is an order. The order type of the product cost collector must
belong to order category 05 (product cost collector). A results analysis key must be specified
in all product cost collectors for which you want to calculate work in process. When the
product cost collector is settled, the system apportions the balance among the different stock
in accordance with the delivery values for the period. The settlement process generates the
distribution rule automatically on the basis of the delivery values. The system creates
equivalence numbers based on the delivery values, and transfers these equivalence numbers
into the dynamic distribution rule. For preliminary costing and simultaneous costing, enter the
costing variant and valuation variant in the order type.
Preliminary Costing
- Based on: Costing lot-size of production process; BOM and Routing; Costing variant
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In Customizing, you can use a valuation variant to define which cost estimate should be
used to calculate the target costs for the valuation of the work in process and the scrap. If
you are using a product cost collector, in many cases it is appropriate to calculate the
target costs using the preliminary costing for the product cost collector. You assign a
valuation variant for work in process and scrap to a combination of controlling area,
Results Analysis version and Results Analysis key.
Results analysis versions contain information on whether a version is relevant for
the balance sheet and the profit and loss statement or if it solely serves informational
purposes.
Results analysis keys contain control parameters for WIP calculation. The order
(product cost collector or manufacturing order) is only included in WIP calculation, if it
has a results analysis key.
Definition: results analysis = A periodic valuation of long-term orders and projects.
Results analysis valuates the relationship between the costs and a measure of the
order's progress toward completion, such as the revenue or the quantity produced.
Results Analysis cost elements of type 31
Definition: line ID = A concept used to structure the costs and revenue of a results
analysis object. You define a line ID to be able to group the results analysis data (such
as work in process) into source cost elements. For example, you could define a line ID
for all direct costs of production. Direct material costs K (costs)/ Accrued costs N
(not included).
When the work in process is settled, a posting document is generated in FI. When the
system capitalizes the work in process, it debits Unfinished Goods Inventory (WIP) (balance
sheet account) and credits Changes in Unfinished Goods Inventory (WIP) (income
statement account).
! The WIP GL account, although it is a P&L account it does not use a primary cost element,
but a Results Analysis cost elements of type 31
Variance Calculation
In variance calculation, target cost versions are used mainly to control the type of variance
(total variance, production variance, or planning variance). They can also be used to valuate
the scrap variances. The standard system uses the following target cost versions:
- Target cost version 0 (total variance). The total variance equals the order balance. For
this version, choose actual costs as the control costs and standard cost estimate as the
target costs.
- Target cost version 1 (production variance). For this version, choose actual costs as
the control costs and preliminary costs as the target costs.
- Target cost version 2 (planning variance). With target cost version 2, the costs in the
preliminary order cost estimate are interpreted as control costs. For this version, choose
planned costs as the control costs and current standard cost estimate as the target costs.
You cannot calculate planning variances for product cost collectors.
- Target cost version 3 (production variance of the period). You compare the planned
costs of the period calculated on the basis of an alternative material cost estimate (such as
a modified standard cost estimate) with the actual costs of the period on the basis of the
yield delivered to inventory in the period. The base quantity for variance calculation is the
yield. For this version, choose actual costs as the control costs and alternative material
cost estimate as the target costs.
Variance Categories
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Settlement
Settlement transfers the variance values and WIP values to FI and CO-PA and Material Ledger
(if active).
Price
Inventory account
You can settle the variance categories to Costing-Based Profitability Analysis (CO-PA).
The only variances that are relevant for settlement to Profitability Analysis are those
calculated on the basis of target cost version 0. The value fields are assigned to the variances
for each category and cost element. If the price difference account has a corresponding cost
element, the price difference is settled to Account-Based Profitability Analysis in a similar
way as to Financial Accounting.
Settlement Profile
The settlement profile for a product cost collector must
allow settlement to a material. If you want to settle
variances to Profitability Analysis, the Variances
indicator must be selected and settlement to a
profitability segment must be allowed.
The settlement profile is defaulted through the order
type of the product cost collector.
The settlement profile also has fields for the allocation structure and the PA transfer
structure. These structures control settlement to costing-based Profitability Analysis. In the
PA transfer structure, you specify which variance category and cost element groups are
assigned to which value fields in Profitability Analysis.
flat rate billing document with list of the actual effort; resource related creation of quotations;
flat-rate quotation with list of planned effort.
Preliminary Costing
TFIN22_1
Unit 1 Profitability Management
Overview of Profitability Management
Methods of Profitability Management
Cost-of-sales accounting With this method, the emphasis
is on matching the revenues for goods or services provided, or
both, such as the value that a company gains as a result of
sales against the related expenses for the items for which the
value is lost when products are transferred out of the company.
As a result, this accounting method displays the profit and loss
information in a way optimized for conducting margin
analyses, and as such it is optimal for the sales, marketing, and product management
areas.
Period accounting With this method, the emphasis is on summarizing the activity and
situational change over a period of time for a given organizational unit. As a result, this
accounting method presents the revenues and primary expenses that have been incurred
during a given period of time and the changes in stock value levels, work-in-process, and
capitalized activities. As such, it is optimal for the production and profit center areas.
Views of Profitability Management
Sales Reporting CO-PA allows you to analyse the profitability of specific market segments,
structured according to products, customers, and summarizations of these and other
characteristics as well as organizational units, such as company codes or business areas. The
aim is to provide your sales, marketing, product management and business planning
departments with the market-oriented controlling information to support the decision-making
process.
Responsibility Reporting You can use EC-PCA to analyse internal profit and loss for profit
centers. This allows you to evaluate the different areas or units within your company. You can
structure the profit centers of your company according to region, such as branch offices and
plants, or functions, such as production and sales, or products, such as product ranges and
divisions. Profit Center Accounting is a component of Enterprise Controlling
Profitability Analysis and Profit Center Accounting
Profitability Analysis by Market Segments
32
statements under the period accounting format and philosophy. Notice that the cost-ofsales accounting in EC-PCA can also be undertaken with the aid of functional areas.
Organizational Units and Master Data
Operating concern the key organizational unit in the
Profitability Analysis, for which the sales market has a
uniform structure. One or more controlling areas are
assigned to an operating concern when organizational
structures are defined. In most cases, corporations have
only a single operating concern, which is recommended
for the sake of simplicity and convenience if all
controlling areas and company codes share the same
fiscal calendar.
Parallel
Currencies
Profitability Management
in
accounting in Profit Center Accounting. If you want to use cost-of-sales accounting, you have
to activate the COS accounting scenario and configure the corresponding settings.
Global Settings in New General Ledger Accounting for Profit Centers
Ledger Definition and Profit Centers
The dummy profit center is the primary default value for postings to an account
assignment object in an accounting area if no other profit center is assigned. In the new
general ledger - in contrast to classic Profit Center Accounting - you do not have to
define or use a dummy profit center. Postings are simply made without profit centers and
then assessed or distributed to the desired profit centers.
Create Dummy Profit Center: You do not specify a validity period. The dummy profit
center is automatically valid for the maximum validity period./ You cannot copy the
dummy profit center from an existing profit center./ A flag identifying the profit
center as the dummy profit center is set automatically (in the indicator folder).
Default profit centers are profit centers that do not reflect an organizational area of
responsibility, but instead are used to collect costs, revenues, and postings to balance
sheet accounts within a posting period. You should only define default profit centers
for accounts for which document splitting is not active.
Profit Center Accounting is based on the chart of accounts that is assigned to Financial
Accounting. These accounts include: Stock accounts: The system uses these accounts to
display the liability and equity sides of the balance sheet. P&L accounts (primary cost
element): The system uses these accounts to generate the profit and loss statement.
Secondary cost elements: These costs are generated through allocations within controlling
Derivation of a Segment The segment characteristic is only derived together with the
profit center characteristic. If no segment is entered manually during posting (only possible in
Financial Accounting transactions), the segment is determined from the master record of the
profit center.
Profit center groups are alternative hierarchies to the standard
hierarchy. You can use them in reporting, distribution and assessment, or
various planning functions. In contrast to the standard hierarchy, these
profit center groups do not have to contain all the profit centers in the
controlling area.
Profit Center
Status
Profit Center Assignments
You assign profit centers to all account assignment objects to which costs and revenues
have been posted. As a result of the assignment logic, the profit center is normally not posted
to explicitly. Instead, data is derived from primary account assignment objects (cost centers,
internal orders).
Cost objects are used in Product Cost Accounting to collect and store costs that cannot be
assigned to objects at a lower level (orders, projects, or cost centers). However, in certain
circumstances, you may need to assign a cost object to a profit center.
Unlike other assignment objects, profitability segments do not have master records. A
profitability segment is a combination of characteristics, such as a customer, product, plant,
distribution channel, and so on. The profit center is always one of the characteristics.
Profit centers are assigned to the various data-bearing structures in the project rather than to
the project definition itself. These structures are: Work breakdown structure element
(WBS element)/ Network header/ Network operation
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Unit 6 Structures
Overview of Operating Concern
- Operating concern -> Controlling area ->Company Code ->Plant
Basic Concepts: Characteristics and Value Fields
Characteristics What do I want to report on? Divisions, Regions, Products, Customers.
Characteristic Values What values can I have for these characteristics? Region South;
Region North.
Profitability Segments What is the technical definition of my sales channel? Combination
of Region North, Product Prod1, Sales Rep Miller. The combination of the values for the
characteristics is a Profitability Segment.
Value Fields What performance measures do I want to track and analyse? Gross Sales,
Surcharges, Discounts, Cost-of-Sales.
Characteristics
- ! Characteristics are valid in all clients and are available for all operating concerns
- Definition: Characteristics are the analytic dimensions of the Profitability Analysis. They
define what items or objects the user can evaluate.
Fixed characteristics: A number of fundamental characteristics are automatically
predefined in every operating concern. These include the product number,
company code, billing type, business area, sales order, customer, and the
Sampl
controlling area, to name but a few. In addition to the fixed characteristics, up to 50
e
Chara
non-fixed characteristics can be added to an operating concern.
cterist
Predefined characteristics: In addition to the fixed characteristics, a number of
other predefined characteristics are available in the field catalogue. Such
characteristics include customer group, customer district, and country, and they
can be added to your operating concern if desired.
Characteristics from SAP tables: You can define your operating concerns by
using characteristics that already exist in other applications. For example, you can
select fields from the tables for customer master records, material master records,
Create
and sales documents. You can also select the partner roles defined in the structure
d by
PAPARTNER in the Sales and Distribution (SD) application and use them as
Custo
characteristics in Profitability Analysis.
mer
Custom Characteristics: If the characteristic categories are insufficient for your
needs, you can define completely new characteristics from scratch for exclusive use
in Profitability Analysis. To derive values for these newly defined characteristics, you
need to create your own derivation rules.
These non-fixed characteristics must be added to the field catalog before they can be used
to define a new operating concern. The field catalog originally contains some suggested
characteristics which might be used in a new operating concern definition. There are two ways
to add other characteristics to the field catalog:
- Choose an existing field from certain SAP tables, which must be five characters long or
less.
- Create a characteristic independently, which should begin with WW and be four to five
characters total.
Value Fields
Value fields are only required in costing-based Profitability Analysis. These are the fields that
contain the currency amounts and quantities that you want to analyse in CO-PA. They
represent the structure of your costs and revenues. Value fields can either be highly
38
! Unlike characteristics, there are no fixed value fields for a new operating concern.
All value fields must exist in the field catalog before they can be used to define a new
operating concern. The field catalog originally contains some suggested value fields, which
might be used in a new operating concern.
Value fields can also be defined independently. These should begin with VV..., and should
be four to five characters in total.
CE1xxxx for actual line items (where xxxx = operating concern), which contains all the
data at the most detailed level
- CE2xxxx for Planned line items
- CE3xxxx for values posted to the profitability segments that are additionally
available broken down into the posting period.
- CE4xxxx for profitability segments, created based on the business considerations that
are defined when an operating concern is created.
Typical record lengths: CE4xxxx = 250 bytes, CE3xxxx = 2000
bytes
Segment Level and Non-Segment Level Characteristics
- For reasons of performance, we recommend that the number of profitability segments be
kept as low as possible so that the quantity of the totals records required in the profitability
segment also remains low. You can achieve this by restricting the selection of
characteristics for the profitability segment.
Operating Concern Templates
- S_AL: Template for Route Profitability.
- S_GO: Cross Industry Template.
- S_CP: Consumer Goods Industry Template.
Operating concern templates offer the following advantages:
- They enable you to gain an insight into Profitability Analysis as a demonstration, without
your having to perform extensive Customizing.
- The operating concern templates simplify the Customizing in the profitability analysis.
Valuation
Valuation Concept
In costing-based Profitability Analysis, you can configure a function
known as valuation to supplement the performance information
provided directly by a transaction. The additional information may
be estimated, calculated, or retrieved from a different source.
- Valuation can be used with either actual or planning data.
- Valuation can be configured to function either in real-time,
which means at the time data is first posted to CO-PA, or
periodically, which means at some later point when manually
triggered.
- Valuation can be used, for example, to calculate:
o Sales deductions that do not appear in the invoice (such
as cash deductions, rebates, and commission)
o Costs of sales (sold products * standard costs of goods manufactured)
o Calculated direct costs, referred to as the special direct costs for sales (such as
transportation costs, packaging or insurance)
Valuation Strategy and Techniques
Profitability Analysis offers you the following methods of valuation:
- Material cost estimate Valuation using material cost estimates lets you determine the
cost of sales when you post a sales transaction to Profitability Analysis. For this, the
quantities of products sold are multiplied by the standard costs of goods manufactured,
thereby including in the contribution margin analysis detailed fixed and variable cost
components for the cost of goods manufactured in the individual contribution margins.
(Customizing: assign Cost component values -> Value Field using costing keys 41
determines which product cost estimate is used to valuate value fields in Profitability
Analysis (CO-PA).
Costing sheet You can use the condition technique to calculate values in CO-PA that,
although relevant for analysis purposes, such as calculating a contribution margin at each
level, are not yet established when the document posting occurs. This means in particular
that you can determine anticipated sales commissions, discounts, or shipping costs that
are not yet known at the time of billing, and use this information to analyze your sales
transactions. (Customizing: )
User Exit Customer-defined valuation routines are available for cases where anticipated
valuation approaches cannot be determined using either of the two preceding methods.
This means that you can implement your own valuation logic.
Costing based
Account based
X
You should divide your assessment into separate cycles if you want to allocate the different
areas of your organization to CO-PA at different times. This also has the advantage that
when errors or changes occur, you only need to repeat the affected cycles.
! A cycle can contain the sender cost centers or sender processes from one controlling
area and can use the values from either costing-based or account-based Profitability
Analysis as tracing factors.
The sender cost centers or processes are credited in the assessment cost element
specified in the segment of the cycle. The receiver is defined by a combination of
characteristic values, which means a profitability segment. The values are debited to the
profitability segment using the assessment cost element, such as account-based CO-PA
and value fields, such as costing-based CO-PA, which you specified for each segment of
the cycle.
Settlement of Orders
In the SAP system, you settle internal orders, sales orders, projects, as well as production
orders, and run schedules with production cost collectors to profitability segments. These
objects are used for the various purposes that are relevant to Profitability Analysis.
- Internal orders and projects can be used to control the costs of an internal activity, such as
the costs of an advertising campaign. At the end of the activity, they are settled to the
appropriate profitability segments, such as the product range and sales area.
- You can also use Management Accounting orders to calculate the anticipated values to be
able to evaluate the accuracy of your accrual method.
- A third possible use of internal orders or projects is in make-to-order manufacturing. If you
are handling sales orders, a customer project or a Management Accounting order to which
revenue postings are allowed, you can post costs, such as production costs and S costs, as
well as revenue and sales deductions to the order or project. When the product is
complete, the costs and revenues can be settled to Profitability Analysis. You can also
transfer the accrued values that are particularly important for progress billing.
Settling Orders Customizing
- In a settlement profile, you define which receivers are allowed for order settlement. You
define a default settlement structure and a default PA transfer structure. When you create
an order, you need to specify an order type. The system uses this order type to determine
which settlement profile and, as a result, which settlement structure and PA transfer
structure to use.
o In account-based CO-PA, costs are settled to the settlement cost element specified
in the settlement structure.
o In costing-based CO-PA, costs are settled from the original cost elements to the
value fields to which they are assigned in the PA transfer structure.
PA Transfer Structure
The PA transfer structure contains the assignment of costs and revenues to the value fields in
costing-based CO-PA.
- A PA transfer structure consists of any number of assignment lines. Each assignment line
contains the assignment of one interval or a group of cost or revenue elements to the
required value field.
- A PA transfer structure must meet the following criteria:
o It must be complete: All the cost and revenue elements that can receive costs or
revenues must be assigned to a value field in the PA transfer structure.
o The assignments must be unique: Each cost or revenue element can only occur
one time within a PA transfer structure.
An allocation structure consists of one or several settlement assignments. An assignment
defines which costs (Origin: Cost element groups from debit cost elements) are to be settled
to which receiver type (for example, cost center or order). You have two alternatives in
settlement assignment:
- You can assign the debit cost element groups to a settlement cost element.
43
You can settle by cost element, which means the debit cost element is the settlement cost
element.
Direct Postings
Direct Posting from Financial Accounting
Direct posting enables you to post direct costs, revenue, and sales deductions to profitability
segments. You assign the values to a profitability segment directly in the Financial Accounting
(FI) posting transaction. There, you can call up a special assignment dialog box for each
posting line by clicking the Prof. segment field.
- For direct postings in Financial Accounting, all the assignments of values and quantities to
the value fields in costing-based Controlling Profitability Analysis (CO-PA) are defined in the
PA transfer structure, FI, which you maintain in Customizing.
- In account-based CO-PA, the data is posted in the same cost or revenue element.
- If your system allows dual postings to both a profitability segment and a cost center, the
real posting always goes to the profitability segment. The cost center is posted only
for statistical purposes.
Value Flow from Cost Object CO
After finishing the production process or at the end of the period, the production order will be
settled to a price difference account. Additional period-end closing activities may be
performed: Calculation of overhead/ Calculation of work in process (WIP)/ Calculation of
variances
Settlement of Variances to PA
- You can settle or transfer the production variances calculated in Product Cost Controlling
for both final production orders as well as run schedule headers, settled periodically to
Controlling Profitability Analysis (CO-PA). The individual variance categories, such as
material price variance and material quantity variance, can be transferred separately.
- Notice the following when you define a PA transfer structure:
o Every debit cost element must be in the PA transfer structure. You can either group
all the cost elements into a cost element group or define a number of groups for
materials, internal activities, business processes, and other overhead costs. These
groups are entered in the cost elements area.
o Every variance category must be represented in the PA transfer structure. The
variance categories are specified by the system and are entered under the source
section.
o Each debit cost element or combination of cost element group and variance
category can only be assigned to one value field.
- You should make sure that:
o The current standard cost estimate is selected for valuation in Profitability Analysis.
o The cost components of the standard cost estimate are linked to value fields.
- Settlement to account based CO-PA is not standard (!) but an option.
Top Down Distribution
Top down distribution of actual data is a periodic function that enables you to distribute this
aggregated data to extensive levels, such as the division level or the customer level in CO-PA,
based on reference information, such as the data from the previous year. This function works
in the same way as top down distribution of plan data.
You can select the values posted to any profitability segments and value fields and then
distribute this data to a predefined distribution level. You can use the existing actual or plan
data as the basis for this distribution. You can also distribute period by period or aggregate
the period values to smooth out variances.
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Schedule Manager
- The closing process is more transparent and easy
to handle.
- Event-driven processing means that the SAP
system automatically performs the necessary
steps.
- Monitoring the complete process is user-friendly.
- Worklist-driven error analysis and integrated error-handling procedures reduce the time
needed for error correction.
- Total processing time is minimized by optimized worklist processing.
Flow Definition: In a flow definition you can link the tasks to one another if they are related
or if they should be processed in a worklist.
Scheduler: In the scheduler, you can schedule tasks in a structure tree. You can use dragand-drop in a daily overview to enable the system to execute the tasks at a certain time.
Monitor: Provides an overview of the scheduled tasks during and after processing. You can
correct faulty objects in a worklist.
Worklist: Objects that are to be processed in a processing step sequence are managed in the
worklist. The worklist monitor presents information, such as the objects that were processed
without errors and the objects that could not be processed.
Unit 9 Tools
Realignment and Customizing Monitors
The realignment function alters the definitions of the profitability segments in the database.
- Its primary use is for restating historic data so that it makes sense in the context of the
current market situation.
- Notice that it can also be used to correct the mistakes in CO-PA and populate the
characteristics that have recently been added to an operating concern on historic
summary records.
- ! A realignment affects all the historic data in the CO-PA data structures.
Customizing Monitor
You can use the Customizing Monitor to carry out three key analysis functions:
- Overview of the organizational structures: The organizational structures for the
current operating concern are displayed here.
- Where-used list: In this list, you can display an overview of the objects in which a
characteristic or value field is used in CO-PA Customizing.
- The report overview specifies the reports in which particular characteristics are used. In
this way, you can set up certain useful summarization levels.
Unit 10 Planning
The Profit Planning Process
- Planning on Different Levels:
o Sales organization Marketing costs
o Customer group Sales costs
o Customer product group Sales volume, revenue
o Product COGS
Planning Layout
Planning layouts are customized screens for entering plan data. The definition of a planning
layout controls not only the appearance of the Planning screen but also some of the functions.
This allows for complete flexibility in controlling the planning entry process.
A planning layout definition consists of three parts:
- General data selection - characteristic values are specified that are valid for the entire
layout.
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46
Contents
TFIN20_1.................................................................................................................................... 1
Unit 1 - Overview of Management Accounting........................................................................1
General Tasks of Management Accounting..........................................................................1
Integration Within Management Accounting and with Other SAP Applications....................1
Unit 2 Organizational Units................................................................................................... 1
Unit 3 Master Data................................................................................................................ 2
Cost Centres........................................................................................................................ 2
Cost elements...................................................................................................................... 3
Activity Types....................................................................................................................... 3
Statistical key figures........................................................................................................... 3
Global Functions for Master Data......................................................................................... 3
Unit 4 Event-Based Postings................................................................................................. 3
Entering Primary Postings.................................................................................................... 3
Reports in Cost Centre Accounting....................................................................................... 4
Account Assignment Tools.................................................................................................... 4
Adjustment postings............................................................................................................ 4
Direct Activity Allocation...................................................................................................... 4
Unit 5 Period-End Closing..................................................................................................... 4
Accrual Calculation.............................................................................................................. 4
Entering Statistical Key Figures............................................................................................ 5
Periodic Reposting................................................................................................................ 5
Cost Allocations................................................................................................................... 5
Period Lock........................................................................................................................... 6
Unit 6 Internal Orders: Overview.......................................................................................... 6
The Different Scenarios for Internal Orders..........................................................................7
Unit 7 Master Data of Internal Orders...................................................................................7
Master Data Maintenance.................................................................................................... 7
Status Management for Overhead Cost Orders....................................................................7
Grouping and Collective Processing..................................................................................... 7
Unit 8 Transaction-Based Postings........................................................................................ 8
Event-Based Postings Within and Outside Management Accounting....................................8
Commitment Management.................................................................................................. 8
Unit 9 Period-End Closing of the Internal Orders..................................................................8
Periodic Debit Postings......................................................................................................... 8
Periodic Credit Postings........................................................................................................ 8
Unit 10 Planning, Budgeting and Availability Control............................................................9
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49