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SAP-TO BE Process
Cost Center Accounting

New Allenberry Works

CO 002 NAW
Controlling

Version 1.0
28.09.2006

STATEMENT OF CONFIDENTIALITY / DISCLAIMER

This document is the property of Caritor, Inc. No part of this
document shall be reproduced, stored in a retrieval system,
or transmitted by any means, electronic, mechanical,

Table of Contents

Table of Contents
1

Cost Center Accounting.........................................................................................................................3

AS IS Process.........................................................................................................................................................3

Core to Be Process.................................................................................................................................4
General Explanation...............................................................................................................................................4
Cost Center Creation..............................................................................................................................................5
Cost Center Change...............................................................................................................................................5
Planned activity price calculation............................................................................................................................6
Transfer of Primary costs........................................................................................................................................6
Default Cost Centers..............................................................................................................................................8
Changes to Existing Organization..........................................................................................................................8
Description of Improvements and Key Metrics.......................................................................................................8
Notes on Further Improvements.............................................................................................................................8
Functional Deficit and Method to Remove That......................................................................................................8
Interface Requirement............................................................................................................................................8
System Configuration Considerations....................................................................................................................8
File Conversion Considerations..............................................................................................................................8
Any reports required related to current business process......................................................................................8
Any document/output would be printed for this business process..........................................................................8
Authorization Considerations..................................................................................................................................8
End User Training Requirements............................................................................................................................9

SAP Standard Reports..........................................................................................................................10

Custom Developments.........................................................................................................................11

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1 Cost Center Accounting

TO-BE Document
For SAP R/3 Implementation at New Allenberry Works.

Sr. No of TO BE document

CO-002

Ref. Sr. No. Of AS-IS document

N/A

Name of Business Process:

Cost Center Accounting

Module: CO (Controlling)

Sub module: Cost Center Accounting

Version no of document: 1.0

Date: 28.09.2006

Version Management This Document is subject to change control. Every change of the document has to Undergo change
control procedure and has to be registered in the following table
Version

Change

Prepared By

Date

AS IS Process
There is no AS-IS process existing for Cost Center Accounting. Expenses are captured at GL A/c level / individual
level / department level, depending upon nature of expense.

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2 Core to Be Process
Following are the processes in Cost Element Accounting:

Cost Centre creation

Cost Centre change
Transfer of Primary costs to cost centre
Cost Reposting

General Explanation
The Cost Center Accounting component (CO-OM-CCA) tracks where costs occur in your organization. The cost
center is an organizational unit in a controlling area. Cost centers can be defined for each low-level organizational
unit that has responsibility for managing costs. As costs are incurred, they are assigned or posted to the appropriate
cost center. These costs could include payroll costs, rent and utility costs, or any other costs assignable to a given
cost center.

Cost center master

A cost center represents the location of cost occurrence. . It can be set up based on function, geographical location,
area of responsibility, activities / service provided or allocation criteria.
The cost center structure should serve the following purposes:
All reporting requirements require costs to be displayed separately for a department / function.
All allocation requirements that require costs to be identified separately and put in separate buckets such that they
could be directly picked up for different basis of allocation
The Cost Centers at NAW represents the following:
Functional Departments are created as cost centers to collect the costs incurred at each of the Plants.
One Cost Center will be created for NAW, Rudrapur and one for NAW, Kolkatta to collect all the costs
The production cost centers have been designed to represent 1 work center as 1 cost center. The
costs recorded under these cost centers will be relevant for activity price calculation and revaluation of
cost objects.

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Cost center categories
Cost centers have been classified into the following categories: 1. Production (This will cover production and overhead cost centers)
2. Service (Other Cost Centers)
Standard hierarchy
The standard hierarchy is the organization structure from the cost controlling point of view. The cost center hierarchy
is classified into: 01-Production
02-Production Support
03-General and Administration
04- Selling and Distribution.
05-Plant Segment.
Every Cost Center will have 8 digits and the coding is as follows:
First 4 digits for the Cost center will be the plant number in sap, Next 2 digits will be Cost Center
Category and the next 2 digits will be cost center numbers

Cost Center Creation

Cost center is created in a controlling area and assigned to a company code.
Initial cost centers will be created valid from 01.01.2006
The authorization for creating the cost center master shall be with the CO Core Team.
Cost center code will be externally assigned at the time of creation
Each Cost Center will be attached to one Profit Center.

Cost Center Change

Cost center master data is maintained on a time dependant basis.
Change in cost center can be made individually or collectively. It is also possible to re-group the cost center from one
cost center group to a different cost center group in a hierarchy, thereby enabling reporting on a new hierarchy.
The authorization for changing the cost center master shall be with the CO Core Team/Costing department. The
system will maintain the history of changes in the cost center master.
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Planned activity price calculation
In the initial period, the activity price will be calculated outside the system and manually entered as a rate per hour.
After the system has stabilized over a period of time, the operating rate can be calculated from system also. This
overhead rate is used in product cost planning to arrive at the planned cost of production

Transfer of Primary costs

When the actual expense is accounted in the FI module, the costs are simultaneously updated from the controlling
perspective. It is ensured that all costs are compulsorily debited in CO. This may take place as follows: -

Consumption of stock items from MM

The consumption of certain material may not have a direct relation to the product but to the cost center. The
goods issue is assigned to a cost center. In this case goods receipt is inventorised and consumption is
booked at the time of goods issue.
Consumption of non-valuated items from MM
Certain material cost is not inventoried but is charged off at the time of purchase itself. The item is assigned
to a cost centre in the purchase order. In this case consumption is booked at the time of goods receipt and
goods issue has no accounting implication.

Consumption of non-stock items from MM

Certain material are not stocked but is charged off at the time of purchase itself. The item is assigned to a
cost centre in the purchase order. In this case consumption is booked at the time of goods receipt. For
example: - Printing & Stationery is issued to P&A Cost Centre.
Allocation of actual costs
The actual overheads for support cost centers like Stores, Purchase etc. are allocated to the production cost centers
using actual statistical key figures. Allocations will be done using secondary cost allocations viz. Assessments.

Cost Allocations in SAP shall be done using the procedure of Reposting, Distribution & Assessment.

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SAP-TO BE Process
Under this procedure, the costs collected on a cost center during the accounting period are allocated to
receivers. These are indirect allocation methods, because the exchange of activity is not the basis for
allocating costs/quantities. Instead, user-defined keys such as percentage rates, amounts, statistical key
figures, or posted amounts provide the basis for cost/quantity assignment.
These methods are easy to use as the keys and the sender/receiver relationships are usually defined only
once.
For example, the costs of the company cafeteria can be assigned based on the number of employees in
each cost center. Telephone costs are collected on a clearing cost center for each period & then can be
allocated using the process of reposting or distribution/assessment cycles at the end of the period
according to the number of telephone units or telephone installations in each cost center.
Repostings
Periodic repostings is an allocation method that uses rules defined in the form of cycles for correcting
postings to cost centers.
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 exactly
Only primary costs can be reposted. Periodic repostings can be reversed and repeated as often as
required.
Distribution
Distribution is a method of internal cost allocation that allocates primary costs. The allocation is done using
Distribution Cycles by specifying rules for the settlement of primary costs on a cost center
Main features of this process are as below:

The original cost element is retained in the receiver cost center, &
Information about the sender and the receiver is documented in the Controlling document.

Assessment
Assessment is a method of internal cost allocation by which the costs of a sender cost center is allocated
(transferred) to receiver CO objects (orders, other cost centers, and so on) under an assessment cost
element (category 42). The method works according to the keys defined by the user.
It is used when it is unimportant or not possible for the user to know the break down of costs that a cost
center will receive in an allocation. E.g. allocating general & administrative costs. Further analysis is
available through CCA reporting.

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Default Cost Centers
When some costs are attributable to a distinct cost center, it is advisable to default the cost center. SAP provides the
functionality of defaulting any specific expense (G/L Account) into a specific Cost Center. This will make data entry
faster & will reduce mistakes.
Further Notes

Changes to Existing Organization

To enter Cost Center No. with every posting of Expenses related GL A/c in FI/MM.

Description of Improvements and Key Metrics

Cost Center accounting gives cost center-wise cost visibility with-out impacting normal books of accounts. This also
provides the flexibility to do cost allocation.

Notes on Further Improvements

NA

Functional Deficit and Method to Remove That

NA

Interface Requirement
NA

System Configuration Considerations

NA

File Conversion Considerations

NA

Any reports required related to current business process

NA

Any document/output would be printed for this business process

Authorization Considerations
Detailed Authorization matrix will be defined for all users in the common file for all modules.
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The high level Authorization requirements are as below.
Business Roles

Number of Users

Business Manager

Operations Manager

Transaction Owners

End User Training Requirements

Business User Segments

Number of Users

Type of Transaction

Geographical Location

Business Manager

Display, Reports

Faridabad

Operations Manager

Change, Display, Reports

Faridabad

Transaction Owners

Create, Display, Reports

Faridabad

Sign-off (Approval) for this document:

Name of Team members:

Organization / Bus. Unit

Raman Arora / Vinod Atmakuri

Caritor Inc

Vishal Sharma

NAW

Balbir Khanna

NAW

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Signature

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SAP-TO BE Process

3 SAP Standard Reports

SAP Standard Reports

Sl No:

Report Description

Selection Criteria

Output

01

KS01,02,03

Controlling Area

Create, Change, Display Cost

centers

02

KSH1,2,3

Controlling Area

Create, Change, Display Cost

centers groups

03

KS13

Controlling Area / Cost element

Group

List of cost centers

04
05
06
07
08
09
10
11

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4 Custom Developments

Print Requirements
Sl No:
1.0

Report Description

Selection Criteria

Output

NIL

2.0

Development Requirements
Sl No:
1.0

Report Description

Selection Criteria

Output

NIL

Report Requirements
Sl No:
1.

Report Description

Selection Criteria

Output

NIL

2.
3.

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