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Using the controlling component, we can provide the information to the management for
the performance analysis and decision making. The controlling component is always
concerned with analysis of “expenses and income”. It is also called “internal reporting
tool”.
Controlling object: It is the entity for which the information is maintained and analyzed
in controlling. The following controlling objects are available in SAP controlling.
Cost object: it is the unit of production or service for which the cost is ascertained and
controlled.
SAP ECC system extracts the different types of information from different modules and
maintains them for every controlling objects as follows
MM-material consumption
SD-sales revenues/sales related expenses
PPC-production information
HR-employees cost
AA-depreciation
P/m-repair costs/maintenances costs
FI-all other expenses (over heads)
Controlling area: it is the organization area in controlling for which all the controlling
activities are performed. There are two scenarios in maintaining the controlling area.
i.e., all the company codes under the company are assigned to same controlling area. The
incomes and expenses of all the company will be available in the same controlling area,
as a result we can compare the cost & incomes of one company codes with that of
another company codes. i.e., it is called cross company code. To assign several company
codes to one controlling area. The following two conditions must be satisfied.
Cost center standard hierarchy: It is the arrangement of cost centers for the reporting
purposes. It is mandatory that we should have one cost center standard hierarchy for each
controlling area. There can be only one cost center hierarchy for controlling area.
Versions: It is the set of values for alternative plans (It is nothing but budget)
Primary cost element: These are the cost elements which have corresponding GL
accounts in FI, to which cost elements, we can post directly.
Ex: Trade discount, sales men commission……. This is also used in PA.
The primary cost elements arise due to the consumption of production factors and
sourced externally.
Secondary cost element: These are the cost elements which do not have corresponding
GL A/c in FI and to which cost elements we can not post directly. Secondary cost
elements are created only in CO. The secondary cost elements arise due to the
consumption of production factors and sourced internally.
42---- To apportion the cost of service cost center to other cost centers(Assessment).
Cost object: Cost object means a cost or revenue collector. Where in all the costs or
revenues are collected for a particular cost object.
Ex: Cost center, Production order and internal order
Using the cost center accounting, we can identify which department, which group of
people, which machinery or group of machines or which activity or which manufacturing
process or which phase of a particular manufacturing process is responsible for the cost.
Cost center: it is an area of activity or a area of responsibility for which, the cost are
incurred. We can design our cost center based on one or more of the following criteria.
Functional requirements
Allocation requirements / Allocation criteria
Physical location
Responsibility for cost
Based on the reporting requirements of the management, we design the cost centers with
the help of settings done in the cost element accounting. Whenever any expenses posted
in any module they are automatically identified with respective cost centers. This is
called the actual expenditure for every cost center. We can also plan for the expenditure
of every cost center. Using this actual information and planned information, we can
generate the variance reports. In the cost center accounting, we have to maintain the
master records for the following objects.
Cost element
Cost center
Statistical key figure (SCF)
Activity type.
Naming logic for the cost centers (ex) : the cost center identification contains , seven
digits from the left . the first two digits represents the company code , the next two digits
represents the functions , such as production , service , finance , marketing & HR…. the
last three digits represents the individual cost centers.
Cost Center Category: The cost center category controls the Activity which we can
perform for every cost center created under the category. The following activities we can
perform for every cost center (Transaction code: OKA2).
Posting of quantities
Posting of Actual Primary costs
Posting of Actual Secondary costs
Posting of Actual Revenues
Posting of Planned Primary costs
Posting of Planned Secondary costs
Posting of Planned Revenues
Cost Center Groups: Based on the common attributes among the cost centers, we can
group them together. These are called Cost center groups. These groups are used for
planning and reposting of costs.
Reposting of Costs: This activity is used to transfer the costs from one cost center to
another cost center with cost element wise. This activity can also be used to rectify the
wrong allocation of costs. In this case, only CO document will generate.
Cost center group: Based on the common attributes among the cost centers, we group
them together these are called cost center groups.
Production cost center: It is the cost center in which the actual production carried on.
Service cost center: It is the cost center whose services are required to carry on the
production smoothly.
Ex: Canteen, plant maintenance, power generation and admn.
Cycle: Cycle is a program which is executed at the end of every month for assessment
and distributions. A cycle can contain any number of segments (parts).In every segment,
we can define the sender cost centers, receiver cost centers, and assessment cost elements
and receiver gracing factors.
Activity type: It is the nature of activity carried on in a cost center, we can measure the
Quantities of each activity type. The activity type quantities can be used as the basis in
the apportionment of overheads. We have to maintain a master record for each activity
type in cost center accounting.
Statistical Key figures: This is the information, which is used as a base for assessment,
distributions and periodic reposting of overheads.
There are two category of statistical key figures- Fixed and Totals
Fixed Category: These are the statistical key figures which remains same over a period
of time. Ex: No.of employees etc
Totals Category: These are the statistical key figures which change in every field.
Ex: No.of telephone calls.