Following on the success of his April “Ask a Fixer” webcast for ERPfixers, best-selling author and SAP FI/CO expert John Jordan of ERP Corp. returned on July 14th and discussed how to get costs into SAP Controlling and how to allocate them accurately to individual products. While the allocation of costs directly attributable to the manufacturing of individual products is relatively straightforward, allocation of overhead costs can be surprisingly difficult, involving techniques including activities, costing sheets, and activity-based costing. John will look at the developments from ECC to SAP S/4HANA to improve the accuracy of cost and revenue flows and reconciliation with the General Ledger.
In this session, learn more about:
- Data flows within SAP Controlling
- How to take advantage of the functionality to better understand and improve your company's profitability
- Developments from ECC to SAP S/4HANA to improve the accuracy of cost and revenue flows
- Reconciliation with the General Ledger
- How data flows into Controlling in ECC and S/4HANA
- Merging FI and CO with the Universal Journal in S/4HANA
- Compare cost objects in cost-based CO-PA with Margin Analysis posting
Watch The Recorded Webcast:
Q&A
Q: When do we use template allocation?
A: You use templates to allocate overhead when you need more flexibility than provided by costing sheets. For example, if you want to base the overhead allocation on the weight or volume of a product.
Q: Please share link of automatic account determination blog
A: Account determination blogs: https://www.erpcorp.com/sap-controlling-blog/fundamentals-of-mm-fi-account-determination, and https://www.erpcorp.com/sap-controlling-blog/sap-automatic-account-assignment-entries
Q: Would you recommend using SAP variance categories or more user friendly own variance categories?
A: I recommend you use standard SAP variance categories. There is nothing to stop you from trying your own custom variance categories though.
Q: Is there a way to have cost center variances reported in Margin Analysis without executing additional transaction of assessment?
A: It would be difficult to report cost center over/under absorption in Margin Analysis since this does not correspond to a G/L account. You typically want to assess over/under absorption to Margin Analysis so that you can spread it across products via top-down distribution.
Q: Talking about data flow in SAP S/4 Hana, can we organize data to have standards costs reflected in transactional currencies?
A: Without SAP Material Ledger, inventory is valued at company code currency and legal valuation. Material Ledger allows you to value inventory in up to three valuation approaches. S/4HANA allows you 8 freely definable FI currencies which you may be able to map to your 3rd ML currency.
Q: Is it possible to ACTUALIZE the sales overhead cost absorbed in Cost estimate via Costing Sheet, like we do in tcode CON2?
A: Revaluation at actual activity price to eliminate cost center over/under absorption does not apply to costing sheets. Interesting concept though.
Q: How do you see the difference between production order Vs process order VS PCC?
A: On the costing side there is little difference between production and process orders. WIP is valued at actual on orders and at target on product cost collectors.
Q: Does SAP Provide any Report on Gross Margin Analysis using COPA Characteristics with Cost Component Split.
A: You may have to write your Gross Margin Analysis report with Cost Component Split.
Q: Is there is any standard report to show Collective Materials cost component, something like a CKM3N collective?
A: My blog discusses how to display cost components as columns in collective reports: https://www.erpcorp.com/sap-controlling-blog/add-cost-component-groups-to-cost-components
Q: For OH cost allocation from Cost Center to materials is it industry standrd to use a Costing Sheet or Activity Types ( as for Direct labor activities )?
A: It is easier to distribute overhead across products with costing sheets. This is a month-end activity. Allocating overhead with activity confirmation allocation occurs in real-time.
Q: Will overhead cost become part of product cost or will it be used only for profitability analysis?
A: If you include overhead in the standard cost estimate, then it becomes part of the product cost.
Q: What is the difference between SAP FI and CO?
A: FI is for external legal reporting. CO is for internal management reporting.
Q: How are all expenses posted from FI to CO?
A: All FI expense GL accounts are assigned a CO primary cost element which requires you to assign a CO cost object for every posting.
Q: Do material expenses in production pass-through cost centers?
A: No. Components are issued directly to production orders.
Q: What movement type issues components to production orders?
A: Movement type 261.
Q: What SAP table stores automatic account determination G/L accounts?
A: Table T030.
Q: What defines a production cost center?
A: You confirm activities from a production cost center to a production order.
Q: How do you allocate overhead cost from an overhead cost center to a production cost center?
A: Assessment.