Table of Contents

1. Controlling.......................................................................................................................................2
PRIMARY AND SECONDARY COST ELEMENT.....................................................................3
2. Currencies in CO.........................................................................................................................3
3. Secondary element category....................................................................................................3
4. Activity type:...............................................................................................................................4
5. Planning:.......................................................................................................................................4
6. Important Notes (CC report & Reposting)..............................................................................6
7. Distribution:...................................................................................................................................7
8. Assessment: KSU5.....................................................................................................................7
9. Internal Order: KO01................................................................................................................7
10. Product cost controlling:........................................................................................................7
11. Costing Variant:.........................................................................................................................8
12. Costing type:..............................................................................................................................9
13. Production planning.................................................................................................................9
1. Material cost estimate with Quantity structure: Can determine product
structure and production plans as...........................................................................................9
2. Material cost estimate without Quantity structure: It is designed to cost
material w/o accessing BOM & routing. We can use this 1. When costing & updating
prices for new material 2. When costing material using non SAP production
planning data.................................................................................................................................9
14. BOM: it is like a directory for an object contains name, reference no. , qty, UOM. 10
15. Routing: Describes a sequence of production steps......................................................10
16. Material Ledger : Material ledger is a line item wise record showing changes in
stock and prices with each material movement in upto 3 currencies. It is used in
Inventory valuation, it is the basis of actual costing.............................................................10
17. Costing Sheet : KZS2............................................................................................................10
18. Cost object controlling: We can determine COGS & COGM.........................................10
19. WIP calculation in production:.............................................................................................10
There are 2 methods:.....................................................................................................................10
20. Overhead costs:......................................................................................................................11
21. Result analysis key: Contains control parameters or calculation for WIP, each
order for which we want to create WIP process must receive RA key. RA key is imp to
ensure that the order is included in WIP calculation during period end closing..........11
22. Variance Key: It is required to calculate variance. It controls whether scrap value
has to be calculated & deducted from total variance and also it controls Log to be
created..............................................................................................................................................11
23. Settlement Profile: Contains settlement parameters which is required to maintain
settlement rule in order. It contains specific which receiver allow to settle, distribution
rule and default structure like allocation structure( contains source CE which is used
to transfer to receiver side), source structure ( group of CE) & PA structure( PA
transfer struc. Assign to group of CE either variance category or value fields but for
production order.............................................................................................................................11
24. Order Type category for Production order:......................................................................12
25. Integration b/w CO-PP.............................................................................................................12
26. Periodic Reposting:.................................................................................................................12
27. CO-PA........................................................................................................................................13
28. Costing based CO-PA: it uses a costing based approach. Here we can valuate
billing docs, sales deduction, cost or even estimated cost. COGS recognized after
goods are billed and before being shipped.............................................................................14
29. Account based CO-PA: Uses a account based approach and provides a
profitability report that is permanently reconciled with FI. COGS recognized after
goods are shipped & before being billed..................................................................................14
30. Steps in CO-PA:........................................................................................................................14
31. Value Fields: Only in costing based CO-PA.....................................................................14
32. What are the No. range element for PA?...........................................................................15
33. Valuation Strategy:.................................................................................................................15
34. Derivation Strategy: it is very useful in COPA report especially for SBU
overwriting data. It contains sequence of steps, logically & sequentially organized
under derivation strategy.............................................................................................................16
35. Standard COPA Reports:......................................................................................................16

1. Controlling
 Maintain CO area: OKKP
Change co. code or CO area: OKKS

Operating Concern: Highest level in CO

One CO area is must, if more than one co. code having same COA then same
CO area can be used for cross co. code. If each co. code having different
COA then we have to create separate CO area for each co. code

 Cost element acting

 Cost center acting
 Internal orders
 Activity based costing
 Product cost controlling
 Profitability analysis
 Profit center acting

PRIMARY AND SECONDARY COST ELEMENT

Primary CE are used for finanacial accounting, by default all p&L GL’s needs
to be created as primary CE e.g electricity bill/ expenditure.
Secondary CE are for cost acting purpose to move costs around in controlling.
E.g production labour activity cost, OH allocation, internal activity allocation,
production cost, material OH

2. Currencies in CO

Co. code currency: 10

Co area currency: 20
Group curncy: 30
Hard curncy: 40

3. Secondary element category

1: expense
11: Revenue
21: internal settlement
31: orders/project
41: overheads
42: Assessment
43: Internal activity etc.

4. Activity type:
Activity type are objects that classifies activity performed at CC, such as
machine hours, consulting hours.
Before creating AT we have to create AT CE like Labour AT, Machine AT,
Assembly AT, Cleaning AT
1. Direct A allocation
2. Indirect A allocation
AT category
1: manual entry, manual allocation ( plan activity Qty manually for AT)
2: Indirect calculation, indirect allocation ( For AT of this category, we plan
AT on sender CC
3: Manual entry, indirect allocation (
4: Manual entry, No allocation

5. Planning:

Input planning:
1. A independent planning
2. A Dependent planning

1. A independent Planning

Create PL for Planning layout like CC planning KP65, AT planning KP75,

SKF KP85
Define planner profile KP34
Change CE/ input planning KP06

KP26: Always Output planning or pricing

KP06: Always input planning activity- CC+CE

A Dependent planning
1. KP26
2. KSPI: plan A price calculation
3. KSS4: A plan price calculation with CC splitting
4. KSPI: Price calculation
5. KSBT: Plan/actual prices
6. OKES: define splitting structure
6. Important Notes (CC report & Reposting)

Cost center report: S_ALR_87013611 (If actual cost is more than plan cost,
means overabsorption & if less than underabsorption)

Imp: 1. If we do posting from FI, always CC is debit.

2. In CO. the same CC from FI is going to be distributed or allocated or
assessment then it become credit.
Manual Reposting (reversal) of cost: KB11N
Manual Reposting of revenues: KB41N
Repost line items: KB61
Note: whenever we repost from manual reposting of cost and revenue with
reference to FI document after reversing in CO, there is a seprate document
is created in FI
If we do reposting line items, reversal changes will be only in CO but no
changes in FI document.
7. Distribution:
Dis. Created to transfer Primary from sender CC to receiver CO objects.
Dis. Receivers can be CC, WBS, IO. And we can restrict the no of receiver in
customizing.
[Link] CC
2. Define D: KSV7
3. Define Actual D:
Distribution run : KSV5

8. Assessment: KSU5
It is created to transfer or allocating primary & secondary Cost , during Ass.
CC & BP can be used as sender.
Dis. & Ass receivers can be: CC, WBS element, IO, cost object
Dis. & Per Repos only for primary CE

9. Internal Order: KO01

IO is a cost object that tracks the cost of specific event. IO has a short life
as compare to CC. In Sap 2 types of IO:
1. Real IO….we can track cost of particular event, we can settle the IO cost
to the respective CC
Exp: Exhibition IO, we can allocate/distribute to other cost object like
CC1…CC2
2. Statistical IO…..we can not settle statistical IO to any other cost object,
this is only for report
Exp: vehicle expense

10. Product cost controlling:

It is used to manage cost related to manufacturing products or

rendering services. It uses information from OH cost controlling
to calculate labour, machine, factory OH. It also supplies information to
profitability analysis, so that component can calculate contribution
margin. It includes:
1. Product cost planning
2. Cost object controlling
3. Sales order controlling
 Define cost component structure: OKTZ
J1 material cost
J2 Direct OH
J3 Indirect OH

Cost component view: Upto 99 cost component views can be created

1 COGM
2 COGS
3 Sales & admin cost
4 External procurement

11. Costing Variant:

To create a material cost estimate we required costing variant which contains

various components like costing type OKKI, valuation variant OKK4, date
control OKK6, quantity structure cntrl OKK5, transfer strategy OKKM.
Costing variant is link b/w application & customizing to cost a product mainly
for finished & semi finished goods.
12. Costing type:

13. Production planning

Production planning can be done in 2 ways:
1. Material cost estimate with Quantity structure: Can determine product
structure and production plans as
o Material master exists
o NO BOM or routing
2. Material cost estimate without Quantity structure: It is designed to cost
material w/o accessing BOM & routing. We can use this 1. When costing
& updating prices for new material 2. When costing material using non
SAP production planning data

o Material master exists

o BOM & routing exists
Quantity structure means BOM & Routing
14. BOM: it is like a directory for an object contains name, reference no. , qty,
UOM.
BOM header contain information that applies all items in BOM CS01
BOM usage, status, lot size range.
BOM item category: L- indicates Stock item
N- Non stock items
R- Variable size items

15. Routing: Describes a sequence of production steps. CA01

16. Material Ledger : Material ledger is a line item wise record showing
changes in stock and prices with each material movement in upto 3
currencies. It is used in Inventory valuation, it is the basis of actual costing.
1. it has ability to manage material prices in multiple currencies
2. actual costing

17. Costing Sheet : KZS2

Cost sheet integrate all elements of OH & calculation base elements, we

have to assign this to credit key. It contains various components of total
cost of a product and shows previous data for comparison.

18. Cost object controlling: We can determine COGS & COGM

3 Steps:
1. Product cost by period
2. Product cost by order
3. Product cost by sales order
19. WIP calculation in production:

There are 2 methods:

1. Actual cost method
2. Target cost method or plan cost method: Plan cost method is used only
in product cost collector

Formula of WIP: Actual debited on order- actual cost credited on order

Production order status:

a. Create : Order is not ready for progress or used, there is no WIP
b. Release: 1st step Order is ready to use
2nd step Material cost is booked, activity cost booked,
OH cost booked
3rd step There is no output for production, ther is no credit entry
4th step Only debit entry is there in Release status
5th step WIP= Actual cost debited- actual cost credited

c. Partial delivery: WIP B/S Dr.

WIP P/L Cr.
d. Delivery
e. Technical clearing (Teco): job is technically completed, no further
work is there, During Teco if WIP is there, then WIP will cancel
FI entry: WIP PL Dr.
WIP BS Cr.
Here we can not booked OH, only calculate variance.

f. Closed: we can not booked OH

20. Overhead costs:

Direct mat. Cost+ mat OH= Mat. Cost
Direct labour cost+ prod. OH= Production cost
Mat. Cost +Prod. Cost= Manufacturing cost

Manufacturing cost + admin cost OH+ Sales OH= COGS

21. Result analysis key: Contains control parameters or calculation for

WIP, each order for which we want to create WIP process must receive
RA key. RA key is imp to ensure that the order is included in WIP
calculation during period end closing.
 22. Variance Key: It is required to calculate variance. It controls whether
scrap value has to be calculated & deducted from total variance and
also it controls Log to be created.

23. Settlement Profile: Contains settlement parameters which is required

to maintain settlement rule in order. It contains specific which receiver
allow to settle, distribution rule and default structure like allocation
structure( contains source CE which is used to transfer to receiver side),
source structure ( group of CE) & PA structure( PA transfer struc.
Assign to group of CE either variance category or value fields but for
production order.

24. Order Type category for Production order:

Order type category 10 means it’s a Production PP order

Order type category 1 means IO for CO
Order type category 2 means accrual calculation for CO
Order type category 30 means maintenance order
Order type category 5 means Product cost collector etc.

25. Integration b/w CO-PP

1. Creation of material for PP MM01

2. Creation of BOM CS01
3. Creation of work center CR01
4. Routing CA01 etc.

26. Periodic Reposting:

It is one of the allocation methods used at month end closing activity. It is a
posting tool , user can transfer postings that have been posted to IO, CC, BP
or WBS elements. Receivers of periodic reposting can be CC, WBS element, IO
or cost object. We can restrict the no. of receiver category in customizing.
Posting relevant to cost e.g insurance premium, telephone cost, electricity
charges are recorded in FI and simultaneously posted to CC in CO

Requirement for PR:

o Define sender & receiver types for allocation
o Define a cycle
o Define segment for cycle
Segment has Sender value, receiver values, Tracing factors

27. CO-PA

In PA, mgmt. can review information with respect to

company’s profit or contribution margin by business
segment acc. To product, customers, sales district etc.
In CO-PA we can analyse contribution margin which is
sales- COGS acc. to market segment.
28. Costing based CO-PA: it uses a costing based approach. Here we can
valuate billing docs, sales deduction, cost or even estimated cost. COGS
recognized after goods are billed and before being shipped.
The cost of sales set off against revenue using either direct costing or full
absorption method.
main curncy is operating concern currency

29. Account based CO-PA: Uses a account based approach and provides a
profitability report that is permanently reconciled with FI. COGS recognized
after goods are shipped & before being billed.
Costs are debited with same allocation CE. We need to assign this allocation
DE to the required value fields in PA transfer structure.
Currency is Transaction curncy, Local curncy & CO area curncy

# CO-PA calculates profit acc. to cost of sales method of accounting.

30. Steps in CO-PA:

1. Decide form of CO-PA- Account based or costing based

2. Define enterprise structure- Operating concern, co area
3. Master data- characteristics, value fields & market segments
4. Derivation- If it is applies
5. Valuation- If it is applies
6. Assessment cycle
7. Summarization
8. Reports

Practical:
1. Maintain characteristics: we have to always starts from letter ‘W’. we
have to analyse no. of region, acc. to that we will give length e.g
Chandigarh means data type/length: 10
2. Maintain value fields KEA6: We will start from letter ‘V’

31. Value Fields: Only in costing based CO-PA

Predefined value fields
Custom value fields- created by customer

3. Maintain Operating concern: We can create multiple Operating concern

based on the scenario, separate currencies we can maintain.
 What are 3 tabs or steps are in Op. concern?
 Data structure
 Attributes
 Enviornment

4. Maintain characterstics: Values

5. Define No. ranges for actual postings

32. What are the No. range element for PA?

A - Incoming sales order
B - direct posting from FI
C - Order/ project settlement
D - OH costs
E - Single transfer costing
F - Billing data
G - Customer agreements
H - SKF
I - Order real projects
A to I are called record types
6. Define PA transfer structure for variance settlement
7. Assign value fields
Direct posting from FI/MM
Maintain PA transfer structure for direct postings

33. Valuation Strategy:

Breakup of COGM from cost estimate to transfer cost component split from
product cost to COPA.
3 types:
1. VS with mat. Cost estimated
2. VS with COPA conditions & COPA costing sheet
3. We can apply VS to assigned record types & point of valuation
Post manual COPA entries: KE21N

34. Derivation Strategy: it is very useful in COPA report especially for SBU
overwriting data. It contains sequence of steps, logically & sequentially
organized under derivation strategy.
Exp: PC is derived from MM but Rederive the PC for BU that means we are
overwriting the MM.

35. Standard COPA Reports:

KE24 : Line item report
KE30