SAP Training Notes – Based on Training Classes by ICMAP and TMC

SAP CO NOTES BASED ON LECTURE 12 (10 T H JAN 2025) ONWARDS

T. Code/Def/Key Term Explanation/Notes

Master Data of CO 1. Cost Element
2. Cost Center
3. Profit Center
4. Internal Order
5. Activity Type
Cost Element A cost element is a classification used to categorize costs and
revenues within the company's management accounting
(Controlling) area. It essentially links a General Ledger (G/L)
account to the Controlling module, enabling detailed
tracking and analysis of cost. All G/L of PNL.
Primary Cost Element
These are created based on expense accounts in Financial
Accounting (FI) and represent costs incurred from external
sources, like materials, salaries, or depreciation. They
impact both FI and CO.
Secondary Cost Element
These are created within the Controlling (CO) module and
are used for internal cost allocations, overhead calculations,
and other internal cost flows. They don't directly impact FI.
Cost Center A cost center is a delimited location within an organization
where costs are recorded. It can be a department, a
functional area, a machine, or any other unit that incurs
costs. Common examples include:
Functional cost centers: Sales & Marketing, HR, IT, etc.
Product cost centers: A specific production line or machine.
Service cost centers: A shared service like the IT help desk
Profit Center A profit center is a segment of a company that is treated as a
separate unit for profitability analysis. Examples:
Product Lines: A clothing retailer might have separate profit
centers for "Men's Wear," "Women's Wear," and "Kid's
Wear".
Geographic Regions: A multinational corporation could have
profit centers for "North America," "Europe," and "Asia".
Functional Areas: A manufacturing company might have
profit centers for "Production," "Sales," and "Marketing".
Individual Restaurants: In a large restaurant chain, each
restaurant can be a profit center.
Retail Stores: Similarly, each in each individual store in a
retail chain can be a profit center.
Internal Order A temporary cost object used to track and manage the costs
associated with specific tasks, projects, or events within an
organization. Key features of Internal Orders:
Settlement: Internal orders can be settled to other cost
objects (like cost centers, profit centers, or fixed assets) at

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the end of a period or project.

Budgeting: You can define a budget for an internal order to
control spending.
Status Management: Internal orders have statuses (e.g.,
created, released, completed) that reflect their lifecycle.
Activity Type Activity types classify the activities performed at cost
centers, enabling cost allocation to different objects like
orders or other cost centers. Examples include consulting
hours, machine hours, or units produced, each measured in
a specific activity unit.
KS01 Create a new COST CENTER in SAP. Define: Controlling Area,
ID Name, Validity Period, Cost Center Category (e.g. Admin
Prod Sales) Responsible Person, Company Code, Business
Area.
OKEON Define and manage the standard hierarchy for cost centers in
Controlling Area.
OKENN Change the Hierarchy
Hierarchy Every controlling area must have one standard hierarchy. Its
Drilling down like Master Tree that organizes all cost centers into a clear,
logical structure. Making easier to plan, report and control
cost.
Explanation: Top Node: Company
Sub Nodes: Departments (Sales, HR,
etc.)
Leaves: Employee
Example: Tope Node: ICMAP
Sub Node: Industrial Linkage Department
Leave: Employee
KSV1 Setup Rules for Distributing Primary Costs:
KSV5 (execute) 1. Enter Cycle and Description
KSV2 (change) 2. Enter Validity Dates
KSV3 (display) 3. Define Sender (cost center)
4. Define Receiver
5. Basis of Allocation
6. Save the Cycle
KSB1 Display actual cost line items. What?
See Pic Below:

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KAH3 To view the structure and contents of a COST CENTER

KAH1 (Create) GROUP in SAP
KAH2 (Change)
Cost Center Group Way to organize multiple cost center into a hierarchy for
easier reporting.
KB11N Manual Cost allocation. Useful for:
1. Adjust internal cost allocation
2. Correct prior posting
3. Distribute cost that can’t be auto done
CRC1 (Production Planning) CRC1 is used to create a master record for a resource, which
CRC2 and CRC3 are used to change represents a production facility, piece of equipment, or a
and display resources, respectively, person involved in the production process. When creating a
resource using CRC1, you'll need to enter information such
as the plant, resource number, capacity details, and costing
information. For PP resource is Master Data. Behind these
resource CO put Cost Center.
Work Center Work center is a master data object that represents a
physical location or resource where tasks are performed
within a company's production or manufacturing processes.
It can be a machine, a group of machines, a production line,
or a work area. Work centers are used for planning,
scheduling, capacity planning, and cost calculation within
SAP's production planning (PP) and other modules
Statistical Key Figure Non-monetary values used to represent quantities or
characteristics of organizational units, like cost centers or
profit centers. They provide additional data beyond
monetary values and are crucial for various cost allocation
and analysis processes. Examples of statistical key figures:
 Number of employees
 Kilowatt-hour consumption

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 Square meters occupied

 Machine counts
 Capacity usage
 Market information
 Number of laptops

KL01 - Create Transaction code KL01 allows you to create new activity
KL02 - Change types.
KL03 - Display When creating an activity type, you need to specify:
 Activity Type Category: This determines how the
activity type is used and priced (e.g., manually
entered, calculated, or fixed).
 Price Indicator: This indicates whether the activity
type will be priced at an average, standard, or
manual rate.
 Activity Unit: The unit of measure for the activity
(e.g., hours, pieces, etc.).
 Allocation Cost Element: The cost element
associated with the activity.
 Validity Dates: The period for which the activity type
is valid.
Resource provided by PP and CO put the pricing in it.
Material Cost Estimate Primarily MM create material master, while CO put the initial
FG, SFG, RM material cost. However, the system then updates the
material master with the calculated standard price.
MM01 (Create) This transaction allows users to create a new material master
MM02 (Change) record by inputting the necessary data and selecting the
MMO3 (Display) relevant views (basic data, purchasing, sales, accounting,
etc.). In essence, MM01 is the starting point for managing
materials in SAP, enabling the creation and maintenance of
comprehensive material master records. CO (Controlling)
module plays a crucial role by providing cost and revenue
management, planning, and analysis functionalities within
the material master data.

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BOM (Standard Price Fetched from Bill of Material (BOM):

here) Purpose: Lists all the raw materials, sub-assemblies, and
components required to manufacture a finished product or a
semi-finished product.
Structure: Can be single-level (showing direct components)
or multi-level (showing a hierarchical structure of
components and sub-components).
Key Information: Includes component material numbers,
quantities, and units of measure.
Routing (standard hours/activity Routing:
fetched from here) Purpose:
Defines the manufacturing process for a product, specifying
the sequence of operations.
Key Information:
Includes operation numbers, work centers (where the
operation is performed), machine/tool requirements, and
the time needed for each operation.
Integration:
Routings are linked to BOM components, indicating which
operations are needed to assemble or process each
component.
BOM Example for National Masala (Single-Level):
Product: Garam Masala (Finished Good)
Components:
 Cumin Seeds (Quantity: 1 kg)
 Coriander Seeds (Quantity: 2 kg)
 Red Chili Powder (Quantity: 1 kg)
 ...and other spices as needed
Packaging Materials:
 Pouches (Quantity: as per requirement)
 Labels (Quantity: as per requirement)
 Routing Example for National Masala (Single-Level):
Operation 10:
 Mixing (Work Center: Mixing Station, Machine: Mixer)
 Ingredients from BOM are combined.
Operation 20:
 Grinding (Work Center: Grinding Station, Machine: Grinder)
 Ingredients are ground.
Operation 30:
 Filling (Work Center: Filling Station, Machine: Filling Machine)
 Powder is filled into pouches.
Operation 40:
 Sealing (Work Center: Sealing Station, Machine: Sealing Machine)
 Pouches are sealed.
Operation 50:
 Labeling (Work Center: Labeling Station, Machine: Labeling Machine)
 Labels are applied to the pouches.
Operation 60:

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 Packing (Work Center: Packing Station)

 Sealed pouches are packed into boxes.
Cost Center vs Work Center A cost center represents an organizational unit where costs
Relationship: are incurred and tracked, while a work center is a specific
A work center is typically assigned to location or resource where tasks are performed. Think of a
one cost center for a given period. cost center as a department (like Marketing) that
The cost center captures the costs accumulates expenses, while a work center is a machine or a
incurred at the work center. team within that department that carries out specific
Work centers are used to define operations.
activity types and rates, which are
used in production planning and In essence, cost centers provide the financial context (where
costing. the costs are tracked), while work centers provide the
Cost centers, on the other hand, are operational context (where the work is done).
used for overall cost management and
reporting.
Cost Component Structure CCS A cost component structure is a hierarchical grouping of
OKTZ costs that breaks down the total cost of a product or service
into meaningful categories. This allows for detailed cost
CCS=BOM+ROUTING analysis and reporting, enabling businesses to understand
where their costs are incurred and to make informed
In SAP S/4HANA Finance, the cost decisions. It includes:
component structure can be broken M Material
down into a maximum of 120 E Internal Activity
components. F External Activity
L Subcontracting
MM60 To see material list.
CK11N A transaction code used to create a standard cost estimate
CK13N (Display) for a single material. It allows users to calculate the cost of
manufacturing a product based on its bill of materials
(BOM), routing, and other relevant data. This cost estimate is
then used as a benchmark for analyzing actual production
costs and variances.
CK24 CK24 is the follow-up transaction to CK11N (or other cost
estimate transactions). You must have a saved cost estimate
in CK11N before you can release it with CK24. Posting
Period: Ensure you're using the correct posting period for
your cost estimate.

OKVG A transaction code used for defining variance variants.

Variance Categories on/off Specifically, it allows you to configure how variance
calculation is performed for production orders, product cost
collectors, and process orders. This transaction is part of the
Cost Object Controlling module and is crucial for analyzing
differences between planned and actual costs
CS01 (Create) A transaction code used to create a Bill of Materials (BOM)
CS02 (Change) for a material. A BOM defines the components and their
CS03 (Display) quantities needed to manufacture a finished product or

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assembly.
CA01 (Create) The transaction code used to create a routing. Routings
CA02 define the sequence of operations required to produce a
CA03 material, including the work centers, standard times, and
components involved. This master data is essential for
production orders and other manufacturing processes.
KP26 Activity Prices:
KP26 allows you to define (change) the price per unit of an
In essence, KP26 helps determine the activity type, which is then used to allocate costs to cost
cost of performing specific activities objects like production orders or other cost centers.
within a company, which is then used Cost Center Accounting:
to allocate those costs to relevant When you confirm production, the system uses the activity
objects for accurate cost accounting prices defined in KP26 to debit the production order with the
and product costing. corresponding costs.
Product Costing:
The activity prices from KP26 are also used to calculate the
cost of goods manufactured, ensuring accurate product
costing.
Cost Center Planning:
KP26 is used to plan the costs associated with activity types
within cost centers.
Secondary Cost Allocation:
The prices defined in KP26 are used to allocate secondary
costs through the activity types.
KSBT KSBT provides a report that shows the calculated prices for
activity types at different cost centers.
Functionality:
It allows users to view activity prices that have been
maintained for cost center/activity type combinations.
Production Order How Production Orders Work:
1. Creation:
Production orders can be created manually or automatically
through processes like Material Requirements Planning
(MRP).
2. Release:
Once created, a production order is typically released, which
signals that production can begin and triggers necessary
actions like material availability checks and goods issue for
components.
3. Execution:
The production process is executed according to the defined
operations and resource usage outlined in the order.
4. Confirmation:
As production progresses, confirmations are entered to track
actual production quantities, resource consumption, and
completion of operations.
5. Goods Receipt:

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Upon completion, the finished goods are received into

inventory, and a goods receipt document is created.
6. Settlement:
Finally, the production order is settled, which involves
calculating and posting the actual costs of production.
CO01 – create production order 1. Access CO01: Enter CO01 in the command field and
CO02 (Change) press Enter.
CO03 (Display) 2. Initial Screen: The initial screen for creating a production
order will appear.
In essence, CO03 is the starting point 3. Enter Data:
for working with a production order, o Material: Enter the material number for which the
while KKBC_ORD is the tool for in- production order is being created.
depth cost analysis and variance o Plant: Enter the production plant.
calculation o Order Type: Enter the appropriate order type.
4. Press Enter: Press Enter to proceed to the next screen.
5. Additional Data: Enter any other required information,
such as the required quantity and scheduling details.
6. Save: Save the production order.

KKBC_ORD KKBC_ORD (Analyze Order):

 Purpose:
Designed specifically for detailed cost analysis of production
orders, allowing users to compare planned, actual, and
target costs.
 Cost Analysis:
Provides a detailed breakdown of costs, including planned
costs (from BOM and routing), actual costs incurred, and
target costs.
 Variance Calculation:
Allows users to see the variances between planned and
actual costs, and understand where costs deviate.
 Target Cost:
Offers a clearer view of target costs, especially when
variance calculation has been run.
 Settlement:
While not primarily a settlement transaction, it can display
settlement data related to the order.

It becomes zero in the end.

Key Differences Summarized:

Feature CO03 KKBC_ORD

Primary Function Display and maintain production Detailed cost analysis of production
order order

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Cost Analysis Limited, within the order display Comprehensive, separate transaction
View

Target Cost May require variance calculation or Generally available, especially after
Availability order completion variance calculation

Variance Analysis Limited Detailed, including planned vs. actual

comparison

Settlement Primarily for settlement Displays settlement data

Work in Process (WIP)  Definition:

KO88 WIP represents the value of partially completed production
orders at a specific point in time, usually month-end.
 Purpose:
It allows for accurate financial reporting by recognizing the
costs associated with unfinished goods and ensuring they are
reflected on the balance sheet.
 Calculation:
WIP is calculated based on the actual costs incurred on the
production orders and is typically done at the actual cost
level.
 Settlement:
WIP is settled during the period-end closing process, often
using transaction code KO88 for individual production
orders.
 Relevance:
WIP is essential for understanding production efficiency,
identifying bottlenecks, and maintaining accurate financial
records.
 Integration:
WIP is integrated with both Production Planning (PP) and
Financial Accounting (FI) modules in SAP.
 Month-End Process:
WIP calculation is a standard month-end activity, ensuring
that the financial statements accurately reflect the value of
unfinished goods.
 Reversal:
When a production order is finally delivered or settled, the
WIP is typically reversed and the costs are transferred to the
appropriate cost of goods sold (COGS) or other relevant
accounts.
 Transaction Codes:
Several transaction codes are used in relation to WIP,
including KKA1 (for calculating WIP for a single order), KO88
(for settling individual production orders), and others

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depending on the specific SAP module and configuration.

Month End Processes of CO KSV5: Used to run distribution cycles, which allocate costs
from sender cost centers to receiver cost centers based on
defined rules.
KSII: Executes the actual rate calculation process,
determining the actual activity prices for cost centers.
KSBT: This T-code is not directly related to month-end
closing. KSBT is used for creating settlement rules for internal
orders.
KKAO: Used to calculate work-in-process (WIP) for
production orders.
KSS2: Used to split actual costs on cost centers.
CO88: Executes the settlement of production orders,
transferring costs to their final receivers.
KKS1: Used to calculate variances for production orders on a
plant.
KKS2: used to calculate variance on individual production
order.
CKMLCP: Executes the material ledger and actual costing
run. Run plant by plant.
CO43: Used for costing sheet actualization.
CON2: Used for revaluation of production orders at actual
activity rates.
KSU5: Used to run assessment cycles, which allocate costs
based on percentages or fixed amounts.
KK01/KK02/KK03: Used for creating, changing, or displaying
statistical key figure (SKF) distribution cycles.
Key Differences Summarized:
Feature KKS1 KKS2

Scope Plant or collective orders Single order

Analysis Level Broad, plant-level analysis Detailed, order-level analysis

Use Case Overall cost deviation trends Specific order cost analysis

Functionality Bulk processing Single order processing

CKM3N  Price History:

display costs broken down by cost The transaction also provides a price history view, allowing
components, allowing for a granular users to track price changes over time.
analysis of the material's price.  Multi-Level Analysis:
It allows for the analysis of single-level and multi-level
differences in material prices.
 S/4HANA Changes:

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In S/4HANA, the default view has changed, and cost

components are integrated into the price determination
structure.
How to Use CKM3N:
1. Access the Transaction: Enter CKM3N in the SAP
command field.
2. Enter Selection Criteria: Specify the material, plant,
and period for analysis.
3. Choose a View: Select the desired view, such as the
price determination structure or cost components.
4. Analyze the Data: Examine the displayed price and
cost information.
In summary, CKM3N is a crucial transaction for analyzing
material prices and valuations in SAP, offering detailed
insights into price movements and cost components,
particularly within the Material Ledger.

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