CONTROLLING
QUESTIONS & ANSWERS
1. Explain the organizational assignment in the controlling module?
Company
codes are assigned to the controlling area. A controlling area is assigned to
the operating concern. Controlling Area is the umbrella under which all
controlling activities of Cost Center Accounting, Product costing,
Profitability Analysis and Profit Center are stored. Operating Concern is the
highest node in Profitability Analysis
2. What is primary Cost element and secondary cost element?
Every
Profit and Loss GL account that needs to be controlled has to be defined as a
cost element in SAP. Just as in FI General Ledger Accounts exist, in
Controlling we have Cost element. Each FI General Ledger Account that is a
Profit and Loss Account is also created as a Cost element in SAP.
Primary Cost Elements are those which are
created from FI general Ledger Accounts and impact the financial accounts eg.
Traveling expenses, consumption account infect, any Profit and Loss GL account
Secondary Cost Elements are those which are
created only in controlling and does not affect the financials of the company.
It is used for internal reporting only. The postings to these accounts do not
affect
the
Profit or Loss of the company. The following categories exist for secondary
cost elements:
21 Internal Settlement: Cost elements of this category is used to settle order
costs to objects in controlling such as cost centers, pa segments etc.
31 Order/Results Analysis: Used to calculate WIP on the order/project
41 Overhead: Used to calculate
indirect costs from cost centers to orders
42. Assessment: Used to calculate
costs during assessment
43 Internal Activity Allocation: Used to allocate
costs during internal activity allocation such as Machine
Labour
etc
3) What are cost objects?
A
cost object means a cost or a revenue collector wherein all the costs or revenues
are collected for a particular cost object. Examples of this could be cost
center, production order, internal order, projects, sales order So whenever you
look at any controlling function the basic thing you need to ask yourself is
What is the cost element(expense) I want to control and what is the cost object
( i.e. either the production order, sales order, internal order) I am using to
control this cost element. Sounds confusing read it again it is very simple
Controlling is all about knowing the cost element
and the cost object. Every time pose this question to yourself what is the cost
element what is the cost object. At the end of the period all costs or
revenues in the cost object are settled
to
their respective receivers which could be a gl account, a cost center, profitability
analysis or asset. It is very Important that you understand this otherwise you
would struggle to understand Controlling.
Cost Center Accounting
4) How is cost center accounting related to profit center?
In
the master data of the Cost Center there is a provision to enter the profit
center. This way all costs which flow to the cost center are also captured in
the profit center. Cost centers are basically created to capture costs e.g.
admin cost center, canteen cost center etc Profit centers are created to
capture cost and revenue for a particular plant, business unit or product line.
5) What is a cost element group?
Cost
element group is nothing but a group of cost elements which help one to track
and control cost more effectively. You can make as many number of cost element
groups as you feel necessary by combining
various
logical cost elements.
6) What is a cost center group?
In
a similar line the cost center group is also a group of cost centers which help
one to track and control the cost of a department more effectively. You can
make as many number of cost centers as you feel necessary by combining various
logical cost centers Infact you can use various combinations of cost center
group with the cost element group to track and control your costs per
department or across departments
7) What is the difference between Distribution and Assessment?
Distribution
uses the original cost element for allocating cost to the sender cost center.
Thus on the receiving cost center we can see the original cost element from the
sender cost center. Distribution only allocates primary cost.
Assessment
uses assessment cost element No 43 defined above to allocate cost. Thus various
costs are summarized under a single assessment cost element. In receiver cost
center the original cost breakup from sender is not available. Assessment
allocates both primary as well as secondary cost.
8) What are the other activities in Cost center?
If
you have a manufacturing set up, entering of Activity prices per cost center/activity
type is an important exercise undertaken in Cost center accounting.
9) What is an Activity Type?
Activity
types classify the activities produced in the cost centers. Examples of
Activity Type could be Machine, Labour, Utilities
10) You want to calculate the activity price through system? What
are the requirements for that?
In
the activity type master you need to select price indicator 1 – Plan
price, automatically based on activity.
11) When activity price is calculated through system whether
activity price is shown as fixed or variable?
Normally
when activity price is calculated through system it is shown as fixed activity
price since primary cost are planned as activity independent costs.
12) What is required to be done if activity price
is to be shown both fixed and variable?
In
this case you need to plan both activity independent cost which are shown as
fixed costs and activity dependent costs which are shown as variable costs.
13) Is it possible to calculate the planned activity output through
system?
Yes.
It is possible to calculate the planned activity output through system by using
Long term Planning process in PP module.
14) Explain the process of calculating the planned activity output
through Long term planning?
In
Long term planning process the planned production quantities are entered for
the planning year in a particular scenario. The Long term planning is executed
for the scenario. This generates the planned activity requirements taking the
activity quantities from the routing and multiplying with the planned
production. The activity requirements are then transferred to the controlling
module as scheduled activity quantities. Thereafter you execute a plan activity
reconciliation which will reconcile the schedule activity and the activity you
have planned manually. The reconciliation program updates the scheduled
activity quantity as the planned activity in the controlling module.
15) You want to revalue the production orders using actual activity
prices. Is there any configuration setting?
Yes.
There is a configuration setting to be done.
16) Where is the configuration setting to be done for carrying out
revaluation of planned activity prices in various cost objects?
The
configuration setting is to be done in the cost center accounting version
maintenance for fiscal year. This has to be maintained for version 0. You need
to select revalue option either using own business transaction or
original business transaction.
17) At month end you calculate actual activity prices in the system.
You want to revalue the production orders with this actual activity prices.
What are the options available in the system for revaluation?
The
options available are as follows:-
You
can revalue the transactions using periodic price, average price or cumulative
price.
Further
you can revalue the various cost objects as follows:-
Own
business transaction – Differential entries are posted
Original
business transaction – The original business transaction is changed.
Internal orders
18) What is the purpose of defining Internal Orders?
An
example would help us understand this much better. Lets say in an organization
there are various events such as trade fairs, training seminars, which occur
during the year. Now lets assume for a second that these Trade fairs are
organized by the Marketing cost center of the organization. Therefore in this
case marketing cost center is
responsible
for all the trade fairs costs. All these trade fairs costs are posted to the
marketing cost centers. Now if the
management wants an analysis of the cost incurred for each of the trade fair
organized by the marketing cost center how would the marketing manager get this
piece of information across to them? The cost center report
would not give this piece of info Now this is where
Internal Order steps in .If you go through all cost center reports this
information is not readily available since all the costs are posted to the cost
center. SAP, therefore rovides the facility of using internal orders
which comes in real handy in such situations. In the above scenario the
controlling department would then need to create an internal order for each of
the trade fair organized. The cost incurred for each of the trade fair will be posted
to the internal orders during the month. At the month end, these
costs
which are collected in the internal order will be settled from these orders to
the marketing cost center. Thus the controlling person is now in a position to
analyze the cost for each of the trade fair separately. Thus internal order is
used to monitor costs for short term events, activities. It helps in providing
more information than that is provided on the cost centers. It can be widely
used for various purposes.
19) How can you default certain items while creation of internal
order master data?
You
can do so by creating a model order and then update the fields which you want
to default in this model order. Finally attach this model order in the internal
order type in the field reference order. Once the above is done whenever you
create an internal order for this order type the field entries will get copied
from the model order.
20) What is the configuration setting for the release of the
internal order immediately after creation?
You have to check the “release immediately” check
box in the internal order type.
Product Costing
21) What
are the important Terminologies in Product Costing?
Results
Analysis Key – This key determines how the Work in Progress is calculated
Cost
Components - The break up of the costs which get reflected in the
product costing eg. Material Cost, Labour Cost, Overhead etc
Costing
Sheets - This is used to calculate the overhead in Controlling
Costing
Variant - For All manufactured products the price control recommended
is Standard Price. To come up with this standard price for the finished good
material this material has to be costed. This is done using Costing Variant.
Further questions down below will explain this concept better.
22) What are the configuration settings maintained in the costing
variant?
Costing
variant forms the link between the application and Customizing, since all cost
estimates are carried out and saved with reference to a costing variant. The
costing variant contains all the control parameters for costing.
The
configuration parameters are maintained for costing type, valuation variants,
date control, and quantity structure control. In costing type we specify which
field in the material master should be updated.
In
valuation variant we specify the following:
a)
The sequence or order the system should go about accessing prices for the
material master (planned price,
standard price, moving average price etc).
b)
It also contains which price should be considered for activity price calculation
and.
c)
How the system should select BOM and routing.
23) How does SAP go about costing a Product having multiple Bill of
materials within it?
SAP
first costs the lowest level product, arrives at the cost and then goes and
cost the next highest level and finally arrives at the cost of the final product.
24) What does the concept of cost roll up mean in product costing
context?
The
purpose of the cost roll up is to include the cost of goods manufactured of all
materials in a multilevel production structure at the topmost level of the
BOM(Bill of Material) The costs are rolled up automatically using the costing
levels.
1)
The system first calculates the costs for the materials with the lowest costing
level and assigns them to cost components.
2)
The materials in the next highest costing level (such as semi finished materials)
are then costed. The costs for the materials costed first are rolled up and
become part of the material costs of the next highest level.
25) What is a settlement profile and why is it needed?
All
the costs or revenues which are collected in the Production order or Sales
order for example have to be settled to a receiver at the end of the period.
This receiver could be a Gl account, a cost center, profitability analysis or
asset. Also read the question “What is a cost object “ in the section
Controlling. In order to settle the costs of the production order or sales
order a settlement profile is needed. In a settlement profile you define a
range of control parameters for settlement. You must define the settlement
profile before you can enter a settlement rule for a sender. The Settlement
Profile is maintained in the Order Type and defaults during creating of order.
.
26) Settlement profile includes:-
1)
the retention period for the settlement documents.
2)
Valid receivers GL account, cost center, order, WBS element, fixed asset,
material, profitability segment, sales order, cost objects, order items,
business process
3)
Document type is also attached here
4)
Allocation structure and PA transfer structure is also attached to the settlement
profile e.g. A1
27) The settlement profile created is then attached to the order
type. What is Transfer or Allocation structure?
The
transfer structure is what helps in settling the cost from one cost object to
the receiver. It is maintained in the Settlement profile defined above. The
Transfer structure has 2 parts:
a)
Source of cost elements you want to settle
b)
Target receiver whether it is a Profitability segment or fixed asset or cost
center So basically for settling the
costs of a cost object you need to define the Transfer structure where you
mention what are the costs you want to settle and the target receiver for that.
This information you fit it in the settlement
profile which contains various other parameters and this settlement profile is
defaulted in the Order type. So every time a order is executed the relevant
settlement rule is stored and at the month end by running the transaction of
the settlement of orders all the cost is passed on to the receiver So to put in
simple terms:
a) You define your cost object which could be a production
order a sales order for eg
b) You collect costs or revenues for it
c) You determine where you want to pass these costs
or revenues to for eg if the sales order is the cost object
all the
costs or revenues of a sales order could be passed to Profitability Analysis
28) What do you mean by primary cost component split?
Primary
cost split is defined when you create a cost component structure. When you
switch on this setting, the primary cost from the cost center are picked up and
assigned to the various cost components.
29) How do primary costs get picked up from cost center into the
cost component structure?
This
is possible when you do a plan activity price calculation from SAP. The primary
cost component structure is assigned to the plan version 0 in Controlling .
30) Is it possible to configure 2 cost component structures for the
same product in order to have 2 different views?
Yes
it is possible. We create another cost component structure and assign it to the
main cost component structure. This cost component structure is called
Auxiliary cost component structure which provides another view of the cost
component structure.
31) How do you go about configuring for the sales order costing?
The
flow is as follows:
Sales
order -> Requirement Type-à Requirement Class-> All settings for controlling
In
a sales order you have a requirement type .In configuration, the requirement
Class is attached to the requirement type and in this requirement class all
configuration settings are maintained for controlling. In the requirement class
we attach the costing variant, we attach the condition type EK02 where we want
the sales order cost to be updated, and the account assignment category. In the
account assignment category we define whether the sales order will carry cost
or not. In case if we do not want to carry cost on the sales order we keep the consumption
posting field blank. We also define here the Results Analysis version which
helps to calculate the Results Analysis for the Sales order if required.
32)There are 2 plants in a company code. First plant is the
manufacturing plant and another plant is the selling plant. Finished goods are
manufactured at the manufacturing plant and transferred to the selling plant.
How is standard cost estimate calculated at the selling plant given the fact
that the cost at both the plant should be the same?
The
special procurement type needs to be configured which specifies in which plant
the system is to look up for cost. Here a special procurement key specifying
plant 1 (manufacturing plant) should be configured. This special procurement
type must be entered in the costing view or the MRP view of the Finished good
material master record in plant 2. When you cost the finished good at plant 2,
the system will transfer the standard cost estimate from plant 1 to plant 2
33) What is mixed costing in SAP? Give an example to explain.
Mixed
costing is required when different processes are used to manufacture the same
material. Mixed costing is required when you have different sources of supply
for purchasing the material.
Let
us take an example:-
There
is a finished good Xylene which can be manufactured by 3 different processes.
The
first process uses an old machine and labor. The processing time is 9 hrs to
manufacture.
The
second process uses a semi-automatic machine and labor. The processing time is
7 hrs to manufacture.
The
third process uses a fully automatic machine and the processing time is 5 hrs.
Thus
cost of manufacture for the 3 processes is different. By using Mixed costing
you can create a mixed price for the valuation of this finished good.
34) What configuration needs to done for using Mixed costing?
Quantity
Structure type for mixed costing must be configured. Here we specify the time
dependency of the structure type. The following options exist
a)
You have no time dependency.
b)
It is based on fiscal year
c)
It is based on period
This
quantity structure type is then assigned to the costing version.
35) Lets say for a product there exists three production versions.
Explain the process how you would go about creating a mixed cost estimate?
The
process of creating a Mixed cost estimate would be as follows:-
1)
Create procurement alternatives for each of the production version.
2)
Define Mixing ratios for the procurement alternatives
3)
Select the configured quantity structure type and execute a
material
cost estimate based on the costing version.
36) What is Mixing ratios and why are they required to be maintained
before creation of cost estimate?
Mixing
ratios are weighting factors assigned to the procurement alternatives. This
weighting factor is obtained from the planning department based on the usage of
the procurement alternatives during the planning year. For e.g.
Procurement
alternative 1 (production version 1) 40% will be manufactured
Procurement
alternative 2 (production version 2) 35% will be manufactured
Procurement
alternative 3 (production version 3) 25% will be manufactured
This
% will be maintained as mixing ratios.
Thus
when system calculates the mixed cost estimate, system will first cost each of
the production version and then multiply each of the costs with the weighting
factors.
Thus
240
(cost of prod. Vers 1) X 40 = 9600
210
(cost of prod. Vers 2) X 35 = 7350
160
(cost of prod vers 3) X 25 = 4000
Mixed
costs 17350/100 = 173.5
37) There are Result analysis categories in WIP (Work in Process).
What do you mean by the result analysis category Reserves for unrealized costs?
If
you are calculating the work in process at actual costs, the system will create
reserves for unrealized costs if the credit for the production order based on
goods receipts is greater than the debit of the order with actual costs
incurred. The Result analysis category RUCR
(Reserves for unrealized cost) would need to be maintained. Normally
this is not maintained in most of the companies.
38) Which is the Result analysis category which is normally
maintained for the WIP (Work in Process) calculation?
The
Result analysis category WIPR - Work in
process with requirement to capitalize costs is normally maintained for
WIP calculation
39) How do you define a By-product in SAP?
A
By-product in SAP is defined as an item with a negative quantity in the Bill of
Material. By-product reduces the cost of the main product. There is no Bill of
Material for a By-product.
40) How do you calculate the cost for a By-product in SAP?
The
cost for the By-product is the net realizable value. This is manually maintained
in the system for the by-product through transaction code MR21 Price change.
41) How do you define a Co-Product in SAP?
A
Co-product (primary product or by-product) is indicated by a tick in the
costing view of the material master. In the BOM all the primary products are
represented as an item with negative quantity. A primary product is also
indicated as a co-product in the BOM of the leading coproduct. For primary
products the costs are calculated using the apportionment method, while for
by-products the net realizable value method applies.
42) Is it possible to use Standard SAP Co-product functionality in
Repetitive manufacturing?
No.
It is not possible to use the Standard Co-product functionality in repetitive
manufacturing
43) How do you got about defining CO-Product functionality in Repetitive
manufacturing?
In
the Repetitive manufacturing you need to use the Costing BOM for the other
co-product. Through arithmetical calculation you need to maintain the
quantities in the costing BOM. This co-product will be shown as a
negative
item in the leading co-product.
44) You get an error while executing a cost estimate which says”
Item no 1 (which is a raw material) is not assigned to the cost component
structure? What could be the possible
cause of error in this scenario?
The
consumption GL code for the material master is not assigned to the cost
component structure. To find out how you can know which GL code to assign read
the next question.
45) In the above scenario how do you know which cost element is
being called for?
In
this case you need to the use simulation mode OMWB in MM and enter the material
code plant and the movement type 261 (issue against production order). You will
see the account modifier VBR and against
which
the GL code is available.
46) You get an error while executing a cost estimate, which says”
Item no. 1 (which is a raw material) is not assigned to the cost component
structure? In this case everything is perfectly configured, what could be the possible
error in this scenario?
In
the material master of the raw material the valuation class updated in the
accounting view will be incorrect.
47) Is it possible to calculate standard cost estimate for a past
date?
No.
It is not possible to calculate standard cost estimate for a past date.
48) What is the difference between a product cost collector and
production order?
Both
of these are cost objects which collect production costs for manufactured
product. Product cost collector is a single order created for a material. All
the costs during the month for that material is debited to single product cost
collector. No costing by lot size is required in case of product cost
collector. The latter is where there are many production orders for a single
material during the month. Costs are collected on each of this production
order.
Costing
by lot size is the main requirement in case of production orders.
49) What is the meaning of preliminary cost estimate for product
cost collector?
Preliminary
costing in the product cost by period component calculates the costs for the
product cost collector. In repetitive manufacturing you can create cost
estimate for specific production version.
50) Why is preliminary cost estimate required?
The
preliminary cost estimate is required for the following:-
·
Confirm
the actual activity quantities.
·
Valuate
work in process
·
Calculate
production variances in variance calculation
·
Valuate
the unplanned scrap in variance calculation
51) Is it possible to update the results of the standard cost
estimate to other fields such as commercial price, tax price fields in the
accounting view?
Yes.
It is possible to update the standard cost estimate to other fields such as
commercial price etc. in accounting view.
52) How do you configure that the results of the standard cost
estimate are updated in other fields other than the standard price?
The
price update in the material master is defined in Costing type. This costing type is attached to the costing
variant.
53) What do you mean by Assembly scrap and how is it maintained in
SAP?
Assembly
scrap is scrap that is expected to occur during the production of a material
which is used as an assembly. If a certain amount of scrap always occurs during
the production of an assembly, the quantities and activities used must be
increased by the system so that the required lot size can be produced. To
increase the lot size of an assembly you can enter a percentage, flatrate assembly
scrap in the MRP 1 view of the material master record. This assembly scrap is
reflected in all the subordinate components. The system increases the quantity
to be produced by the calculated scrap quantity. This increases both the
materials consumed and the activities
consumed
and consequently the cost.
54) How are scrap costs shows in the standard cost estimate?
Scrap
costs are assigned to the relevant cost component and can be shown separately
for a material in the costed multilevel BOM.
55) How are scrap variances calculated?
Scrap
variance are calculated by valuating the scrap quantities with the amount of
the actual costs less the planned scrap costs.
56) What do you mean by Component scrap and how is it maintained in
SAP?
Component
scrap is the scrap of a material that is expected to occur during production.
When an assembly is produced with this component, the system has to increase
the component quantity to enable to reach the required lot size. The component
scrap can be entered in the BOM item or in the MRP 4 view of the material
master
57) What do you mean by Operation scrap and how is it maintained in
SAP?
Operation
scrap is a scrap that is expected to occur during production. Operation scrap
is used to reduce the planned input quantities in follow up operations and to
calculate the precise amount of assembly scrap. Operation scrap can be
maintained in % in the routing and in the BOM.
58) What are the implications if the operation scrap is maintained
in the routing and if it maintained in the BOM?
If
the operation scrap is maintained only in the routing, the costing lot size is
reduced by this percentage. If the operation scrap is maintained in the BOM,
the planned input (not the output quantity) is increased and any assembly scrap
is reduced.
59) What is the meaning of additive costs in SAP and why is it
required?
Additive
costs are used to add costs manually to a material cost estimate when it cannot
be calculated by the system. Examples of such costs are freight charges,
insurance costs and stock transfer costs.
60) What is the configuration required for additive costs?
To
include additive costs in the material cost estimate you need to set the indicator
“Incl. additive costs” for each valuation strategy in the valuation variant. Further
you also need to set in the costing variant to include additive
costs.
61) How do you configure split valuation?
The
configuration steps involved in split valuation:-
1)
Activate split valuation – Configure whether split valuation is allowed for the
company code.
2)
Determine the valuation categories and valuation types that are allowed for all
valuation areas.
3)
Allocate the valuation types to the valuation categories
4)
Determine the local valuation categories for each valuation area and activate
the categories to be used in your valuation area.
62) What is valuation category and valuation type in split
valuation?
In
split valuation the material stock is divided according to valuation category
and valuation type.
Valuation
category determines how the partial stocks are divided according
to which criteria. The following valuation categories are preset
in
the standard SAP R/3 system –
B
- Procurement type
H
– Origin type
X
– Automatic batch valuation
Valuation
type describes the characteristic of individual stock.
e.g.
EIGEN Inhouse production (SAP
standard)
FREMD External procurement (SAP standard)
Valuation
types are assigned to valuation categories.
63) What are the steps involved before you run a cost estimate for a
split valuated material?
The
following are the steps:-
1)
Create procurement alternatives based on the valuation types for the material.
2)
Maintain Mixing ratios for the procurement alternatives
64) How do you create a material master with split valuation?
To
create a split valuated material master proceed as follows:-
1.
First create a valuation header record for the material. Update the Valuation
category field on the accounting screen; leave the Valuation type field blank.
In the Price control field, enter V (moving average price). When you save, the
system creates the valuation header record.
2.
Then create the material for a valuation type. Call up the same material in
creation mode again. Due to the fact
that
a valuation header record exists, the system requires you to enter a valuation
type for the valuation category.
3.
Repeat Step two for every valuation type planned.
65) When a standard cost
estimate is run for a finished good does SAP calculate cost estimate for its
components such as raw and packing material?
Yes.
SAP calculates the cost estimate even for raw and packing material and stores
it in the standard price field for information purposes
66) How do you prevent the system from calculating the cost estimate
for raw and packing material when you run a standard cost estimate for the
finished goods?
To
prevent the system from calculating cost estimates for raw and packing material,
you need to select the “No costing”
checkbox in the costing view of the material master.
67) How is it possible to apply 2 different overhead rates for 2
different finished goods?
It
is possible through overhead groups. You configure 2 overhead keys. Define
rates for each of this overhead key. These two overhead keys is then assigned
to the two overhead groups. These overhead groups are
attached
in the costing view of the finished goods material master.
68) In period 1 there is a WIP posted of 22000 USD in period 2 some
further goods issue are done to the extent of 15000 USD . How will system
calculate WIP for period 2?
System
will post a delta WIP of 15000 USD in period 2.
69) What is the basic difference in WIP calculation in product cost
by order and product cost by period (repetitive manufacturing)?
Generally
in product cost by order, WIP is calculated at actual costs and in product cost
by period WIP is calculated at target costs
70) What are the configuration settings for calculating WIP in SAP?
You
define secondary cost elements of type 31 first. You then need to define the
Results Analysis version
This
results analysis contains line ids which are basically nothing but break up of
costs Next you define assignments-> here you assign source cost elements to the
line ids defined above You also define the secondary cost elements which are
assigned to the line ids. In the end you define the Finance GL accounts which
are debited and credited when a Work in Progress is calculated. Please refer to
the configuration document for more detailed information
71) How does SAP calculate Work in Process (WIP) in product cost by
order?
The
system first runs through all the production order for the month and checks for
the status of each production order. If the status of the production order is
REL (Released) or PREL (Partially released) and if costs are incurred for that
order system calculates WIP for the production order. The system cancels the
WIP for the production order when the status of the order becomes DLV
(delivered) or TECO (Technically complete).
72) There is a production order with order quantity 1000 kgs. During
the month 500 kgs of goods were produced. What will be the system treatment at
the month end?
The
system will first check the status of the production order. Since the status of
the order is not DLV (Delivered) it will calculate a WIP for the production
order.
73) Why does the system not calculate variance for the 500 kgs which
has been delivered?
In
the product cost by order component the system does not calculate a variance
for partially delivered stock on the production order. Whatever is the balance
on the production order is considered as WIP. In the product cost by period
component, system will calculate WIP as well as variance provided
74) Is the WIP calculated in the product cost by order component at
actual costs or standard costs?
In
the product cost by order component the WIP is calculated at actual costs.
75) Is the WIP calculated in the product cost by period component at
actual costs or target costs?
In
the product cost by period component the WIP is calculated at target costs.
Material Ledger
76) What precautions have to be taken while switching on the
material ledger for a plant?
A
material ledger once activated for a plant cannot be switched off. Therefore it
is important that the material ledger be activated carefully for a plant.
77) How do you go about configuring material ledger?
The
following are the steps:-
1)
Activate Valuation Areas for Material Ledger
2)
Assign Currency Types to Material Ledger Type
3)
Assign Material Ledger Types to Valuation Area
4)
Maintain Number Ranges for Material Ledger Documents
5)
Activate Actual costing (whether activity update relevant for price determination)
6)
Activate Actual cost component split
7)
Customizing settings in OBYC
78) What are the problems faced when a material ledger is activated?
When
a material ledger is activated it is imperative that actual costing run has to
be done every month. Actual costing run needs to be done immediately after the
new month roll over. After the actual costing run you cannot post any
MM(Materials Management) entry to the previous period.
79) What are the options available while performing revaluation in
an actual costing run?
There
are 2 options available:-
Revaluation – You can revalue
the finished goods stock
Accrual – You can accrue
the revaluation gain or loss without actually changing the price in the
material master.
80) What is the configuration setting to be done for posting the
accrual in the actual costing run?
In
transaction code OBYC select transaction key LKW and maintain the balance sheet
account for accrual.
81) What are the steps to be taken before you execute an actual
costing run?
The
following are the steps to be taken:
1.)
Execute all the allocation cycles in the cost center accounting module.
2.)
Execute actual activity price calculation.
3.)
Revalue all the production orders with the actual activity prices. The under or
over absorbed cost on cost centers are passed on to the production order
through this step of revaluation of production orders.
4.)
Calculate overheads, do a variance calculation and finally settle the
production order.
5.)
Finally execute the actual costing run.
82) What happens in an actual costing run?
In
actual costing run there is a process of single level price determination and
multi level price determination. The production price difference variances are
collected on the material ledger for each of the finished goods and semi
finished goods. During single level price determination the price difference
collected on a single finished product is allocated to consumption. This
allocation to the consumption is not individually allocated to the good issues.
In
multi level price determination the price difference is allocated to individual
goods issue. The price differences are passed on to the next level of
consumption. The system calculates a weighted average price for the finished
goods and semi finished goods. This weighted average price is called as the periodic
unit price
83) What happens when the revaluation is done in actual costing run
for the previous period?
When
revaluation is performed in actual costing for the previous period the price
control in the material master is changed from S to V and the periodic price is
updated as the valuation price for the previous period.
84) What is the importance of the price determination indicator in
the material master for the purpose of actual costing run?
There
are 2 price determination indicators in the material master when material
ledger is activated.
They
are as follows:-
2
– transaction based
3
– Single level / multi level
In
case of material masters having price determination indicator 2 no
actual
costing will take place. In case of material masters having price
determination
indicator 3 actual costing will take place.
85) What should be the price control for a material master which has
a price determination indicator 3 where material ledger is activated?
In
such a case only price control S is possible where the price determination 3 is
activated in material master.
Profitability Analysis
86) Explain the organizational assignment in the PA module?
The
operating Concern is the highest node in Profitability Analysis. The operating
concern is assigned to the Controlling Area. Within the operating concern all
the transactions of Profitability Analysis are stored. The operating concern is
nothing but a nomenclature for defining the highest node in PA.
87) What is the functionality of the PA module?
PA
module is the most important module when it comes to analyzing the results of
the organization. In this module you basically collect the revenues from the
sale order, the costs from the production order, cost center or internal order
and analyze their results.
The
interesting part about this module is that when it collects the costs and
revenues it also collects the characteristics associated with the costs and
revenues and this is what makes it stand out So for e.g. using PA module you
can find out the following:
Profit
of a certain product
Profit
of a certain product in a certain region
Profit
of a certain product in a certain region by a certain customer
Profit
of a certain product in a certain region by a certain sales person and the list
can go on in depth
It
is one of the most wonderful modules in the SAP
88) How do you get all those characteristics defined above and how
do you analyze them?
To
do so while defining Operating concern one has to define Characteristics and
Value fields.
89) What are characteristics and Value Fields?
In
the operating concern two things are basically defined
a)
Characteristics
b)
Value Fields
Characteristics
are nothing but those aspects on which we want to break down the profit
logically such as customer, region product, product hierarchy, sales person etc
Value Fields are nothing but the values associated with these characteristics
Eg
Sales, Raw Material Cost, Labour Cost, Overheads etc
Once
you define the characteristics and value fields these values are updated in the
table.
90) From where does the characteristics come from?
The
characteristics which are defined above basically comes from either the
Customer Master or the Material Master.
91) How does various values( revenues and costs) flow into PA?
The
Sales Revenue comes from the Condition Type in SD. We need to map the Condition
Type in SD to the respective value fields in customizing to have the revenue
flow into PA. The Cost comes from Cost estimates which are transferred using
the PA transfer structure which we have covered in the Product costing section.
The
various cost components of the cost component structure is assigned to the
value field of PA module and this is how the costs come into PA. Once the
actual revenue and the std cost defined above are captured in PA the variances
are also transferred into PA. This way the std cost variances equal the actual
cost. So actual revenue- actual cost helps us determine the profit.
92) How do you configure the assignment of variances from product
costing to COPA module?
The
variance categories from product costing along with cost element is to be
assigned to the value fields in COPA
93)Once you have captured all the costs and revenues how do you
analyze them?
The
costs and revenues which we have captured in the above manner are then analysed
by writing reports using the Report Painter Functionality in SAP.
94) What is characteristic Derivation in Profitability Analysis
Module?
Characteristic
Derivation is usually used when you want to derive the characteristics . An
example of this could be say you want to derive the first two characteristics
of product hierarchy. In such cases you define characteristic derivation where
you maintain the rules, which contain the table names of the product hierarchy
fields and the number of characters to be extracted, and it also specifies the target
characteristic field in PA.
95) What is the basic difference in customizing in Profitability
analysis as compared to other modules?
In
PA when we configure the system i.e. creating operating concern, maintain
structures no customizing request is generated. The configuration needs to be
transported through a different transaction
called
as KE3I.
96) What is the difference between Account based Profitability
Analysis and Costing based Profitability Analysis?
Account
based Profitability analysis is a form of Profitability analysis (PA) that uses
accounts as its base and has an account based approach. It uses costs and
revenue elements. Costing based Profitability Analysis is a form of
profitability analysis that groups costs and revenues according to value fields
and costing based
valuation
approaches. The cost and revenues are shown in value fields.
97) What are the advantages and disadvantages of Account based
profitability analysis vis-à-vis costing based profitability analysis?
The
advantage of Account based PA is that it is permanently reconciled with
Financial accounting. The disadvantages are that it is not powerful as the
costing based PA, since it uses accounts to get values. No Contribution margin
planning can be done since it cannot access the standard cost estimate. Further
no
variance analysis is readily available. The advantages of the Costing based PA
are manifold. They are as
Follows:
-
·
Greater Reporting capabilities since lot of characteristics are available for
analysis.
·
This form of PA accesses the Standard cost estimate of the manufactured product
and gives a split according
to the
cost component split (from the product costing module) when the bills are posted.
·
Contribution margin can be planned in this module since the system
automatically accesses the standard cost
estimate of the product based on the
valuation approaches.
·
Variance analysis is ready available here since the variance categories can be
individually mapped to the
value fields.
Disadvantages:-
Since
it uses a costing based approach, it does not sometime reconcile with financial
accounting.
98)Can both Account based and Costing based Profitability analysis
be configured at the same time?
Yes.
It is possible to configure both types of costing based profitability analysis
at the same time.
99) What is the advantage of configuring both the type of
Profitability analysis together?
The
advantage of activating account based profitability analysis along with costing
based PA is that you can easily reconcile costing based profitability analysis
to account based profitability analysis, which means
indirectly
reconciling with Financial accounting.
100) Is there any additional configuration required for Account
based profitability analysis as compared to costing based profitability
analysis?
No.
There are no special configurations required except for activating the account
based profitability analysis while maintaining the operating concern.
101) What is the difference between Profitability analysis and
Profit center accounting?
Profitability
analysis lets you analyze the profitability of segments of your market according
to products, customers, regions, division. It provides your sales, marketing,
planning and management organizations with
decision
support from a market oriented view point. Profit center accounting lets you
analyze profit and loss for profit centers. It makes it possible to evaluate
different areas or units within your company. Profit center can be structured
according to region, plants, functions or products (product ranges).
102) What configuration settings are available to set up valuation
using material cost estimate in costing based profitability analysis?
In
Costing based Profitability analysis you define costing keys. A costing key is
a set of access parameters which are used in valuation to determine which data
in Product cost planning should be read. In the costing key you attach the
costing variant. In the costing key you specify whether the system should read
the current standard cost estimate, the previous standard cost estimate or the
future standard cost estimate or a saved cost estimate. The configuration
settings to determine this costing key is as follows:-
1)
Assign costing keys to the products – Three costing keys can be attached to a single product for a specific
point of valuation, record type, plan
version.
2)
Assign costing keys to Material types
3)
Assign costing keys to any characteristics – You can use your own strategy to
determine the costing keys. This is through user defined assignment tables.
Profit Center
103) What is the basic purpose of creating a Profit Center?
The
basic purpose of creating a Profit Center is to analyse the revenues and costs
for a particular product line, or a plant or a business unit. Though you can
generate balance sheets and profit and loss accounts per Profit Center still a
profit center should basically be used as a tool only for internal reporting
purposes. If legally one has to produce the Balance sheets and Profit and Loss Accounts
for a profit center then it is advisable to create it as a company code instead
of a profit center
104) How does the cost and revenue flow to the Profit Center?
The
profit center is stored in the cost center this way the costs flow to the profit
center. The profit center is also stored in material master. This way all sales
orders created for the finished product automatically picks up the profit center
from the material master and all the revenues and costs coming from this sales
order for that finished product is passed on to this profit center.A profit
center document is created in addition to the Finance document
whenever
revenue or consumption takes place. This document contains the details of the
profit center. Once both the costs and revenues flow to the profit center you
can write reports using the Report Painter to get intelligent analysis. You can
also use SAP standard reports
105) Statistical key figures are created in the cost center
accounting module. Now the same statistical key figures are required in the
profit center accounting module. Is it required to maintain the statistical key
figure in PCA module?
No.
Since the statistical key figures are created in a controlling area. Profit
center is a sub module within controlling area. The statistical key figure is
created for the controlling area and as such is available in profit
center
accounting module.
106) What are the precautions to be taken while maintaining the 3KEH
table for profit center accounting?
You
should not maintain the customer and vendor reconciliation accounts in the 3KEH
table. Further you should also not maintain the special GL accounts in this
table. Since we are transferring the customer and vendor alances to profit center module through
separate month end programs. If the reconciliation’s accounts are maintained
here it will result in double posting in the profit center module.
107) should secondary cost elements be maintained in the 3KEH table?
No.
Since here we maintain only those accounts for which the value should flow from
FI to PCA. Secondary cost elements are already defined in the controlling
module which will reflect in the postings in PCA also
108) How can the default settings be maintained for cost elements
per company code?
The
default settings can be maintained in transaction OKB9. Here we can specify for
a company code, cost element which is the cost center to be defaulted or
whether profitability segment is to be automatically derived. Further we can
also maintain whether business area is mandatory or profit center is mandatory
and can maintain the default business areas and profit centers.
109) What are the other important activities in Profit Center?
The
assignments of profit center to the cost center and also assignment of profit
center to the material master is what will determine the success of the Profit
center posting. If these assignments are wrongly done then
the
profit center postings will not come in properly.
Period End Closing Activities in Controlling
110) What are the period end closing activities in controlling?
The
following are the period end closing activities in Controlling:
·
Repost CO Documents that was incorrectly
posted
·
Run Distribution or Assessment Cycles
·
Run the Overhead Calculation in Product
Costing
·
Run the WIP Calculation in Product Costing
·
Run the Variance Calculation in Product
Costing
·
Run the Settlement Calculation in Product
Costing which will post all the
·
WIP and variance to Finance and PA.
·
Calculate FI Data for Transfer to Profit
Center
·
Transfer Balance Sheet Items like
Receivables, Payables, Assets and Stock
·
Run Results Analysis for Sales Order if applicable
·
Run Settlement of Sales Orders to PA.
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