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SAP AG 1999
Reflecting Your Business in CO: Unit Contents
Organizational Units and Structures
Basic Data and Structures
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Reflecting Your Business in CO: Unit Objectives
dentif! t"e basic organizational structures
#"ic" are relevant to CO$ and t"e relations"i%s
bet#een t"e&.
'a&e e(a&%les of &aster data #"ic" are
relevant to CO$ and t"eir %ur%ose.
)ist at least t"ree #a!s in #"ic" grou%s of
&aster data can be used.
*t t"e conclusion of t"is U'+$
!ou #ill be able to:
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SAP AG 1999
Reflecting Your Business in CO: BusinessScenario
-ac" co&%an! "as a given organizational structure t"at &ust
be reflected in t"e R., s!ste&. You are res%onsible for
revie#ing t"e decisions &ade b! t"e i&%le&entation tea& in
t"is area.
Since !our co&%an! "as elected to utilize all CO co&%onents$
!ou &ust fa&iliarize !ourself #it" t"e basic organizational
structures available in CO. Your anal!sis &ust focus on
#"et"er t"e a%%ro%riate relations"i%s "ave been defined to
su%%ort t"e co&%an!/s 0e! infor&ation re1uire&ents.
+"is anal!sis #ill begin #it" t"e relations"i% bet#een
controlling area and co&%an! code$ and continue #it" t"e
definition of areas of res%onsibilit!$ suc" as cost centers and
%rofit centers. t #ill also include t"e %roduction function$ and
t"e anal!sis of %rofitabilit! for 0e! &ar0et seg&ents. +"is #ill
re1uire an understanding of t"e various t!%es of &aster
records used in CO.
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S!ste&$ Client and Organizational Structures
S!ste&: D,
Client:
000
Client:
200
3rofitabilit!
Seg&ents
O%erating
Concern
D-*
C"art C"art Of Of
*ccounts *ccounts
C*US C*US
C"art C"art Of Of
*ccounts *ccounts
'+ '+
Business *rea Business *rea
4500 4500
Business *rea Business *rea
0004 0004
Co&%an!
Code
2000
Co&%an!
Code
4000
Co&%an!
Code
,000
Co&%an!
Code
2000
Cost Centers
Orders
3rocesses
Cost Objects
3rofit Centers
Cost Centers
Orders
3rocesses
Cost Objects
3rofit Centers
Controlling *rea
4000
Controlling *rea
2000
Controlling Area: The controlling area is the fundamental organizational unit that defines the use of
cost accounting within an organization. A controlling area may include one or more company codes.
All company codes and the controlling area to which they are assigned must use a common
operational chart of accounts and fiscal year. Any transaction internal to CO must occur within a
single controlling area; i.e. no transaction can cross controlling area boundaries.
Company Code: The company code is an independent accounting unit, typically representing a
legal entity. Financial statements (balance sheet and profit and loss statement re!uired by
regulatory authorities can be produced at the company code le"el.
Chart of Accounts: The chart of accounts is a classification of accounts defined in financial
accounting as a framewor# for recording "alues and "alue flows. The chart of accounts contains all
accounts used in the presentation of financial statements (re"enues, e$penses, assets, liabilities, and
e!uity.
Business Area: The business area is an organizational unit of financial accounting that represents a
separate area of operations or responsibilities within an enterprise. %ach financial accounting
transaction line item can be assigned to a specific business area. &alance sheets and income
statements can be prepared at the business area le"el.
Operating Concern: The operating concern is utilized only by 'rofitability Analysis (CO('A, and
represents the highest reporting le"el. One or more controlling areas can be assigned to a single
operating concern. )hen data is transferred to 'A, the system determines the proper operating
concern based on the controlling area. *ou assign a controlling area to an operating concern when
you customize your organizational structures.
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+"e Cost -le&ent
3ri&ar! cost ele&ents
Primary cost element
Impte! cost element
"#ternal or!er settlement
Secondar! cost ele&ents
Internal acti$ity allocation
Assessment
O$er%ea!s
Internal or!er settlement
Revenue ele&ents
&e$ene element
Sales !e!ction
Revenue account
Expense accounts
Accounts posted
to directly, such as
bank accounts
Accounts posted
to indirectly, such
as reconciliation
accounts
Balance s"eet
accounts
3 6 )
accounts
7.)
accounts
8 8
CO CO
The integrated nature of the +,- .ystem means that you need to create e$pense accounts in
Financial Accounting with corresponding primary costs elements in Controlling. This ensures that
you can reconcile e$penses in F/ with primary costs in CO. &efore you can create primary cost
elements in CO, you first need to create them as 0,1 acccounts in F/.
To be able to post to a primary cost element, you re!uire a cost(carrying ob2ect (such as a cost
center to identiry the origin of the costs. %$amples of primary cost elements are material costs and
salary costs.
Secondary costs elements are used e$clusi"ely in CO to identify internal cost flows such as
assessments or settlements. They do not ha"e corresponding general ledger accounts in F/ and are
defined in CO only.
)hen you analyze re"enues in cost controlling, the +,- .ystem records them as re"enue elements.
Revenue elements are primary cost elements.
)hen you create a cost element, you must assign a cost element category. This assignment
determines the transactions for which you can use the cost element. For e$ample, category 34
(genearal primary cost elements is used for the standard primary postings from Financial
Accounting or 5aterials 5anagement.
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:aster Data in Over"ead Cost Controlling
Over"ead Cost Controlling
3roduct Cost
Controlling
Cost
Object
CO
*n
3rofitabilit!
Seg&ent
3rocess
3rofitabilit!
*nal!sis
3rofit Center
*ccounting
nternal
Order
3rofit
Center
Cost Center
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Cost Center < 3ur%ose
)evel of cost res%onsibilit!:
="ere t"e costs #ere incurred
3lan *ctual
The Cost Center Accounting component (CO(O5(CCA trac#s where costs occur in your
organization. The cost center is an organizational unit in a controlling area. Cost centers can be
defined according to se"eral different design approaches. A typical approach could be for an
enterprise to define a cost center for each low(le"el organizational unit that has responsibility for
managing costs. As costs are incurred, they are assigned or posted to the appropriate cost center.
These costs could include payroll costs, rent and utility costs, or any other costs rele"ant to a gi"en
cost center.
The posting and assignment of costs to cost centers not only ma#es managerial accounting possible;
but is a "ital step for utilizing the other Controlling components. As noted abo"e, cost centers can be
set up according to different design approaches, including6 functional re!uirements, allocation
criteria, acti"ities or ser"ices pro"ided, geographic location and,or area of responsibility. &ut
whiche"er approach is selected, it should be consistent throughout the enterprise.
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*ctivit! +!%e < 3ur%ose
Sending cost center
?:aintenance?
%rovides , "ours at 400."r
credited for ,00
Receiving cost center
?3roduction@
consu&es , "ours at 400."r
debited for ,00
Re%air Aours
* &easure of t"e
out%ut of a cost center
The acti"ity type represents some form of producti"e output by a cost center. Common e$amples of
acti"ity type would include labor hours or minutes of machine time. Acti"ity types are used to
allocate costs from a sender cost center to another CO ob2ect (e.g. cost center, internal order,
production order, etc. based on the number of units of the acti"ity performed. A unit price is used to
"alue the acti"ity !uantity.
/n the picture abo"e, a maintenance cost center performs - hours of repair acti"ity ha"ing a unit
price of 433,hour. The "alue of the acti"ity performed is then allocated as a cost of -33 to the
recei"ing production cost center. The net effect is a cost flow of -33 from the sender to the recei"er
cost center. This reduces the balance of costs on the sender by -33 (credit amount, and increases
the balance on the recei"er by -33 (debit amount. This internal acti"ity allocation transaction
creates a balanced, two(sided cost accounting posting within the controlling area.
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Statistical Ce! 8igures
* &easurable 1uantit! t"at can be assigned to Cost
Centers$ *ctivit! +!%es$ Over"ead Orders$ Business
3rocesses and 3rofit Centers
Used as an allocation base D?+racing 8actor@E in
over"ead cost allocations
+#o categories: +!%e 4 F 8i(ed$ +!%e 2 F +otals
Can be lin0ed to )ogistics nfor&ation S!ste& D)SE
3eriods 4 2 , . . . 42
-&%lo!ees 20 20 20 20
Counter no. 4,00 4,55 42;5 4,25
+!%e 04
+!%e 02
.tatistical #ey figures define some measurable "alue applicable to cost centers, profit centers,
internal orders, or processes. %$amples could include total number of employees in a cost center,
minutes of long(distance phone calls, number of employees in the Transportation cost center who
perform "ehicle repairs, etc.
*ou can post both plan and actual "alues for statistical #ey figures.
*ou can use statistical #ey figures as an allocation base (or 7tracing factor8 in CO terminology for
periodic allocation transactions, such as distribution or assessment, as well as for analysis purposes
(e.g. to calculate the rent cost per employee.
*ou define a statistical #ey figure as a fixed value or a totals value6
The fi$ed "alue is carried o"er from the period in which it is posted to all subse!uent periods of
the same fiscal year. This is useful for statistical #ey figures that tend to remain constant o"er
time (such as the number of employees. *ou need enter a new posting only when the "alue
changes.
The totals "alue is not transferred to the following period but must be entered for each indi"idual
period. This is preferable for statistical #ey figures whose "alues tend to change each period
(such as #ilowatt hours of electricity consumption.
*ou can also transfer statistical #ey figures "alues from the 1ogistics /nformation .ystem (1/..
This is accomplished by lin#ing a #ey figure from 1/. to a statistical #ey figure in Cost Center
Accounting.
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Over"ead Order < 3ur%ose
3lan *ctual
Over"ead
Order
Over"ead
Order
/nternal orders are used to plan, collect, monitor, and settle the costs of specific operations and tas#s
performed within a company. The .A' +,-(.ystem allows you to control your internal orders
throughout their entire life(cycle from initial creation through the planning and posting of actual
costs right up to final settlement.
/nternal orders can be used for different purposes. This functional classification is reflected in the
different order types, whose attributes define the way orders are processed in the system. The
general categories of internal orders include6
Overhead orders6 9sed to monitor o"erhead costs incurred for a particular purpose, such as
conducting a trade fair, or trac#ing costs for maintenance and repair wor# each period.
Investment orders6 9sed to monitor costs incurred in the production of a fi$ed asset, such as
building a storage facility.
Accrual orders6 9sed to offset postings of accrued costs (costs calculated in CO to cost centers.
Orders with revenue6 9sed to replace the cost accounting parts of .: customer orders if .: is
not being used, so that both costs and re"enues can be trac#ed; or to monitor re"enues not
affecting the organization;s core business (such as miscellaneous re"enues.
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Cost
Center
Quality
Cost
Center
Purchasing
Cost
Center
Receiving
3urc"asing 3rocess
?)o# Co&%le(it!@ ?'on<Galue *dded@
Business 3rocess D*BCE < 3ur%ose
Cost
Driver
A process in A&C is not <tied< to only one specific cost center. /t is a cross(functional CO ob2ect
whose costs may be produced or generated by multiple cost centers with different functional
responsibilities.
The process can also carry different types of attributes, such as 7"alue added,non("alue added8,
which add a further dimension to managing the processes within an Acti"ity &ased management
framewor#. )hen loo#ing for ways to impro"e operating efficiency, a process identified as adding
low "alue would be an attracti"e candidate for cost reduction.
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:aster Data 7rou%s
Wages Wages Salaries Salaries F1 F1 F2 F2 F3 F3 PHR1 PHR1 PHR2 PHR2 Temps Temps Tenured Tenured
Cust. Cust.
Care Care
Order Order
-ntr! -ntr!
Domestic Domestic 8oreign 8oreign
Personnel Personnel Motor Pool Motor Pool
Production Production
Hours Hours
Employees Employees Trade Fair Trade Fair Sales Sales
Cost Cost
-le&ents -le&ents
Cost Cost
Centers Centers
*ctivit! *ctivit!
+!%es +!%es
Statistical Statistical
Ce! 8igures Ce! 8igures
nternal nternal
Orders Orders
Business Business
3rocesses 3rocesses
)ith master data groups, you can summarize or group together "arious types of master data in CO(
O5 for use in analysis (reporting, planning, and allocations. These groups can be useful for
processing multiple master data records in a single transaction. For e$ample, in a single cost
planning transaction you could enter plan data for all the cost elements used by your cost center by
creating an appropriate cost element group, and specifying it in the planning selection screen.
.imilarly, you could produce a report summarizing the results for all the cost centers that you
manage by creating the cost center group, and then specifying it in your report definition.
5aster data groups can be 7flat8 (meaning all "alues are at the same le"el, or can incorporate a
hierarchical structure. )hen using these groups in reporting, each hierarchical le"el can produce
automatic totals of the le"els beneath it. The master data itself is assigned to the lowest le"el nodes
in the structure. The +,- .ystem chec#s that a "alue (cost center, cost element, acti"ity type, etc. is
represented only once in the group. *ou can create as many different groups as are re!uired to
support your business. A gi"en "alue can appear in multiple different groups.
The cost center standard hierarchy is a special type of cost center group. %ach controlling area must
ha"e a uni!ue standard hierarchy. All cost centers in that controlling area must be assigned to a node
on the standard hierarchy.
A master data group name may be used only once in a client. /f, for e$ample, you create a cost
center group named 79tilities8, you cannot use this name for any other group, whether it is a cost
center group, cost element group, etc.
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:aster Data in 3roduct Cost Controlling
Over"ead Cost Controlling
3roduct Cost
Controlling
nternal
Order
Cost
Object
CO
*n
3rofitabilit!
Seg&ent
3rofitabilit!
*nal!sis
3rofit Center
*ccounting
3rofit
Center
3rocess
Cost Center
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Bill of :aterial
Engineering drawing and derived BOM
Unit of
&easure
Designation 3art 'o. Ht! te&
PC +osin, 100-100 1 4
PC Impeller 100-200 1 2
PC Co$er 100-400 1 ,
PC -ase 100-(00 1 2
, ,
2 2
4 4
2 2
A &ill Of 5aterial (&O5 is a complete, formally structured list of the components that ma#e up a
product or assembly. The list contains the ob2ect number of each component, together with the
!uantity and unit of measure. The components are #nown as &O5 items. A &O5 can include
materials that ha"e their own &O5s.
/n +,-, bills of material are created in the '' module. They are used in 'roduct Cost 'lanning to
calculate the costs of materials re!uired for a specific product when creating a product cost estimate.
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:aster Data Structures in CO<3C
BO: BO:
* #or0 center is a %"!sical location
at #"ic" an o%eration is carried out.
-ac" #or0 center is assigned to a cost center.
Routing
+"e Bill of :aterial is a co&%lete$
for&all! structured list of t"e co&%onents
t"at &a0e u% a %roduct or asse&bl!.
* routing describes a se1uence
of %rocessing ste%s and deter&ines t"e
activit! 1uantities used fro& cost center accounting.
A &ill Of 5aterial (&O5 is a complete, formally structured list of the components that ma#e up a
product or assembly. The list contains the material number of each component, together with the
!uantity and unit of measure. The components are #nown as &O5 items. A &O5 can include
materials that ha"e their own &O5s.
The wor# center is the physical location at which an operation is carried out. )hen the master
record for a wor# center is created in '', it is lin#ed to a cost center, and also the "arious acti"ity
types produced by the cost center. This lin# allows access to the acti"ity type unit prices, which are
used in "aluing labor (or machine time supplied by the cost centers in a production process.
The +outing lists the specific steps re!uired to manufacture a product. These 7steps8 are called
operations. The routing specifies the following for each operation6
the wor# center which carries out the operation
the default "alues used for calculating dates, capacities and production costs
whether the costs of an operation are ta#en into account for costing
the material components needed to carry out an operation
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Routing
Routing Routing
* routing describes a se1uence
of %rocessing ste%s and deter&ines t"e
activit! 1uantities used fro& cost center accounting.
Definition
Example
O%erations 40 Staging...
20 3re<asse&bl!...
,0 8inal asse&bl!...
20 C"ec0ing...
50 Deliver!...
The +outing lists the specific steps re!uired to manufacture a product. These 7steps8 are called
operations. The routing specifies the following for each operation6
the wor# center which carries out the operation
the default "alues used for calculating dates, capacities and production costs
whether the costs of an operation are ta#en into account for costing
the material components needed to carry out an operation
The system calculates the amount of acti"ity used on the basis of a formula in the wor# center, and
the default "alues in the operation of the routing. The acti"ity is pro"ided by the cost center lin#ed
to the wor# center performing the operation. )hen the costs for the operation are calculated, the
acti"ity is "alued using the acti"ity prices from that cost center.
/n repetiti"e manufacturing and process manufacturing you can use rate routings and recipes instead
of routings.
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:aster Data in Cost Object Controlling
:aterials$ run sc"edule "eaders$ cost object
"ierarc"ies
:aterials$ %roduction orders$ %rocess orders
Sales orders$ %roduction orders
7eneral cost objects$ internal orders D#it"
revenuesE
Prod. ost !y
"ales Order
#ntangi!le $oods
and "ervices
Prod. ost !y Period
Prod. ost !y Order
:epending on the production scenario, "arious cost ob2ects can be used.
/n 7product cost by period8 we generally control a production process by focusing on a certain
period. This scenario suits to mass production of goods. The cost ob2ects are created independent
from a lot size, control the production process periodically and can be used for many periods.
/n 7product cost by order8 we generally control a production process by focusing on a specific lot
size. %"en the data on the cost ob2ects can be analyzed period by period, the cost ob2ects are created
to control the production of a certain lot and are only used to control this one lot.
/n the scenarios described abo"e, we generally ha"e a ma#e(to(stoc# en"ironment. This means,
according to a production plan the re!uired products are manufactured and deli"ered to unrestricted
stoc# or are procured e$ternally. The sales process will come later and will ship the goods of the
unrestricted stoc# to the customers.
/n 7product cost for sales orders8 we can assume, that first a sales order is created for the supply of
goods and,or ser"ices. :epending on the scenario, you can use on(site or e$ternal procurement to
co"er the re!uirement. /f the sales order is a controlling ob2ect, the consumption of goods and
ser"ices is directly assigned to this sales order. 0oods are assigned to a special sales order stoc# or
pro2ect stoc#, from where they are shipped to the customers. The re"enues will be posted to the sales
order.
/n 7product cost for intangible goods and ser"ices8 a sales order stoc# is not used. The sales order is
always a cost ob2ect, so that the cost and re"enues for pro"iding the ser"ice are directly assigned to
the sales order.
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:aster Data in 3rofitabilit! :anage&ent
3roduct Cost
Controlling
nternal
Order
Cost
Object
CO
*n
3rofitabilit!
Seg&ent
3rofitabilit!
*nal!sis
3rofit Center
*ccounting
3rofit
Center
3rocess
Cost Center
Over"ead Cost Controlling
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C"aracteristics
CO<3*: Structures and :aster Data
Derivation of
3rofitabilit!
Seg&ents
Galuation
Galue
8ields
Structures
:aster
Data
The fundamental structure of CO('A is defined by the operating concern.
The operating concern is, in turn, defined by the following6
characteristics (%$amples6 products, customers, regions
characteristic "alues (%$amples6 product =, customer A, eastern region
profitability segments (combinations of characteristic "alues; e$ample6 product = sales to
customer A in the eastern region
"alue fields (%$amples6 re"enues, sales deductions, costs
cost elements (only in account(based 'rofitability Analysis
This structure may "ary greatly from one company to the ne$t.
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3rofit Center < 3ur%ose
3lan *ctual
3r 3r Ctr Ctr 4 4
3r 3r Ctr Ctr , ,
3rCtr 2
3r 3r Ctr Ctr 2 2
3r 3r Ctr Ctr 5 5
A 'rofit Center is a management(oriented organizational unit used for internal controlling purposes.
:i"iding your company up into profit centers allows you to analyze areas of responsibility and to
delegate responsibility to decentralized units, thus treating them as 7companies within the
company8. 'rofit centers can be defined according to product (product lines, di"isions,
geographical factors (regions, offices or production sites or function (production, sales.
'rofit Center Accounting ('CA allows you to calculate internal measurements of profitability. This
internal "iew of profitability reflects the success of a gi"en profit center at meeting the profitability
goal for which it was gi"en responsibility. :ifferent types of profit centers may ha"e differing
measures of profitability. For e$ample, a profit center that was defined as a sales profit center would
ob"iously generate re"enue from e$ternal customers. &y contrast, a profit center responsible for
production may generate no re"enue at all from e$ternal customers. &ut the deli"ery of finished
products to in"entory could be "alued as an e!ui"alent form of re"enue (internal re"enue, when
measuring how well this particular profit center met its profitability responsibilities.
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Organizational Units 6 :aster Data < Su&&ar!
3rofit
Center
3rofit
Center
3rofit
Centers
Order Cost Object 3roject 3rocess Cost Center
Cost -le&ent
grou%
*ctivit!
+!%e grou%
3rofit Center
"ierarc"!
Cost Center
"ierarc"!
Order
grou%
O%erating
Concern
Controlling
*rea
Structure
definitions
Object level Object level
Contents Contents Cost -le&ent *ctivit! +!%e Statistical Ce! 8igure
3rofit
Center
Co&%an!
Codes
There are se"eral structures within a controlling area that pro"ide support for managing areas of
responsibility. These include the cost center standard hierarchy and the profit center standard
hierarchy. These hierarchies pro"ide a control feature, as well as offering summarizing capabilities
at each node for reporting at "arious organizational le"els.
'rofit centers also pro"ide summary information. Ob2ects such as cost centers, production orders,
and others are assigned to only one profit center. This means that the profit center reflects the sum
of all credits and debits belonging to the ob2ects assigned to it. At period end closing you use
additional functionality to meet certain tas#s of profit center accounting.
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Reflecting Your Business in CO : Unit Su&&ar!
dentif! t"e basic organizational structures #"ic"
are relevant to CO$ and t"e relations"i%s bet#een
t"e&.
'a&e e(a&%les of &aster data #"ic" are relevant
to CO$ and t"eir %ur%ose.
)ist at least t"ree #a!s in #"ic" grou%s of
&aster data can be used.
Aaving co&%leted t"is U'+$
!ou s"ould no# be able to:
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