Actual Costs

and Transfer Prices

in Material Valuation and Product Cost Controlling

SAP AG

Actual Costs and Transfer Prices

SAP AG

Course Overview Diagram I

1. 2. 3. 4.

Introduction and Definition of Terms

Fundamentals of the Transfer Pricing Solution

Transfer Prices from the Viewpoint of PCA

Transfer Prices in the Various Applications

5.
6.
SAP AG

New Functions in PCA

Posting Examples

Strategic Enterprise Control

America

Europe/Africa D

Asia

Division A
USA

E F
J

?
MEX

Corporate Executive Board

Division B
BRA

Legal view - that of the independent legal companies Group view - that of the organization as a whole Profit center view - that of the decentralized responsibility areas
SAP AG

Parallel Valuation Approaches

Group view

Legal view

Profit center view

Group CoCd 1 CoCd 2 CoCd 3 CoCd 4

Profit center 1

Profit center 2
SAP AG

Definition of a Transfer Price

A transfer price is a price used to valuate the transfer of goods and services between independent

organizational units.

SAP AG

Transfer Prices in the R/3 System

CO

Controlling area
PCA

Profit center

FI

Company code

Transfer price from the group viewpoint Transfer price from the profit center viewpoint Transfer price from the legal viewpoint
SAP AG

= = =

group production costs management price sales and purchase price

Parallel Valuation Approaches

Raw material

Cost center Semifin. material Finished product Distribution center Sales order

Production order

Production order

SAP AG

Parallel Valuation Approaches

Cost center Raw material

Semifin. material

Finished product

Distribution center

Sales order

Production order

Production order

Company code 1
PrCtr1 PrCtr2 L G P 70 70 75 L G P 70 70 75

Company code 2
PrCtr3
100 120 L 120 G 90 P 140 L 120 CCtr 20

Company code 3
PrCtr4

75 L G P 70 70 70

220

L G P

220 90 240

G 90 P 140

240

Assumed Plan = Actual => No Variances

SAP AG

Course Overview Diagram II

1. 2. 3. 4.

Introduction and Definition of Terms

Fundamentals of the Transfer Pricing Solution

Transfer Prices from the Viewpoint of PCA

Transfer Prices in the Various Applications

5.
6.
SAP AG

New Functions in PCA

Posting Examples

Quantity and Value Flow

PCA

Overhead costs

V A L U E F L O W

Profit center 1

Profit center 2

FI

COOM

COPA

Direct costs

COPC

Process and data

SAP AG

Purchase

Production

Transfer

Sale

The Concept of Parallel Value Flows

PCA

Overhead costs

V A L U E F L O W

Profit center 1

Profit center 2

or

or

FI
L G P

COOM

COPA

Direct costs

L G P

COPC

Process and data

SAP AG

Stock L G P

Material Ledger

Currency and Valuation Profile

Valuation
10

Legal Group PrCtr

Leg.

0
Grp

30

1 2 10 30
30 PrCtr.

Currency type

Company code currency Group currency

SAP AG

Activating the C & V Profile

Controlling
COOM
Cur.. Leg.

C&V Profile

Activate

COPC

Cur. Grp Cur. PrCtr

Cur. Leg. Cur. Grp Cur.

Material Ledger

PrCtr Cur. Leg. Cur. Grp Cur. PrCtr

SAP AG

Scenarios

Profit Center Accounting

PCA Cur. PrCtr

or

Cur. Grp

or

Cur. Leg.

Financial Accounting
Cur. Leg.

Controlling
COOM COPC
Cur. Leg.
Cur. Grp Cur. PrCtr

mand. opt. opt.

mand.

COPA

Cur. Leg.
Cur. Grp Cur. PrCtr

opt. opt.

FI

Cur. Grp Cur. PrCtr

FI-AA

opt.

Material Ledger

ML

Cur. Leg.

mand.

Cur. Grp

Cur. PrCtr

SAP AG

Example I - Group Valuation

Profit Center Accounting

PCA Cur. Grp

Financial Accounting
Cur. Leg.

Controlling
COOM
COPC
Cur. Leg.

operational

COPA

Cur. Leg. Cur. Grp

FI
FI-AA
Cur. Grp

Cur. Grp

Material Ledger
Cur. Grp Cur. Leg.

SAP AG

Example II - PCA Valuation

Profit Center Accounting

PCA Cur. PrCtr

Financial Accounting
Cur. Leg.

Controlling
COOM
COPC
Cur. PrCtr

operational

COPA

Cur.

PrCtr
Cur. Leg.

FI
Cur. Cur. Leg.

FI-AA

PrCtr

Material Ledger

Cur. PrCtr

Cur. Leg.

SAP AG

Summary I

Parallel value flows throughout all of

Financials
The valuation approaches stored in the

system are defined in the currency and valuation profile.

You can store up to

- 3 valuations in - 2 currencies throughout your system.

SAP AG

Summary II

Inventory is valuated using all active

valuation approaches in parallel.

The material ledger is a subsidiary ledger

in inventory accounting.
Inventories are valuated by plant or

company code in the R/3 System.

Inventories of one material in one plant

always belong to the same profit center.

SAP AG

Summary III

No influence on posting logic. Parallel values posted to the same

accounts.
Parallel valuation approaches are currently

only supported for goods movements.

SAP AG

Course Overview Diagram III

1. 2. 3. 4.

Introduction and Definition of Terms

Fundamentals of the Transfer Pricing Solution

Transfer Prices from the Viewpoint of PCA

Transfer Prices in the Various Applications

5.
6.
SAP AG

New Functions in PCA

Posting Examples

Transfer Prices Between Profit Centers

TP TP TP TP

TP

SAP AG

Valuation Approaches in PCA

Legal

Goods movements valuated with sale or purchase price Goods movements valuated with group cost of goods manufactured Goods movements valuated with internally agreed prices

Group

Profit center

SAP AG

Transfer Prices in PCA

Transferpreis 150price Transfer
150

Profit center 1

Profit center 2

PCA

Material

Production order

120 FI/CO Logistics

Parallel value flows
Quantity flow

SAP AG

Transfer Prices in PCA

Profit center 1
PCA
Internal revenue: - 150
Cost of sales Stock + 120 - 120

Profit center 2
Material consumption 150

Material

Production order

120 FI/CO Logistics

Parallel value flows
Quantity flow

SAP AG

Flexible Transfer Pricing

Plant Material

PrCtr

Transfer price

0001 PROD1 X200 1200 DEM 0001 PROD2 X300 1500 DEM - - Prod.grp PrCtr Rec.PrCtr TP markup Plant 0001 A X100 0002 B X100 - - Product group Plant X200 X300 5% 6.25%

TP markup 5.5%

0001 C -- SAP AG

Customizing for Transfer Pricing

Pricing procedure

Condition types

Access seq.
Transfer price Condition tables

SAP AG

Customizing for Transfer Pricing

Variant for transfer pricing:

Pricing procedure Step Condition type From To Cond.formula 10 TP01 20 TPB1 100 30 TP02 20 20 TP01 Calc. rule C Cond.class B Fixed price 150
SAP AG

TPB1 Calc. rule C Cond.class B Calc. price 95

TP02 Calc. rule A Cond.class A Markup 10%

Planning - Valuation with PCA Cost Est.

PrCtr: X100 Plan Planversion: version: 001 001 Year: Jahr: 1999 SEMI1 HALB1 SEMI2 HALB2 SEMI3 HALB3
PrCtr 1

Material PROD-REP FERT-REP

1unit 1ST 400000 400000 1000,1000 2units 2St 412000 412000 1400,1400 1unit 1ST Lief.v.anderen "Goods from other 3000, PrCtrs" -. 3000
PRODFERT- REP REP
PrCtr 2 TP TP3000,3000

SEMI1 HALB1

SEMI2 HALB2

SEMI3 HALB3

MDC MEK 1000

SAP AG

MGK MOH 800,800

MOH 500,500 MEK MDC1400,1400 MGK

MDC MEK 1800, 1800 - MOH MGK 500 500,

Planning - Valuation with Transfer Prices

PrCtr: X100 Plan version: 001 Year: 1999 PrCtr PPrCtr Acct X100 X200 X100 X300 800000 800000 Material Plant Qty Revenue

REP-1 0001 10 un. 12,000 REP-2 0001 5 un. 5,000

PrCtr X100

Receiver PrCtr X200

Material REP-1

Plant 0001

Transfer price 1200 USD

X100
SAP AG

X300

REP-2

0001

1000 USD

Analysis of Profit Centers in CO-PA

Val. PCA

CoCd 0001

PrCtr X100 X200 X200

Mat. SEMI

Rev. Costs CCtr/Group 75 70 80 85 70

Legal 0001 PCA 0001

PROD 100 PROD 120

Company code 0001 PrCtr X100

PCA 75

Company code 0002 PrCtr X200

10 L G P 80 70 85 L G P 80 70 85 CCtr

PrCtr X300
PCA 120
L G P 100 70 120

L G
P

70 60
70

SEMI
SAP AG

PROD

Summary I

Profit centers earn profit just like independent companies.

Goods movements can be valuated using transfer prices.

Goods movements between profit centers can be analyzed in CO-PA. No internal payables/receivables are posted.

SAP AG

Summary II

Transfer prices are calculated using conditions.

Plan costs are taken from the profit center cost estimate.
Plan revenues are found using transfer pricing.

SAP AG

Course Overview Diagram IV

1. 2. 3. 4.

Introduction and Definition of Terms

Fundamentals of the Transfer Pricing Solution

Transfer Prices from the Viewpoint of PCA

Transfer Prices in the Various Applications

5.
6.
SAP AG

New Functions in PCA

Posting Examples

Parallel Valuation Approaches in FI

FI

General Ledger

Currency and Valuation Profile

Valuation Legal Group PCA Currency type Company code currency Group currency Group currency

Document Legal Group PCA

SAP AG

Parallel Valuation Approaches in FI-AA

IM

Settle to asset

AA

Cap. investm. order

L 50 G 40 P 60

Depreciation area
Area Cur.type

50 40 60

01 11 21

10 31 32

SAP AG

Parallel Valuation Approaches in CO

CO
Actual version 002
Actual version 001 Actual version 000 CO data

CO area currency Object currency Transaction currency Currency and valuation profile
Valuation Legal Group PCA
SAP AG

Currency type Company code currency Group currency Group currency

Additional Actual Versions in CO

PrCtr 1

PrCtr 2

Material
Legal Group PrCtr 500 400 600 TP 700 USD

Overhead
70 70
70 70DEM

500
-300 DEM 400

700

operational

SAP AG

Transfer Prices in CO-PA

Profitability report: PrCtr1 Internal revenues - Variable COS _____________________ Contribution margin I - Fixed COS _____________________ Contribution margin II - Overhead ...
75

Profit center Company code

Company code 1
PrCtr1 PrCtr2 L G P 70 70 75 100

Company code 2
PrCtr3 L 100 G 70 P 120

_____________________ Operating result

L G P

70 70 70

- +
L G 70 70

120

75

SAP AG

Material Inventories

Material Costing Inventory Management Invoice Verification Production Order Delivery Production Order Settlement Legal Group PrCtr

SAP AG

Product Cost Planning

COPC

Controlling area
Material Activity Overhead Profit St.price

Legal mat. cost estimate

DEM 1000.00 100.00 100.00 $330 50.00 $230 $270.00 1200.00

Group cost estimate

USD 170.00 50.00

Legal Group PrCtr

$500.00

1200 $270 $500

Profit center cost estimate

USD 400.00 50.00 50.00

SAP AG

Reporting - Group Costing

Material number
+ 08123 + 47-123548585 - 5967-0956/434 + Company code 0001 + Company code 0002 - Company code 0003 ... Profit center PC - 1 Profit center PC - 3 Profit center PC - 5 Profit center PC - 9

Material
30,000 45,000 54,000 12,500 20,000 21,500 10,000 9,000 500 2,000

Production
34,400 47,000 63,900 13,500 22,500 27,900 11,000 15,000 900 1,000

Profit
4,400 2,000 9,900 1,000 2,500 6,400 1,000 3,000 400 2,000

SAP AG

Group Costing
Company A
Group = Standard CE

Company B
Group CE Standard CE

Company C
Group CE Standard CE

Group
Broken down Total

DCA
POHA FOHA

DCA
POHA FOHA

DCA
POHA FOHA

DCA DCB DCC DCC

POHA FOHA POHB FOHB POH FOH POHC FOHC

DC

DCB PA PA DCB
POHB FOHB POHB FOHB

PA DCB
POHB FOHB

PB
DC POH FOH P Index A, B, C = = = = =

PB

PB DCC

Direct Costs Proportional Overhead Fixed Overhead Profit (Revenue ./. Full Costs) Company A, B, C

PA PB PC P

POHC FOHC POHC FOHC

PC

PC

SAP AG

Example: Value-Added Chain I

GROUP CoCd BX03, Plant WX09
FINISH PrCtr X400

CoCd BX02, Plant WX03

Production in another plant

SEMI
Sale = PrCtr transfer: 800 DM

SEMI

PrCtr X100

Stock transfer
RAW 1
Sale: 300DM PrCtr transfer: 240 DM

RAW 1

PrCtr transfer: 200 DM

RAW 2

PrCtr X300

Legal sale price Markup: 20% on material SAP AG Profit center transfer price

Example: Value-Added Chain II

GROUP
S56_P-100

CoCd BX03, Plant WX09

400,00 350,00 800,00 50,00 300,00 100,00 40,00 124,00 80,00 206,00 206,00 490,00 774,00 980,00

CoCd BX02, Plant WX03

PrCtr X100
S56_100-400

FINISH Material Activity Overhead Profit PrCtr Profit CoCd Price ML

(L) US$ (G) DEM (P) DEM

S56_100-400

SEMI
800 DM 800 DM

SEMI

Material Activity Overhead Profit PrCtr Profit CoCd Price ML (L) US$ 400,00 400,00 (G) DEM 350,00 200,00 44,00 206,00 206,00 594,00 (P) DEM 800,00 800,00
S56_100-431

Material Activity Overhead Profit PrCtr Profit CoCd Price ML (L) DEM 450,00 200,00 44,00 694,00 (G) DEM 350,00 200,00 44,00 90,00 100,00 594,00 (P) DEM 440,00 200,00 44,00 684,00
S56_100-431

RAW 1
100,00 200,00 200,00

RAW 1 Material Activity Overhead Profit PrCtr Profit CoCd Price ML

(L) US$ (G) DEM (P) DEM 100,00 200,00 200,00

300 DM 240 DM

Material Activity Overhead Profit PrCtr Profit CoCd Price ML (L) DEM 300,00 300,00 (G) DEM 200,00 40,00 100,00 200,00 (P) DEM 240,00 240,00

PrCtr X400

S56_100-120

200 DM
Profit CoCd Price ML 150,00 150,00 150,00

RAW 2
(L) DEM (G) DEM (P) DEM

Material Activity Overhead Profit PrCtr 150,00 150,00 150,00

Legal sale price Markup: 20% on material SAP AG Profit center transfer price

PrCtr X300

Purchasing and Sales

Company A Goods issue

Company B Stock transfer order

Goods receipt
Invoice issue IDOC PrCtr1 Invoice receipt PrCtr 2

100
L G P 70 70 75

120

L 100 G 70 P 120

SAP AG

Pricing in SD

Which conditions are required?

Revenue conditions for all valuation approaches in the system

Cost conditions for the valuation approaches used in CO-PA

The following conditions are delivered with the standard SAP system: KW00 PC00 PCVP Revenues/Costs in the Group Valuation Approach Revenues in the Profit Center Valuation Approach Costs in the Profit Center Valuation Approach

SAP AG

Pricing in SD

Group Valuation

PCA Valuation

KW00 Revenues/Costs Type b, statistical

PC00 Revenues Type c, statistical PCVP Costs Type h, statistical

Type h reads the material ledger price in the profit center valuation Type c performs pricing for the profit center valuation Type b reads the material ledger price in the group valuation

Up to and including Release 4.5, no conditions of type b were transferred to CO-PA. Group costs of goods manufactured are transferred to CO-PA from the corresponding costing or from a user exit

SAP AG

Posting Example

Sale between companies within the group

FI
Goods receipt Goods issue Goods usage L 50 G 40 Stock L G 50 40 Stock L 80 G 40 Invoice receipt Billing document Receivables L 150 G 150 IC profit acct L G
L - Legal G - Group
SAP AG

GR/IR L G 80 40

GR/IR L 80 G 40 Input tax L 20 G 20 IC profit acct L G 90 Vendor L 150 G 150 Price diff. L 50 G

Revenues L 130 G 40 Sales tax L 20 G 20

90

Account Categories

FI

Accounts with parallel valuation

Revenues L 130 G 40 Stock L G GR/IR L 80 G 75 130 40 50 40 Usage L G Price diff. 50 40 L 50 G Expense L 50 G 40

Change in stk L 50 G 40

Accounts without parallel valuation

Receivables L 130 G 130 Input tax L 20 G 20 Sales tax L G 20 20

Vendor
L G 150 150

Clearing accounts
VAC
L G
SAP AG

150 150

Summary I

Parallel valuations in FI follow the same logic as the parallel currencies.

No influence on posting logic. Parallel values posted to the same accounts. Additional accounts only required for:

- Clearing of payables and receivables - Internal revenues and costs

SAP AG

Summary II

In FI-AA the parallel valuations are stored in different depreciation areas.

In CO the parallel valuation approaches are stored in separate actual versions.

The additional actual versions are stored in the system as delta versions. In CO-PA legal and profit-center valuation are stored in separate ledgers.

In CO-PA group valuation is stored in the legal ledger in separate value fields.
SAP AG

Restrictions I

Transfer prices currently can only be used for goods movements. FI-AA can only store those valuation approaches that are active in FI as well. Group costing is only possible within one controlling area. Parallel valuation approaches are only possible within one controlling area. No parallel valuation approaches for unvaluated sales order stock.

SAP AG

Restrictions II

WIP at targets does require the legal valuation as the operational one. WIP at targets will only be calculated in the operational valuation.

Parallel valuation approaches are only possible with invoice verification in Logistics.
Automatic invoice receipt for cross-company processing uses EDI, even within the same system.

SAP AG

Course Overview Diagram VI

1.

Introduction and Definition of Terms

2.
3. 4. 5. 6.
SAP AG

Fundamentals of the Transfer Pricing Solution

Transfer Prices from the Viewpoint of PCA

Transfer Prices in the Various Applications

New Functions in PCA

Posting Examples

Scenarios

Profit Center Accounting

PCA Cur. PrCtr

Financial Accounting
Cur. Leg.

Controlling
COOM COPC
Cur. Leg. Cur. Grp Cur. PrCtr

COPA

Cur. Leg.
Cur. Grp

FI
FI-AA

Cur. Grp Cur. PrCtr

Operational

Cur. PrCtr

Material Ledger

ML

Cur. Leg.

Cur. Grp

Cur. PrCtr

SAP AG

Conventions for Representing Postings

V A L U E F L O W

Int. change in stock

Additional posting lines in Profit Center Accounting

PCA

FI

Postings in FI L = Legal G = Group P = PrCtr

COOM

Account

COPC

Update in CO

COPA

Process and data

SAP AG

Process

Example of a Posting in Release 3.0

PCA

Consumption

V A L U E F L O W

60

FI
Consumption
L 60

COOM

COPA

COPC

Consumption L 60

Stock L 60

Process and data

SAP AG

Consumption for production order

Material Withdrawal for a Production Order

PrCtr 1

Transfer price = 150

Internal revenues P 150

PrCtr 2

PCA

V A L U E F L O W

Int. change in stock P 120

Consumption 150

FI
COOM

COPA

Consumption L 100 G 80 P 150 Stock 100 L 80 G 120 P

COPC

Consumption L 100 G 80 P 150

Process and data

SAP AG

PrCtr 1

Consumption for production order

PrCtr 2

Activity Allocation for a Production Order

PCA

PrCtr 1

PrCtr 2
Int. activity alloc. P 600

V A L U E F L O W

Int. activity alloc. P 600

FI

COOM

Int. activity alloc. L 600 G 600 P 600

COPA

COPC

Int. activity alloc. L 600 G 600 P 600

Process and data

SAP AG

PrCtr 1

Activity allocation

PrCtr 2

Results Analysis and Settlement of WIP

PCA

V A L U E F L O W

Change WIP P 750

COPA COPC

FI

Balance WIP L 700 G 680 P 750 Change WIP 700 L 680 G 750 P

COOM

Production costs L 700 G 680 P 750

Process and data

SAP AG

Results analysis, WIP settlement

FI document

Delivery to Stock Within the Same Plant

PCA

V A L U E F L O W

Factory output P 600,-

Costs P 750

FI

Stock L 500 G 400 P 600

COOM

COPC

COPA

Factory output 500 L 400 G 600 P

Factory output L 500 G 400 P 600

Costs L 700 G 680 P 750

Process and data

SAP AG

Delivery to stock

Stock Transfer Between Profit Centers

PrCtr 1
Int. change in stk

Transfer price = 100

P P 100 100

PrCtr 2

PCA

Goods from PrCtr

Int.change in stk

V A L U E

P 60 Internal revenues P 100

FI
Stock L 80 G 40 P 90 Stock L G P Price diff. L 30 30 G P 10
COOM COPA

F L O W

COPC

50 40 60

Process and data

SAP AG

Plant1 PrCtr 1

Stock transfer

Plant2 PrCtr 2

Primary Posting to a Cost Center

PCA

V A L U E F L O W

Expense P 200

FI

Expense L 200 G 200 P 200 Vendor L 200 200 G 200 200 200 P 200

COOM

Expense L 200 G 200 P 200

COPC

COPA

Process and data

SAP AG

Primary posting to cost center