1

Costing & Profitability Analysis

SKH & KML
Working together to improve
Business Performance
Krishna Group
21-Oct-10
2
Agenda

1. Overview of Product Costing ( CO- PC)

2. Overview of Profitability Analysis (CO-PA)

3
Overview of Product Costing
Product Costing in SAP
1. Maintenance of Quantitative Structure
2. Creation of Standard Cost Estimates
3. Execution of Period End closing activities
4. Derivation of Variances
5. Benefits of Product Costing
4
Maintenance of Quantitative Structure
Quantitative Structure is based on Three base objects.
1. Materials Cost - Through the Bill of Materials (BOM)
--Raw materials at moving average price
--Semi finished / Finished at Standard Price
2. Operation Cost - Through Routing and Versions
-- Activities based on Cycle time of operation
3. Overhead Cost - Through Cost sheet Percentage rates or quantitative basis
-- Factory Overheads
-- Administrative Overheads
-- Selling Overheads
5
Cost Component Structure of SKH
Material
Costs
Operatio
n Costs
Overhea
d Costs
COG
M
Costs
6
Cost Component Structure of SKH
Material
Costs
Operatio
n Costs
Overhea
d Costs
COGS
Costs
7
Creation of Standard Cost Estimates
Standard Cost Estimate is Plan Cost for the Period
1. Maintaining Cost Component Structure Like splitting of Costs in Raw
Materials, BOCs, Consumables, Paint Cost, Weld Cost etc.
2. Maintaining Plan Prices of Activities
3. Maintaining Plan Rates of Overheads
4. Execution of Cost Run Provides the Standard Cost Estimate of the Product
and the Components.
It is recommended to update the Standard Cost monthly this provides us cost of
materials near actual.
8
Execution of Period End closing activities
Major Activities of Period End Closing are :
1) Confirmation of Primary Costs in correct Cost centres.
2) Execution of Distribution and Assessment Cycles.
3) Execution of Splitting of Actual Costs at the Cost centre level.
4) Derivation of Actual Activity prices
5) Calculation of Actual Overhead Rates
6) Revaluation of Orders / PCC with the actual prices and overheads

Product Costing requires the Period End closing activities to be run for correct
results
9
Derivation of Variances
Differences in Plan Costs and Actual Cost are Variances
1) On completion of Period end activities the Variances are derived.
2) Variances are normally segregated in
1) Price Variance
2) Quantity Variance
3) Costs Variance
4) Scrap Variance
3) Analysis of Variances for corrective actions
10
Benefits of Product Costing
Depending upon the organisation the following are main benefits
of Product Costing in SAP
1) Correct Valuation of Inventory
2) Product-wise Cost Analysis and Variances
3) Analysis of Cost of Goods Manufactured (COGM) & Cost of Goods Sold
(COGS).
4) Analysis of make or buy decisions
5) Periodic analysis of Cost in Repetitive manufacturing scenario.
6) Flow of Values to COPA provide Profitability Analysis of the product
General Overview of CO-PA


The Controlling Profitability Analysis (CO-PA) component is a subcomponent of
the SAP Controlling (CO) module.



Integrates information coming from different platforms such as Sales and
Distribution (SD), Materials Management (MM), Financials (FI), CO, Production
(PP), and others.
Characteristics in CO-PA

The characteristics in Profitability Analysis represent those criteria
according to which we analyze our operating results, sales and profit.

Characteristics can be described as Customer, Customer group, Billing
type, Division, Plant, Product, Material group etc.

These characteristics can be used to limit the data extraction with the
definition of profitability segments or market segments.
Value fields in CO-PA

These are the fields that contain the currency amounts and quantities
that you want to analyze in CO-PA.


They represent the structure of your costs and revenues.


Value field are such as Sales Quantity, Sales Value, Discount, Raw
material costs, BOC costs, paint cost, freight cost, packing cost etc.
Segment

Combination of characteristics is called Segment
Data flow in COPA
Flow of Actual in Profitability Analysis

Overview

Flow from the Sales and Distribution (SD) Module
Flow from Billing Document

Flow from the FI/MM direct postings
General Ledger Posting
MM Postings

Flow from the Product Costing
Settlement of Production Variances to PA
Sales Data flow
Plan and actual sales data can be maintained in COPA.
Sales Plan can be uploaded to compare with the actual and analysis of
variances.
Actual values of Sales order ,delivery, billing and accounting
simultaneously flows to COPA.
Condition types in the billing documents are mapped to the value fields.

Sales Data flow
Sales Data flow
Finance Data flow
Derivation of documents on actual posting
Finance values simultaneously flow to COPA
FI structure is maintained for flow of finance values direct to COPA.
General Ledger Values are mapped with the value fields in COPA.
Finance values at profit center level can be distributed to other
characteristics of such profit center.
Cost Data flow
Cost Data flow
Cost Data flow
Standard cost estimates of the product flows to COPA with the billing
documents.
Values of Cost component structure are mapped with the value fields.
Costs of Product as per cost component structure can be analyzed
against the sales value.

Cost Data flow
Production variances flow

Production variances values can flow to COPA.

Production orders or Product cost collectors order type
profile should be assigned with settlement profile having
variances settled to COPA.

PA structure is maintained with the variances assigned to
value fields.
Production variances flow
Production variances flow
Summary of Flow of Data to COPA
Profitability Reports

Only customized reports are maintained in COPA.

No standard reports are available.

Report painter reports are maintained for profitability
analysis.

Profitability Reports
Reports can be two types
Basic reports
Maintained for line items drill-down
No restriction can be maintained at line item level
Plan line items cannot be derived
Filters cannot be instituted

Form based reports
Maintained with the structure of form
Restrict the values in the form as per the requirement.
Plan and actual values can be reflected
Profitability Reports
Basic report based on line items

Profitability Reports
Form based reports
Benefits of COPA Reports
Profitability Analysis allows users to display Sales and Profitability
reports based on different characteristics and key figures

Sales and Cost can be analyzed as per Products Characteristic
At Plant Level
At Material Group Level
At Division Level
At Product Level

Sales and Cost can be analyzed as per Customer Characteristics
At Sales Organization Level
At Sales Region Level
At Distribution channel Level
At Customer Group Level
At Customer Level


Combination of Products and Customer characteristics
Benefits of COPA Reports
Benefits of COPA Reports



Working Together for a Better Business Performance
Thank you