Chapter 7
Overhead Cost Order
Overhead Cost Orders
Generally, you use orders in the R/3 System to collect costs and activities for a
simple job. For more complex jobs, whose logistical processing is to be supported
by the R/3 System, you should use projects. If this is planned for a later time, you
can use so-called single-level projects as alternative account assignment objects
for orders. You can get more detailed information on projects in the Project System (PS) brochure.
Orders in the R/3 System
In Controlling, internal orders have an important task. They are created for the
action-oriented planning, collecting, and settling of costs and revenues for simple
jobs.
Internal Orders
The following types of internal orders exist:
❑ Accrual orders
You may want to distribute over several periods in a costing-based approach
those expenses that have been posted in one period in Financial Accounting.
Accrual orders are used to monitor such a period-related accrual calculation
for cost accounting. An example of this could be a holiday bonus, where cost
centers are debited across periods and an accrual order is credited (see Chapter 4).
❑ Capital investment orders
Capital investment orders are used to monitor investment costs that can be
capitalized. These investment costs can then be settled in the fixed assets.
❑ Orders with revenues
You can use orders with revenues to perform tasks such as:
❍ Monitoring activities for partners outside of the business organization
❍ Monitoring organizational activities that do not affect the core business of
the organization
❑ Overhead cost orders
Overhead cost orders are used to monitor overhead costs independently of
the cost center structure and process view.
Overhead Cost Orders
Overhead cost orders collect overhead costs that occur in planned or actual values. Additionally, commitments are reported. Overhead cost orders can fulfil
exclusively statistical purposes or they can be debited in relation to costs. You can
settle overhead cost orders that are debited with costs to different receivers using
freely definable costing sheets, according to specified overhead keys.
Objectives of Overhead
Cost Orders
Overhead cost orders allow you to analyze costs independently of the cost center
structure and processes of the business organization. To support business decisions, this analysis can occur based on time-related criteria, quantities, or values.
You can use overhead cost orders to monitor time-restricted jobs for a business
organization or for the long-term monitoring of parts of the overhead costs. You
can collect and evaluate all costs, such as those arising from participation at a
trade fair, across cost elements on a time-restricted overhead cost order.
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Overhead Cost Order
You could use overhead cost orders for long-term monitoring, for example, to
collect the costs of minor repairs for a specified production machine and to distribute them according to their origin.
You use the Overhead Orders (CO-OM-PA) component to process overhead cost
orders in the SAP R/3 System. Together with Cost Center Accounting (CO-OMCCA) you can perform comprehensive overhead controlling.
Figure 7-1 illustrates the integration of two cost centers from the cost center hierarchy. Within Cost Center Accounting, the cost centers exchange activities through the activity network. Additionally, cost center A posts a share of its costs to an
overhead cost order, which collects across cost centers all costs for a particular job.
The order settles the collected costs to cost center B and other cost centers (at the
latest) after the job has been closed.
Fig. 7-1: Interaction Between Orders and Cost Centers in Overhead Controlling
Characteristics of Overhead Cost Orders
Order Type
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According to the main emphasis of their tasks, overhead cost orders are split into
order types. For some orders, the focal point of the analysis is the up-to-date tracking
of the costs incurred. For other orders, this focal point could be the precise monitoring of open purchase order items, the detailed settlement of individual cost
items, or the continual monitoring of all transaction-based allocations.
Overhead Cost Order
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One of the functions of order types is to determine attributes for orders:
❑ The order layout determines how the order master data is displayed on the
screen.
❑ You can specify which master data fields are to be considered when printing
the order.
❑ The integrated planning of orders with cost center planning allows you to
update allocations directly on the cost centers.
❑ Commitments management can be activated.
❑ You can specify whether revenue postings are permitted.
❑ For evaluation purposes, orders can be classified according to specified characteristics.
❑ You can use the settlement profile to determine to which Target objects orders
can be settled.
❑ Deadlines can be defined for archiving orders.
Life Cycle of Overhead Cost Orders
A job passes through various stages during the planning and execution phases. In
accordance with these stages you can use status management in the R/3 System
to control which actions and activities (such as the planning of primary costs,
calculation of overhead, and so on) can be carried out with an order and when this
can take place. In the course of its life cycle, an order passes through various system statuses. The freely definable user status allows you to effectively administrate and monitor the life cycle of an order.
Status Management
The most important sections of an order life cycle are defined with the following
fixed preset statuses:
❑ Created
❑ Released
❑ Technically completed
❑ Closed
You can set which statuses are defined for each order type. You can assign individual business transactions, such as the planning of primary or secondary costs, in
any combination to specified statuses. This means, for example, that you can exclude changes to cost planning fromorders that have already been closed.
Statistical Overhead Cost Orders
It can be beneficial to collect all the costs for a business area in one cost center, but
to split the costs more precisely (for reporting purposes). For example, you can
post undifferentiated vehicle fleet costs to one cost center and at the same time
carry them on statistical orders, which display the costs per vehicle (see Figure 72). In this way, the amount appears under the original cost element both on the
cost center (affecting costs) as well as on the order (statistical). You can also display revenues on statistical orders.
Statistical Overhead Orders
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Overhead Cost Order
Fig. 7-2: Example - Statistical Overhead Cost Orders for Vehicle Costs
Commitments Management
Purchase orders or purchase requisitions lead to financial obligations with varying degrees of commitment. Such obligations are described as commitments.
A commitment ties up funds that are later to become costs. Therefore, commitments must be taken into account during funds monitoring.
Currencies
Commitments management ensures that you can consider expected future costs
in Controlling at an early stage. A commitment is always identified with the value, and if necessary, the quantity of the cost element, the fiscal year, and the period when the costs are expected to be incurred.
The system records each commitment in the currency of the triggering business
transaction, for example, in the purchase order currency. Additionally, a conversion takes place in the house and object currency.
Commitments from Procurement Transactions
Purchase requisitions and purchase orders in the Purchasing contain information
about expected costs. The R/3 System displays this information as a commitment
on the account assignment object (such as an order). The due date, in this case, is
the planned delivery date.
Commitments from
Purchase Requisitions
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Commitments from purchase requisitions are reduced automatically through assigned
purchase orders and replaced with the corresponding purchase commitments. For
partial purchase orders, the reduction occurs proportionally to the requested/ordered
quantity.
Overhead Cost Order
A commitment from a goods order is reduced through the corresponding goods
receipts (=actual costs). For partial deliveries, the commitment is reduced in line
with the quantity delivered. If an invoice is posted before the goods receipt, the
commitment value is recalculated with the price from the invoice.
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Commitments from Goods
Orders
Figure 7-3 shows how a purchase requisition in Materials Management is automatically identified as a ”commitment from purchase requisitions” on an overhead cost order. When the purchasing department undertakes the corresponding
goods order, this commitment is replaced with a ”purchase commitment.” If the
goods are delivered, the commitment is reduced by the corresponding actual costs
or (for partial deliveries) partially reduced. After the invoice has been received,
any price differences are posted. If the invoice is received before the goods, the
purchase commitment is capitalized in accordance with the invoice (1a). This
capitalized purchase commitment is reduced only after the goods receipt (1b).
Fig. 7-3: Integrated Commitment Processing
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Overhead Cost Order
Commitments from Activity
Purchase Orders
A commitment from the ordering of an external activity is normally reduced
through the invoice receipt (= actual costs). For partial invoices, the commitment
value is reduced by the invoice value.
Procurement Costs
Along with the purchase value (goods/activity value), the procurement costs are
also managed as purchase order commitments. They are displayed separately
according to their origin, for example, freight, customs duty, packaging, and, if
applicable, currency.
Commitments from Funds Reservation
You can also manually enter expected costs as funds reservations with the amount
and due date for a cost center, an order, or a project. This makes sense especially
when you do not have more detailed information and therefore have note yet
determined subtasks. (An example is when it is not yet specified whether a necessary task is to be executed with internal or external resources). Entering a funds
reservation produces a corresponding commitment value on the account assignment object (for example, on the order).
Commitment Reduction and
Assignment
The reduction occurs manually by selecting the reservation document in a list or
by directly entering the reduction amount (partial reduction). During the reduction of the funds reservation you can enter an assignment in the system for the
triggering business transaction (such as an order or a purchase order). This assignment is used later for the audit trail.
Actual Costs of Overhead Cost Orders
As described already in Chapter 4, all cost-accounting relevant business transactions can be transferred from reference systems. This includes transactions such
as:
❑ Postings in Financial Accounting
❑ Goods movements in Materials Management
❑ Internal activity allocations and overhead costing in Cost Accounting.
To be able to post actual costs to an order, the order status and the order type must
permit the required business transaction. An order can carry statistical key figures
for additional information purposes. Internal activity allocations and overhead
costing are described in more detail in the following sections.
Internal Activity Allocation
To carry out jobs, activities can be claimed from cost centers1 . Internal activity
allocation measures and records these activity quantities. It also credits the performing cost center and debits the receiving order.
Internal activity allocation can take place directly, as already described, or on the
basis of indirectly determined activity quantities. The advantages of internal activity allocation are detailed in Chapter 6.
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Orders themselves cannot produce any activities as no resources are assigned to them.
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Periodic Allocations
If no other activity allocation is carried out, you can allocate costs using simple
methods. To achieve this, you can use the functions for periodic allocations, which
allow you to allocate costs easily between cost centers and orders. The definition
of sender and receiver relationships occurs just as in cost center accounting.
Overhead Costing
You can also allocate overhead costs using overhead rates. Overhead costing can
take place in the Overhead Orders component for each order using freely definable costing sheets. You can calculate overhead on planned and actual costs as well
as on commitments.
For the purposes of overhead calculation, you can assign a costing sheet to each
order. The costing sheet determines:
❑ The calculation base contains the cost elements on which overhead is to be
calculated. Origin groups can be used to further differentiate within the cost
elements.
❑ There are percentage- and quantity- based overhead rates. After overhead calculation, the system displays the amount of overhead
❑ The credit entry determines under which cost element the overhead is allocated, and which controlling object is to be credited.
For each cost element or origin group to which you want to apply overhead, you
must enter the required overhead and credit keys. You can simulate the overhead
costing before final execution. The actual allocation of the overhead determined
triggers a credit to the affected cost centers or orders and a debit to the orders
receiving the overhead. This is recorded in a document.
Settlement of Overhead Cost Orders
During the settlement of an overhead cost order, you can control which cost elements can be settled on which target objects under which settlement cost element.
You can settle orders periodically or after a job is completed. You can settle orders
both within internal accounting and external accounting.
Settlement of orders within internal accounting can occur in:
❑ Cost centers
Internal Target Account
Assignment
❑ Orders
❑ Projects
❑ Processes
❑ Profitability segments
❑ Sales orders
❑ Networks or network activities (within a project)
❑ Cost objects
The settlement of an overhead cost order is also possible on controlling account
assignment objects across company codes, business areas, and function areas. Settle-
External Target Account
Assignment
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Overhead Cost Order
ments are then used to pass on the costs to stock- or results affecting target objects.
The reconciliation ledger ensures that the affected Financial Accounting ledgers
are reconciled with one another. Controlling therefore triggers the necessary FI
postings.
Settlement to external accounting can occur to:
❑ Asset Management (FI-AA)
❑ A G/L account in Financial Accounting (FI)
Definition of a Settlement Rule
Settlement Rules
You can control how and to where specified costs are to be settled. To achieve this,
you can assign a settlement rule to each order. The settlement rule defines:
❑ The target account assignment that determines which objects are to be settled
to. For example, the system allows the Overhead Orders component to settle
the part of an order that must be activated to a fixed asset and the parts that
cannot be activated to cost centers.
❑ The debiting of all receivers as percentage rate, absolute amount, or equivalence number. If you use equivalence numbers, you settle to the receivers in
line with the equivalence numbers entered for each receiver.
❑ The cost element or elements under which the order is credited. Settlement
can occur by cost element or using your own settlement cost elements.
Processing a Settlement
The timing of the order settlement depends on the practical requirements of the
order or the order type. Usually, orders to be settled to cost centers are settled
periodically. However, orders can also be settled after final completion.
Simulating Settlement
Before the actual settlement, settlement can be simulated to check the completeness and accuracy of the orders to be settled.
The settled documents and the current order balance are displayed in the information system for orders. This allows continuous control of the open order balance.
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