Controlling Management
EGN 5622
Enterprise Systems Integration
Spring, 2012
Controlling Management
Concepts & Theories
EGN 5622
Enterprise Systems Integration
Controlling Accounting
Most companies divide their accounting function
into internal and external, and controlling
accounting represents the internal accounting.
Controlling (managerial) accounting is the
process of identifying, measuring, analyzing, and
communicating information in pursuit of an
organizations goals.
The controlling accounting objective is to show
how the system adds value by structuring
information in a certain way.
3
Controlling (CO)

Managerial accounting – termed controlling
– is designed to collect the transactional
data that provides a foundation for
preparing internal reports that support
decision-making within the enterprise.

These reports are exclusively for use
within the enterprise and include:
◦ Cost center performance
◦ Profit center performance
◦ Budgets analyses
4
Fundamentals of Cost Management
Financial (external) accounting system and the
cost management (internal accounting)
system are fully integrated.
Every cost is linked to an expense booked in
the financial accounting system and to a cost
element in the managerial accounting
system.
Cost elements are in turn assigned to cost
objects.
5
Fundamentals of Cost Management
A cost object is a classification of costs that is desired
by the user. It could be a cost center (a department
where the cost is incurred), a production order (costs
to produce unit 10004232), or a special project
(installation of an ERP system), etc.
A cost object is simply a way to aggregate costs for
some decision purpose at a later time. For instance,
sales/marketing, finance/accounting, and general
administration could be three cost centers (objects) in
the headquarters under the direction of three different
VPs.
A cost element can be assigned to multiple cost objects.
For example, travel as a cost element may appear in all
cost centers.
January 2008
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rights reserved.
6
Target Audience





Executives
Senior Management
Department Managers
Controllers
Cost Accountants
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Controlling Accounting Terminology
Controlling Area






A self-contained, organizational element serves to broadly
define a managerial accounting and reporting system for
which the management of revenues and expenses can be
performed
A controlling area is the highest level organizational entity
within the Control module in which cost and profit analysis
takes place (except for PA analysis which takes place within
an operating concern.
A controlling area may include one or more company
codes; therefore, an enterprise can perform management
accounting analyses and reports across several companies
Each company code can be assigned to one and only
one controlling area
A way to identify and track where revenues and costs are
incurred for evaluation purposes
8
Controlling Accounting Terminology


Controlling Area (- continue)
A controlling area is also broken down into two different
“standard” hierarchical structures:
◦ 1) standard cost center hierarchy; and
◦ 2) standard profit center hierarchy


Internal financial (controlling) reporting and analysis
focuses on measuring the cost or profit results of
components of a controlling area, such as cost centers
or profit centers.
Note:
◦ External reporting does not take place for a controlling area. Neither
income statements nor balance sheets are created for an entire
controlling area.
9
Subcomponents of Controlling
Accounting
-
Cost Element Accounting
Cost Center accounting
Internal Orders, and
Profit Center Accounting
10
Cost Element Accounting
Cost Elements
Cost and revenue accounts within a chart of accounts that
are involved in cost accounting are referred to as
“elements,” which are further divided into primary cost
elements, primary revenue elements, and
secondary cost elements (there are no secondary
revenue elements).
11
Cost Element Accounting
Cost Elements (- continued)
Primary cost and revenue elements created in the FI
module and are used both in the FI and CO modules to
account for cost and revenue flows with parties
external to the organization. Primary cost and
revenue flows are first recorded in FI and then
transferred automatically to a cost or revenue
object within the CO module (e.g., cost center,
internal order, profitability segment, etc.).
Secondary cost elements are created in the CO module
and are used exclusively within CO to account for
internal cost flows among cost objects within a
controlling area (e.g., cost allocations among cost
centers).
12
Cost Center Accounting (CCA)
Created for internal controlling purposes and provides
a tool that can collect costs.
The cost center accounting (CCA) module within CO
provides the means for assigning planned costs and
actual costs incurred to areas of cost responsibility
within an organization. For example, if a manager wants
to know how much it costs to run his department for the
month of April, this module can be used to provide the
answer. The CCA module contains a variety of methods
for allocating costs among cost centers and from cost
centers to other cost objects (e.g., internal orders,
production orders, profitability segments, etc.).
13
Cost Centers

Units that are distinguished, for example, by area
of responsibility, location, or type of activity
◦ Copy center
◦ Security department
◦ Maintenance department
Can be permanent or temporary (e.g., internal
order)
 Operates as a collector and assignor of
responsibility for expenditures
 A way to identify and track where costs are
incurred for evaluation purposes
 Responsible for cost containment, not responsible
for revenue generation
◦ One or more value-added activities are performed
within each cost center
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
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The Rushmore Group, LLC 2007. All
rights reserved.
14
Cost Center (- continued)

A cost center is the basic
organizational/responsibility component of a
controlling area. A controlling area is broken
down into cost centers, which are organized
in a “standard cost center hierarchy.”

Cost centers may also be linked to a specific
business area, company code, and profit center
(i.e., business areas, company codes, profit
centers and controlling areas may all be viewed
as collections of cost centers).
15
Cost Center Accounting
Cost Drivers

A cost driver is a factor, such as machine hours, beds
occupied, computer usage time, flight hours, or any other
factor that causes overhead costs.

Most companies use direct labor-hours or direct labor cost
as the allocation base for manufacturing overhead,

However, major shifts are being made in the way cost is
structured. With the increased usage of sophisticated and
complex equipment in manufacturing, there is less direct
labor relative to overhead as a component of product
costs.
Typical cost driver types: activity types and statistical
key figures.

16
Cost Center Accounting
Activity

Any event, action, or transaction that causes a cost to
be incurred in the production of a product or the
providing of a service.
17
Cost Center Accounting




Activity types
Activity types are production or service activities
rendered to a work center or cost center that are
used to allocate costs.
Activity types generally include different types of labor
(e.g., setup, production labor, machine labor, etc.) that
are performed by personnel within a work center or cost
center.
The measure of the activity type quantity (e.g., hours
worked), which is essentially a cost driver measure, may
be used to allocate all or a portion of the costs of a cost
center to other cost objects (e.g., other cost centers,
production orders, profitability segments, etc.).
18
Cost Center Accounting


Activity types (-continued)
The cost center in which the activity is performed is
referred to as the “sender,” and the cost objects
receiving the allocated costs are called “receivers.”
The allocation is based on an “activity (transfer) price”
that is developed for the activity type. The activity price
may be set manually by management, or it may be
calculated automatically using an iterative routine that
explicitly takes into account “cross allocations” (i.e.,
allocations back and forth among two or more cost
centers).
19
Cost Center Accounting
Product Costing (PC)
The product costing (PC) is a CO module which provides
the means for developing different types of cost
estimates for a particular product or subassembly, such
as standard cost, future cost, tax cost, or commercial
cost estimate. These estimates may be used for a
variety of purposes, including product pricing,
production planning and control, inventory valuation,
and income measurement (cost of goods sold).
The product cost is developed after the material is
defined, a bill of materials is created, and a
routing is determined. This product cost reflects the
cost structure of the product on a standard costing basis
prior to manufacturing. The product cost structure is
normally defined for one unit and can be broken out by
individual material parts and further defined as variable
or fixed.
20
Cost Center Accounting
Value-added activity
Any activity that increases the worth of a product or
service.
Non-value-added-activity
Any activity that adds cost to, or increases the time spent
on, a product or service without increasing its market
value.
Product-level activities
Activities that are performed for and are identifiable with
an entire product (line).
21
Cost Center Accounting
Activity Based Costing (ABC)
The activity based costing (ABC) module within CO
provides the means for assigning planned costs and actual
costs incurred at the cost center level to business processes
that cut across areas of responsibility within an organization.
The costs assigned to a business process can in turn be
allocated to those cost objects (products, services,
customers, etc.) that utilize the business process.
It is generally used as a tool for understanding product and
customer cost and profitability. ABC has predominantly been
used to support strategic decisions such as pricing,
outsourcing and identification and measurement of process
improvement initiatives.
22
Cost Center Accounting
Each cost center is assigned to a controlling area,
profit center, company code, and business area.
Taken together, all cost centers within a controlling
area constitute the “standard cost center
hierarchy.” (There is one and only one
standard cost center hierarchy for a
controlling area.)
The cost center standard hierarchy is a special type
of cost center group.
All cost centers in that controlling area must be
assigned to a level of the standard hierarchy.
23
Cost Center Accounting
Each cost center is assigned to a controlling area,
profit center, company code, and business area.
Taken together, all cost centers within a controlling
area constitute the “standard cost center
hierarchy.” (There is one and only one
standard cost center hierarchy for a
controlling area.)
Profit centers generally involve subdivisions of
companies that are set up for internal planning
and control purposes. Taken together, all profit
centers within a controlling area constitute the
“standard profit center hierarchy.” (There is one
and only one standard profit center hierarchy
for a controlling area.)
24
Organizational Structures
-cost center standard hierarchy
Credit Control
Area (Cxxx)
Client (600)
Fiscal Year
Variant (2012)
Chart of
Accounts (Cxxx)
Company
Code (Cxxx)
Controlling
Area (Cxxx)
Plant
(Pxxx)
Cost Center
Standard
Hierarchy
(PENINCxxx)
Purchasing
Organization
(Pxxx)
SL10 SL20
Purchasing
Group (xxx)
ADMINxxx
Shipping
Point
(Sxxx)
A005
A010
A015
A020
Cost Center Accounting



Work Center
Work centers are organizational units that perform operation
functions within a plant. A work center might include a
production line, quality checkpoint, packaging line, and
warehouse. All manufacturing processes are routed
through work centers. Each work center is connected to
a cost center as defined in Work Center Master Records.
This way allows costing, scheduling, and capacity planning to
be done for each functional production area individually. The
amount of work that can take place at a work center is
represented as its capacity. When a capacity is used, the
operations are evaluated by charge rates.
Generally, a work center is combination of the following
resources:
◦
◦
◦
◦
•
•
•
•
Machinery, Equipment, and Vehicles
Employees
Production Lines
Assembly Lines
26
Internal Order
A method of internal cost allocation by which valuated
activities (allocation bases) from cost centers can be
assigned to cost receivers in accordance with the cause of
the cost. The activities or allocation bases represent the
output of a cost center (such as production hours or
machine hours).
In internal activity allocation, the activity produced by the
cost center is multiplied by the activity price. The result is
the cost to be allocated. The sender cost center is
credited with this amount and the receiver object is
debited.
Internal orders support task-oriented planning, monitoring,
and allocation of costs.
27
Internal Order (- contimued)
Temporary cost center responsible for cost
containment, not responsible for revenue
generation
 It is used to plan, collect, and monitor the
costs associated with a distinct short-term
event, activity, or project

◦ Company picnic
◦ Trade show
◦ Recruiting campaign
28
Profit Center Accounting (PCA)
Profit center accounting is used to analyze
income and expenditure for profit centers that
represent an independent subunit within an
organization.
29
Profit Center Accounting
Profit Center
Profit centers are similar to business areas, in the sense
that they are set up for internal reporting purposes.
Profit centers, however, are formally defined as
components of a controlling area, not as components of
one or more company codes.
Income statements may be created for profit centers, and
selected assets may also be reported for profit centers,
but not complete balance sheets (which can be done for
business areas).
Profit centers are linked to cost centers with one-to-one or
one-to-many relationship.
30
Profit Center (- continued)
Responsible for revenue generation and
cost containment
 Evaluated on profit or return on
investment
 Enterprises are commonly divided into
profit centers based on

◦ Region
◦ Function
◦ Product
31
Profit Center Accounting
Profitability Analysis (PA)
The profitability analysis (PA) module within CO
provides the means for assigning planned and actual
revenues and costs to a variety of profitability segments,
including customers, sales territories, sales employee
groups, product groups, etc. This provides great
flexibility in defining, both the market characteristics
that are of interest to managers, and the related
performance measures (e.g., gross margin, contribution
margin, segment margin) that managers use to evaluate
market segments.
32
Accounting and Control within
Production Planning (PP)
For each operation created in a routing, a work center must be
identified for where the operation is to be performed.
A work center is allocated to one and only one cost
center.
Cost centers are organizational units within a controlling area
that represent a defined location of cost incurrence.
Organizational divisions can be made on the basis of
functionality, settlement-related, activity-related, spatial,
and/or responsibility-related business requirements.
33
Accounting and Control within
Production Planning (PP)
Accounting and Control within PP (- continued)
You plan standard activity costs in the corresponding cost
centers using activity types. When an activity type is
allocated to a cost center, it is given a value, for
example, in dollars per hour. The work center specifies
production activity availability for operations at the work
center.
One work center can perform up to six different production
activities within different charge rates. Examples of
activity types are labor, machine, materials, setup costs,
quality costs, and resource consumption.
34
Estimate Cost
For management to make the best decisions possible,
managers must be able to estimate costs as close to
actual costs as possible. When considering product
costs, there are several costs that can be traced directly
to the product. These will give an estimate that is near
the actual costs of making the product.
Examples of these costs are direct material and direct
labor. By using material requisition forms and
payroll time sheets, these costs can easily be traced
to a product.
The costs that are harder to trace are called overhead
costs. They are indirect costs because they cannot be
specifically traced to a product. Estimates must be
used to allocate overhead to products and services.
35
Estimate Cost
The most difficult part of estimating product costs is
calculating the amount of overhead that must be
allocated to each product, service, or job. Many times a
predetermined overhead rate is used.
A predetermined overhead rate refers to a single rate
that is used to apply overhead to all products
produced. When using job order costing systems,
direct labor cost is generally the base used to apply
overhead to each job. In process costing, machine hours
would be an example of an activity base that is used to
allocate overhead.
In the following example, 150 units of a motorcycle were
produced. Of the finished units, 30 have been sold thus
far. This is seen in the figures below.
36
Example of Cost Accounting
Work in Process
Debit Credit
150
Beginning
Work is completed
Ending
150
0
Finished Goods Inventory
Debit Credit
Beginning
0
Work is completed
150
Units sold
30
Ending
120
When the units are completed, work in progress must be
credited for the 150 units, and the finished goods
inventory must be debited the same.
37
Example of Cost Accounting
Units sold
Beginning
Work is completed
Units sold
Ending
Debit Credit
0
30
30
When the 30 units are sold, the Units Sold must be debited for
the units and the finished goods inventory must be credited.
38
Cost Accounting Terminology
When looking at a financial point of view, there are actual
costs of $233,211.00, $336.11, and $156.52. The
standard cost of creating the motorcycles is $240,000.
This can be found by taking the price of $1600 per
motorcycle and multiplying it by the 150 units. When the
30 units are sold, they have a cost of $48,000, and
there is $192,000 remaining in the finished goods
inventory. This can be seen in the figures below.
39
Example of Cost Accounting
Work in Process
Beginning
Total Cost
Production variance
Beginning
Work is completed
Units sold
Ending
Debit Credit
$233,211.00 $240,000.00
336.16
156.52
$233,703.68 $240,00.00
-$6,296.32
Finished Goods Inventory
Debit Credit
$0.00
$240,000.00
$48,000
$192,000.00
40
Example of Cost Accounting
Units sold
Beginning
Work is completed
Units sold
Ending
Debit Credit
$0
$48,000
$48,000
Because of the difference between the standard cost and
the actual cost, there is a Production variance of
$6,296.32. When broken down by units, this variance is
$41.98/pc.
Was the production of these motorcycles efficient?
41
Controlling Management
SAP Implementation
Controlling (CO)
SAP Module View
Financial
Accounting
Sales &
Distribution
Materials
Mgmt.
Controlling
R/3
Production
Planning
Human
Resources
Quality
Maintenance
Fixed Assets
Mgmt.
Integrated Solution
Client / Server
Open Systems
Plant
Management
Project
System
Workflow
Industry
Solutions
Components of Managerial
Accounting
Internal
Orders
Cost
Element
Acct
Controlling
(CO)
Cost
Center
Acct
Profitability
Analysis
Activity
Based
Costing
Product
Cost
Controlling
January 2008
Profit
Center
Acct
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44
Comparison
Financial Accounting Managerial Accounting

External Accounting
◦ Balance Sheet
◦ Profit & Loss Statement


Legal Requirements
Standards
Cost Element Accounting
 Cost Center Accounting
 Internal Orders
 Profit Center Accounting
 Product Costing
 Profitability Analysis
 ABC
 Different Valuations
 Flexibility

January 2008
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45
Comparative Reporting
Liquidity
Calculation
Financial Accounting (FI)
Balance
Sheet
External
Reporting
Managerial Accounting (CO)
Product
Costs
Reports
Internal
Reporting
January 2008
Retained
Earnings
Report
Income
Statement
Cost
Center
Reports
Profit
Center
Reports
Profit
Margin
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46
Interrelated and Closely
Connected
(FI) Transaction
Document
Amount
G/L Account #
Cost Center
1900012432
(CO) Transaction
Document
Cost Center
Cost Element
20000657
Income Statement
Supplies Exp.
Bank
100
Bal. Sheet
100
Financial Accounting
Cost Center
100
Controlling
January 2008
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47
Business Process Integration
FI CO MM PP SD
Rules
CO
FI
MM/PP
SD
January 2008
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48
SAP CO Module

Fully integrated with other SAP modules
including, but not limited to:
◦
◦
◦
◦
Financial Accounting (FI)
Materials Management (MM)
Sales and Distribution (SD)
Production Planning and Execution (PP)
January 2007 (v1.0)
© 2007 by SAP AG. All rights
reserved. SAP University Alliance.
The Rushmore Group, LLC
49
Business Process Integration
CO
January 2008
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The Rushmore Group, LLC 2007. All
rights reserved.
50
SAP CO Organizational Objects
These represent the legal and/or
organizational views of an enterprise
 They form a framework that supports the
activities of a business in the manner
desired by management
 Permit the accurate and organized
collection of business information
 Support the development and
presentation of relevant information in
order to enable and support business
decisions

51
SAP CO Organizational Objects







Client
Company Code
Chart of Accounts
Controlling Area
Cost Center
Internal Order
Profit Center
52
Organizational Structure
Client 765
Chart of
Accounts
Pen Inc.
Credit Control
Area
Fiscal Year
Variant
Controlling
Area
Company
Code
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53
Standard Hierarchy
An organizational unit that serves to
refine and focus a managerial accounting
and reporting sub-system
 A mapping of responsibility to individual
managers
 Mapping of cost centers facilitates
expense

◦ Collection
◦ Tracking
◦ Reporting
January 2008
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54
Standard Hierarchy (- continued)
Standard hierarchies are maintained in
Cost Center Accounting (CCA) master
data maintenance
 A specific name is assigned to identify a
standard hierarchy
 Each standard hierarchy is attached to the
appropriate Controlling Area
 All cost centers of interest must be
entered in the Standard Hierarchy

January 2008
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rights reserved.
55
Cost Center Groups
Logical groupings of cost centers in the
standard hierarchy to establish
accountability and responsibility for one or
more cost centers
 Facilitates reporting, planning, and
allocating costs at a more aggregated
level

January 2008
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56
Business Process Integration
CO
Master Data
CO
January 2008
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57
Cost Element Overview





Cost Element Groups
Cost Elements
Primary Cost Elements
Secondary Cost Elements
Statistical Key Figures
January 2008
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58
Cost Element Groups
Logical groupings of primary and
secondary cost elements
 Facilitates reporting, planning, and
allocating costs

Total Costs
Total Primary Costs
Total Secondary Costs
Utilities
Internal Order
Settlement
Wages
January 2008
Materials
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2007. All rights reserved.
59
Cost Elements
A one-to-one linkage (mapping) between
General Ledger expense accounts and CO
cost elements is established to permit the
transfer of FI expense information to CO
 Postings in FI that impact cost accounts
lead to an posting in CO to a cost element
 In other words, expense account = cost
element – just different words depending
on whether FI object or CO object

60
Cost Elements (- continued)

Used to categorize costs
◦ Primary cost elements originate with Financial
Accounting (FI) postings and are linked in
whole to Controlling (CO) objects (maintain
their source and identity)
◦ Secondary cost elements are used exclusively
in Controlling (CO) for allocations and
settlements to and between Controlling (CO)
objects (may not maintain their source and
identity)
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61
Primary Cost Elements
Linked to expenditure accounts in the chart of
accounts (not just expense accounts, may
include capital acquisition accounts)
 Costs are automatically posted to assigned
Controlling (CO) objects (e.g., cost center or
internal order) upon posting in Financial
Accounting (FI)
 The elements source identity - salaries, utilities,
selling expenses - is maintained within
Controlling (CO)

January 2008
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62
Secondary Cost Elements
Used exclusively in CO for allocations and
settlements between and amongst cost
centers
63
Cost Elements (continued)
Controlling
Financial
Accounting
Total Cost Elements
General Ledger Accounts
Income
Statement
Secondary Cost
Elements
Primary Cost
Elements
Balance
Sheet
Expense
Accounts
Revenue
Accounts
January 2008
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64
Primary Cost Elements (cont.)
Income
Statement
Account
General Ledger
Account Posting
Rent Expense
Debit Credit
Balance
Sheet
Account
Acct. Payable
Debit Credit
1,500
1,500
Cost
Center
A
Primary Cost Element for
Rent Expense
January 2008
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65
Secondary Cost Elements (cont.)
Income
Statement
Account
General Ledger
Account Posting
Balance
Sheet
Account
Rent Expense
Acct. Payable
Debit
Debit
Credit
Credit
1,500
1,500
Cost
Center
A
CC 2
CC 3
Secondary
Cost Element
January 2008
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66
Secondary Cost Elements
(continued)
Cost Center 2
Rent Expense
Debit
Credit
1,500
Cost Center A
Supplies Expense
Debit
1,750
Credit
2,500
Cost Center 3
1,500
Sec. Cost Element
2,000
2,500
2,000
Cost Center 4
Labor Expense
Debit
Credit
2,250
2,000
January 2008
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67
Statistical Key Figures
Provide the foundation for accurate and
effective cost allocations between cost
objects
 Utilized to support internal cost allocations
involving allocations, assessments, and
distributions
 Examples: number of employees, square
footage, minutes of computer usage

January 2008
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68
Statistical Key Figures
Cost
Center
Activity
(20 Hours)
6 Hours
Work Center
10 Hours
Maintenance
Department
4 Hours
Information Services
Department
January 2008
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rights reserved.
69
Revenue Elements
A one-to-one linkage (mapping) between
General Ledger revenue accounts and CO
revenue elements is established to permit
the transfer of FI revenue information to
CO
 Posting in FI that impact revenue
accounts lead to an posting in CO to a
revenue element
 In other words, revenue account =
revenue element – just different words
depending on whether FI object or CO
object

70
Business Process Integration
CO
January 2008
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Cost Center Allocations

Define Sender and Receiver Rules
◦ Percentage, portions, fixed

Identify Sender
◦ Cost center or internal order (what object has
the amounts?)
◦ Cost element (which expenditures are we
interested in transferring?)

Identify Receiver
◦ Cost center or internal order (where do the
amounts need to go to?)
January 2008
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Cost Accounting Allocation
Posting Types of Cost Allocation
In this unit, Costs will be allocated to particular Cost
Centers.
There are three different types of cost allocation:
Direct Reposting,
Percentage Allocation, and
Statistical Key Figures.
In Direct Reposting, an amount of money is allocated
directly to a specific cost center. For example, $200 is
allocated directly to the Production cost center.
73
Cost Accounting Allocation
Posting Types of Cost Allocation (continued)
In Percentage Allocation, the amount that is to be
allocated is split up among multiple cost centers based
on a predetermined percentage. For instance,
assume that there are two services, and 70% of the cost
is to be assigned to one service, while 30% is assigned
to the other. In addition, the total costs to be allocated
equal $2,500. Because the first service is to be allocated
70% of the cost, it will be allocated $1750. Likewise, the
second service which is to be allocated 30% of the cost
will be allocated for the remaining $750.
.
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Cost Accounting Allocation
Posting Types of Cost Allocation (continued)
Statistical Key Figures (SKFs) are used in the R/3 system to
allocate costs from a service department to a user
department at the closing of a period. These cost drivers,
which are often referred to as tracing factors, are used in
allocation methods that do not involve the explicit
development of activity (transfer) prices. Nevertheless, the
allocation approach is quite similar. A lump sum amount
associated with the service department is allocated to a user
department in proportion to the relative amounts of the SKF
associated with each receiver.
75
Types of Allocations Cycles
Distributions – primary cost elements
 Assessments – combination of primary
and/or secondary cost elements

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Distribution Cycle
Method for periodically allocating primary
cost elements
 Primary cost elements maintain their
identities in both the sending and
receiving objects
 Sender and receiver cost centers are fully
documented in a unique Controlling (CO)
document

January 2007 (v1.0)
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77
Receiving
cost centers
Distribution Cycle
Sending
cost center
Primary cost
element
maintains its
identity
A010 – Administration
Rent Expense
$1,500
Distribution
D010 – 550
sq ft
D005 – 900
sq ft
A005 – 400
sq ft
A010 – 600
sq ft
A015 – 150
sq ft
A020 – 100
sq ft
S010 – 100
sq ft
January 2007 (v1.0)
S005 – 200
sq ft
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78
Distribution Cycle
Receiving
cost centers
Sending
cost center
Primary cost
element
maintains its
identity
A010 – Administration
Rent Expense
$1,500
Distribution
D010 –
$275
D005 –
$450
S010 – $50
January 2007 (v1.0)
A005 –
$200
A010 –
$300
A015
A020 $75
$50
S005 –
$100
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79
Assessment Cycle
A method of allocating both primary and
secondary cost elements
 Primary and/or secondary cost elements
are grouped together and transferred to
receiver cost centers through use of a
secondary cost element
 Sender and receiver cost centers are fully
documented in a unique Controlling (CO)
document

January 2007 (v1.0)
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80
Assessment Cycle
Receiving
cost center
Sending
cost center
A020 – IT
Software Expense
$4,200
A020 – IT
Supplies Expense
$500
Primary and
secondary
cost elements
D010 – 10%
A005 – 15%
A010 – 5%
D005 – 20%
A015 – 10%
Assessment
A020 – 0%
S010 – 10%
January 2007 (v1.0)
S005 – 30%
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Assessment Cycle
Sending
cost center
A020 – IT
Software Expense
$4,200
A020 – IT
Supplies Expense
$500
Primary and
secondary
cost elements
Receiving
cost center
A005 – $705
D010 – $470
D005 – $940
A010 – $235
A015 – $470
Assessment
A020 –$0
S010 – $470
January 2007 (v1.0)
S005 – $1,410
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82
Exercises:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Review cost center standard hierarchy
Review cost elements
Review cost element groups
Display individual line items
Create G/L document entry
Display individual line items
Repost expense (cost) between cost centers
Display individual line items
Post statistical key figure
Create distribution cycle
Review actual line item report
Post supplies expense
Post information technology expense
Review actual line item report
Create assessment cycle
Review actual line item report
January 2008
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2007. All rights reserved.
83
Exercises:
PP
PP
PP
PP
PP
PP
PP
17.
18.
19.
20.
21.
22.
23.
Convert planned order into production order
Issue goods to production order
Review production order status and documents
Confirm production completion
Receipt of goods from production order
Review costs assigned to production order
Settle costs of production order
January 2008
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2007. All rights reserved.
84