Use the T-code KP06 and enter the controlling area.

Cost Center dollars are planned by activity Type and cost element. You can also enter the variable and fixed dollar amounts.

You can plan all costs in production cost centers where they will end up through allocations, or you can plan costs where they are incurred and use plan assessments and distributions to allocate.

To define cost center activity quantities, use the T-code KP26. You can also manually enter an activity rate based on last year’s actual values. Note that if you enter an activity rate instead of using the system to calculate a rate, you lose the opportunity to review actual vs. plan and see dollar and unit variances. It is a best practice to plan activity quantities based on practical installed capacity which accounts for downtime. If you plan at full capacity, plan activity rates will be underestimated.

Example

Let’s say we are using Product Costing to value our inventory in a cookie baking shop. This will help us value our cookies (finished good), frosting (semi-finished good), and baking items like eggs, milk, and sugar (raw materials). In order to calculate costs, we need to come up with rates for each activity, such as mixing baking items, oven baking, and cookie cooling. Since a rate is a dollar per unit, we can either come up with a rate based on previous year’s actual rates, or enter our total costs and total units.

SAP CO – Profitability Analysis

SAP CO Profitability Analysis is used to analyze the market segments classified as products, customers, sales area, business area, etc.

SAP CO Profitability Analysis (CO-PA) is used for the evaluation of Market segments which is classified according to products, customers, and orders −

• or any combination of these.
• or Strategic business units such as sales organizations.
• or business areas, with reference to company’s profit.
• or contribution margin.

There are two types of Profitability Analysis are supported −

• Costing-based Profitability Analysis − It is used to group the costs and revenues as per the value fields. It is used to ensure that you access at all times to a complete, short-term profitability report.
• Account-based Profitability Analysis − It is used to provide you with a profitability report that is permanently reconciled with financial accounting. It is mainly used for getting information related to sales, marketing, product management and corporate planning departments to support internal accounting and decision-making.

Key Components in SAP CO-PA

The key components in SAP CO-PA are as follows −

• Actual Posting − It allows you to transfer sales orders and billing documents from the Sales and Distribution application component to CO-PA in real time. You can also transfer costs from cost centers, orders and projects, as well as costs and revenues from direct postings or settle costs from CO to profitability segment.
• Information System − It allows you to analyze existing data from a profitability standpoint using drilldown function in the reporting tool. It allows you to navigate through a multidimensional data cube using different functions like drilldown or switching hierarchies. The system displays data in either value fields or accounts, depending on the currently active type of Profitability Analysis and the type to which the report structure is assigned.
• Planning − This allows you to create a sales and profit plan. Whereas both types of Profitability Analysis can receive actual data in parallel, there is no common source of planning data. Consequently, you always plan either in accounts (account-based CO-PA) or in value fields (costing-based CO-PA). The manual planning function allows you to define planning screens for your organization. With this you can display reference data in planning, calculate formulas, create forecasts, and more. You can perform planning at any level of detail.

Example

You can plan at a higher level, and have this data distributed top-down automatically. In automatic planning, you can copy and revaluate actual or planning data for a large number of profitability segments at once.