CHAPTER 6 -- BUS 301S

Statistical key figures

Statistical key figures are used to support those internal allocations associated with settlement, assessment, and distribution. Statistical key figures provide the foundation for accurate and effective cost allocations between various cost objects. Statistical key figures are essentially mathematic formulas based on different ways an expense can be allocated.

Primary cost elements

A primary cost element is used in controlling to identify the type of cost that was incurred in financial accounting and how it will be assigned, or received, by a cost object in controlling. The receiving cost object keeps the name of the sending G/L as the label of the posting. To put it simply, the identity of the cost in CO is the same as it was in FI. Once a general ledger expense or revenue accounts is assigned a Primary Cost Element, you can no longer create a FI posting without creating a CO posting to the cost object where the cost was incurred.

Activity types

Activity Types are the productive output of a cost center. More specifically, it is how we measure or monetize activities (output). Activity types are used to internally move the productive output from one cost object to another cost object. Once we have created an activity type, a relationship between an activity type and a cost center is created, and that relationship is given a monetary value.

Internal order

An internal order is similar to a cost object, except it is a temporary object with a specific start and end date associated with it. The internal order has responsibility for recording expenses and revenues in the associated time frame. An internal order has similar functionality to that of a cost center including the ability to plan, collect, and monitor the costs associated with a distinct short-term event, activity, or project. There are different types of internal orders used for different reasons. The type of internal order sets up the types of costs and revenues that can be planned for and posted to the internal order.

Operating concern

An operating concern is the highest organizational structure in SAP Controlling. The Operating Concern supports the SAP Profitability Analysis functions in CO. Using SAP profitability analysis, a business can be divided into different external views of the company, called segments, from which profitability can be calculated and analyzed. These segments can be based on product, market or other customer-focused points of view. Each segment's profitability can be then analyzed through this module. The Operating Concern, using the CO Profitability Analysis functions enable the collection of revenues from sales and the costs from controlling to analyze profitability by segment. The Operating Concern is used only for the CO Profitability Analysis functions.

Cost center

Cost centers are generally permanent items of master data that are utilized month after month and year after year to capture costs associated with that area of responsibility, location, or type of activity. The ability to plan costs, capture actual costs, monitor costs, and analyze the variances provides an explanation for some of the other uses of cost centers.

Distributions

Distributions provide a method for periodically allocating primary cost elements. This credits the sender for the entire amount that is being distributed (taken out of the sender) and debits the receiver (put into the receiver) the amount of money that is the receiver's share of the cost. Using a distribution allocation methodology means that the identity of cost element in the sending and receiving cost centers are the same. The business determines when the period-end distributions are made. Distributions are generally done at least at the end of the month in the period closing cycle.

Secondary cost elements

In addition to primary cost elements which originate in FI, there are also secondary cost elements that exist exclusively in CO. These secondary cost elements are used to move costs between different cost objects (internally to CO only). Secondary cost elements allow us to change the identity of a cost as we move it between different cost objects.

Allocation

Periodic allocations allow the company to allocate or share costs collected for a cost center or group of cost centers, called senders. The allocations are then allocated to responsible parties, called receivers, according to business specifications.

Primary revenue elements

Primary revenue elements are a one-to-one linkage (mapping) between general ledger revenue accounts and CO revenue elements. These primary revenue elements are established to permit the transfer of FI revenue information to CO. The establishment of the primary revenue element enables a posting in FI that impacts a revenue account that leads to an automatic posting in CO to a primary revenue element. The primary revenue elements can post to cost centers.

Controlling area

The Controlling Area is a self-contained organizational element for which the management, including oversite, reporting, and analysis, for revenues and costs can be performed. The controlling area provides the structure to identify and track where revenues and costs are incurred for reporting purposes. It should be noted that the controlling area is only for CO and is not considered in the operation of FI reporting. A controlling area may include one or more company codes, however; a company code can only be assigned to one controlling area.

CO

The SAP Controlling (CO) module represents an enterprise's needs arranged by internal areas of responsibility throughout the organization. CO components form a framework that supports the planning and recording of actual activities for a business in the manner desired by management through planning, budgeting, and tracking.

Document principle

The SAP document principle is enforced in that both the sending and receiving cost centers are fully documented with a unique CO document capturing the record of the transaction. This means that periodically distributions use the mapping of the Primary Cost Element and do the work of moving the costs.

Profit center

The profit center is a CO Master Data element responsible for capturing the revenue generation and associated costs incurred in the generation of the revenue and cost containment. You can also examine a profit center by asking how much revenue has been created for the objects included in the profit center. You can also determine what costs are associated with the work done in the profit center. Generally, profit centers are used for the evaluation of profit or return on investment (ROI) for internally defined organizations. These internal organizations (or companies within our company) can be defined based on an area of responsibility such as a: Geographic Location (Region), Organizational Unit (Plant), or Line of Business (Division)