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Activity Based Costing with SAPSolution Overview Presentation

Solution Management ERP FinancialsSAP AG



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1. Why Activity Based Costing?

2. Building Blocks for ABC

3. Different Costing Models

4. Reporting to all Stakeholders5. Planning and Performance Management

Agenda



Why Activity Based Costing/Management?

Source: CAM-I Cross

Resources

Resource Cost

Assignment

Activities/

Processes

Activity Cost

Assignment

Cost Object

MeasuresCost Drivers

Understand how activities impact

customer profitability, productprofitability, channel profitability,

regional profitability, etc

Understand how resources are being

spent and identify idle

capacity/overstretched resources

Determine costs

of activitiesperformed by

organization

Set objectivesfor each activity and

measure effectiveness

Set objectives for each segment andmeasure effectiveness

Set objectives for each resource

and measure effectiveness

Cost Management Performance Management



How Activity Based Costing/Management

Works

Source: CAM-I Cross

Resources

Resource Cost

Assignment

Activities/

Processes

Activity Cost

Assignment

Cost Object


Model how each activity uses

resources

Calculate costs per unit of

resource used

Model how each market segment

uses activitiesCalculate costs per unit of activity

used

Costs enter from Accounting

Revenues enter from

Accounting

Resource drivers from

operations e.g. headcount,

labor hours,...

Activity drivers from

operations e.g. no of calls

handled, no of orders handled,...







Agenda



Sample Costing Model

Receivers

Detect Non-Compliance

Examples

Costs per Taxpayer

Group

HandleInquiries

Contact Center

Costs per Region Costs per Tax Type

Resources

Resource Cost

Assignment

Activities/

Processes

Activity Cost

Assignment

Cost Object




Schematic Sender – Receiver Relationships

Act ivi ty Based Cos ting

Activity/process directory.

Rule-based determinationof resources used by each process

(template assignment)

Profitability Analysis

Multidimensional profitability segments

Assignment of product-, customer, and channel

sustaining activities to provide true profitabilityRule-based determination

of activities used for each cost object

(template assignment)

Cost Center Accounting

Resource directory.

Determines for each activity

Capacity

Price

Fixed and variable costs

Other Cost Objects

Single transaction costing in Banking Environment (for batch and unit-specific activities)

Orders or projects for one-dimensional Profitability Analysis



Resource Assignments in Cost Center

Accounting

Integrated with General Ledger to capture

all relevant expense postings

Integrated with SAP HR for Payroll

Accounting, Headcount Planning and so

on

Integrated with Asset Accounting to

capture depreciation

Model drivers as statistical key figures or

activity types

Cost Centers

Human Resources Asset Accounting

Financial Accounting

Processes Processes



Cost Assignments in Profitability Analysis

Multidimensional profitability analysis by

e.g. customer, product, and channel

Flexible cost object assignment – assign

costs to the appropriate level e.g. product

group or product

Up to 16 independent dimensions – with

many characteristics in each dimension

C o l l e c

t i o n

u n i t s



Building Blocks for ABC

Resource List: Cost Center Hierarchy

Activity Directory: Business Process Hierarchy

Template for Resource Assignment

Template for Activity Assignment



Assignments to org. units ABC attributes

Output units Allocation parameters

Business Process Details







Agenda



Simple Demand Model

Invoice

(Customer

Demand)

OverheadResources

Resource Cost

Assignment

Activities/

Processes

Activity Cost

Assignment

Cost Object


Service Request

(Internal Demand)

# of new workplaces

# of IT activities

# Admin Time

# Procurement Time



1. Replication of invoice in CO-PA (value fields) 2. Template Allocation based on invoiced quantity

4. Costs by customer, division, …3. Costs of Business Process

External Demand Model



1. Starting a service request from Manager Self Service 2. Request Budget Transfer as Adobe Form

3. Internal Service Request Scenarios 4. Charge for service

Internal Demand Model



„Political Prices“ for Business Process

System-calculated price for Business Process

Cost Components for Process Price

Getting started:

Service charge per unit of activity used

More sophisticated:

Calculate service charge based on

demand network

Both standard costs and actual costs are supported!

Service Charges

Rates for Activities/Processes



Timing of Activity Based Costing

All postings in CO are made with respect to an

accounting period All allocations take place at period close –

assessment cycles, template allocations, price

calculation, variance calculation

For reporting purposes, results can be

aggregated by period, quarter, fiscal year

Multiple versions can be used to support

different models in the same period.

For high data volumes, consider running the

allocation transactions on parallel servers.







Agenda



Data Flow

InfoCubes e.g.

• costs and

• allocations

Master Data e.g.

• cost centers,

• activities

• hierarchies

ODS Objects e.g.

• number of

transactions

Data Warehouse (BW)

Cost Centers

Processes

Market Segments

Operational R/3

Auditability:

Use ABAP list viewer and drill down reports

to check results of allocations in ECC

Publish results to role-based

portals or as web queries

Extract

results

to BW



online-drill-down to single transaction is

possible!!

Sample Report within SAP BW







Agenda



Balanced Scorecard

Determine effectiveness of measures using activity costs!





Resource Costs Cost Drivers

Resource Prices Assignment

Planning in BPS (1)



Planning in BPS (2)

Resources to Activities

Resources to Cost Objects

Reporting



Future Scope

VNA

Costing Results

InfoCubes e.g.

• costs and

• allocations

Master Data e.g.

• cost centers,

• activities• hierarchies

ODS Objects e.g.

• number of

transactions

Data Warehouse (BW)

CRMNon

SAP

Extract Import

Import

Query

Extract

Cost Centers Market Segments

Operational R/3

Processes

Local Tables

Resources Activities Cost Objects

SEM/BA



Summary

Flexible definition of product, customer, channel, region, etc. in Profitability Analysis

Supports both fully loaded and marginal cost model

Rule-based definition of assignments from activity to cost object

Rule-based definition of assignments from resource to activity

Remaining costs can be assigned to Profitability Analysis, e.g. using assessment

cycles

Automatic reconciliation of supply and demand during price calculation. Display of unused capacity on the sender side.

Detailed variance analysis by business process.



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