copa desing doc.doc
TRANSCRIPT
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DESIGN DOCUMENT
CO PROFITABILTY ANALYSIS
AUTHOR/APPROVER
Date Document
Version
Document Revision Description Role (Author/Approver) Author/Approver Name
TABLE OF CONTENTS
1.OVERVIEW.....................................................................................................1
2.ASSUMPTIONS...............................................................................................2
3. KEY DECISIONS.............................................................................................2
4.DESIGN DETAILS............................................................................................3
4.1MASTER DATA.......................................................................................................................................4
4.2.PLANNING...........................................................................................................................................10
4.3.ACTUAL DATA.....................................................................................................................................11
4.4.ASSESSMENTS....................................................................................................................................14
4.5.PROCESS DESCRIPTION......................................................................................................................14
4.6.VALUATION.........................................................................................................................................144.7.INFORMATION SYSTEMS......................................................................................................................16
4.8.RECONCILIATIONS...............................................................................................................................18
.
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1. OVERVIEW
SAPs CO-PA (Profitability Analysis Module) will support the need to analyze profitability by market segment.These segments are defined using characteristics. Some are predefined by SAP (i.e., Company Code, Profit Center,Material Number), others are manually defined (i.e., Product Hierarchy, Customer Hierarchy). For the transfer ofthe actual and plan data from other modules (sales, production, etc.), standard SAP can be used.
The following illustration gives an overview of profitability analysis.
Reporting Dimensions
Customer
RegionSales Office
Area
Answers
Revenue
Cost
Loss
Profit
Profit analysis
Market segments
Sales
Quantity
Sales revenue
Customer discount
Sales commission
Direct sales costs
Net revenueDirect material costs
Variableproduction costs
Contribution marginI
Materialoverhead costs
Fixed production costs
Contribution marginII
VariancesContribution marginIII
Overhead costs
Operating profit
Product
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Basic concept of CO-PA:
2. ASSUMPTIONS
The module CO-PA is used to collect and deliver data for the Business Warehouse (BW).
Main focus is the financial reporting (Hyperion report.)
The other modules (sales, production, general ledger, etc.) provide the data, which is required for the
reports.
3. KEY DECISIONS
Costing based vs. Account based CO-PA. The most major decision to be made in a CO-PAimplementation is the selection of costing based versus account based CO-PA implementationmethods. Account based CO-PA uses actual Cost elements as performance measures. In that sense itcan be thought of as a special ledger with a flexible selection of fields and characteristics to report on.The disadvantage of costing based CO-PA is its inflexibility in terms of creating user definedperformance measures. The advantage of it is the ease of reconciliation with FI and PCA. Costingbased CO-PA uses flexible, user defined value fields as performance measures . These value fieldscan be a one to one or many to one match with cost elements. They can also be declared to match apricing condition in SD, which indirectly represents a group of accounts in accounting. Users can alsocreate value fields that do not correspond to any real accounts or cost elements , and are used forinternal analysis and reporting purposes only. Value fields can even be more detailed than accounts, in
CUST
.
GRP
.
Sales region North
Product Prod1Product group Compressorcustomer Cust1Cust. grp Public
sectorCountry UKSales rep. Miller
CharacteristicsCharacteristics
Revenues 800
Sales, discountsand returns 100COGS 650
Value fields RevenuesRevenues
Sales, discountsSales, discounts
and returnsand returnsCOGSCOGS
Profitabilitysegment
ValuesValues
REGIO
N
S
N
W
PRODUCT GRP
Compr.Chiller
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a one to many correspondence scenario (For example splitting of fixed and variable parts of costs in thesame account into different value fields). In short, Costing based CO-PA gives much more flexibility tothe user than account based. The downside is the difficulty of reconciliation with accounting reports,and the fact that the chart of accounts level of detail can typically not be replicated in a value fieldstructure (SAP limits the number of value fields used)
It is also possible to use both account and costing based methods in parallel.
The content of the Operating Concern. The Operating concern defines the set of characteristics and (in
costing based CO-PA) value fields that are used for market segmentation and reporting.
A contribution margin scheme to be used in the profitability analysis. This will define the income statement
structure to be used in profitability reporting. Users can create alternative schemes for analysis purposes
Whether actual sales and sales deductions will be shown for CO-PA reporting. SAP has the ability to show
estimated or actual deductions. This is done through the standard CO-PA functionality to post incomingorders as well as billing documents to CO-PA to estimate the future sales landscape.
(mentioned in the first bullet.).(This is mentioned in the second bullet)
(Mentioned in the second bullet)Standard cost (S-Price) from the product costing module will be the
valuation for delivery out of stock activity.
One operating concern used in the global set up for CO-PA. This is the highest reporting level within CO-
PA.
Whether standard warranty, discount or commission provisions or other accruals will be built as a factor of
revenue or other measures and actual charges will be posted against these accruals. In short, themanagement of accruals on the balance sheet may be handled (estimated) in CO-PA.
The source of data feeding each line of the contribution margin scheme within SAP.
4. DESIGN DETAILS
R/3 Costing based Profitability Analysis is based on a customer-designed structure of so-called value fields, inwhich users can separate costs according to fixed and variable components of general overhead, sales,administration, customer service, marketing and so on.
From SD to CO-PA:
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Users can define profitability segments needed to analyze for their business. The profitability segments are userdefined combinations of characteristics, such as product groups, sales areas, orders and so on.
The system automatically assigns revenues, cost and sales deductions to individual profitability segments when thebusiness transactions (sales orders, invoices) are processed in the system. R/3 ensures that the reports generatedcontain all the relevant business transactions , and that management information is consistent and complete. This is
accomplished thorough the assignment of sales condition types to value fields in CO-PA configuration
Users can allocate costs to profitability segments manually, for example to assess specific overhead costs.
Users can also define key figures and performance measures, such as contribution margin, and have thesecalculated automatically by the system. The report layouts can be defined quickly and easily, and offer a maximumof flexibility. The information is displayed in spreadsheet form, and can be reformatted at any time.
Profitability analysis is also an important tool for planning and forecasting. Users can plan their sales and cost databy accounting period or by week. They can also use formulas to link between revenues with sales quantities, andforecast data using seasonal or probabilistic models. Planning in profitability analysis is also integrated with Salesand Operational Planning. Users can release budgets and transfer data to Production Planning with just a fewmouse clicks.
4.1 Master Data
4.1.1 Characteristics
Characteristics represent the levels at which it is possible to create and analyze actual and plan data. There aretwo types of characteristics:
Standard characteristics, which are automatically predefined in SAP. These include the product number,
company code, customer number, and country.
User-defined characteristics, which can be created to provide additional client specific information.
To derive values for these characteristics, it is necessary to create derivation rules or table lookup rules unless theyare readily available in the sender application (For example, in SD data flow to CO-PA, fields on the billing
document, such as sales org, sales group, customer, etc. are readily available to the CO-PA line item if such fieldsare selected as CO-PA characteristics in the operating concern).
Characteristic derivation makes it possible for the system to automatically derive unknown characteristic values(especially for user-defined characteristics) if these are dependent on characteristics whose values are known.
The following characteristics are typical examples of required fields for reporting and/or planning:
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Area Characteristics
Product View Product number
Product hierarchy (all available levels) Franchise,
Brand, Product Category, Product Group
Plant
Material type
Customer View Customer number
Account group (3rd party, Inter company, Intra group)
Commission sale
Market/Country View Customer group 1 (Market code)
Profit center
Country
Region
Other Posting period
Legal entity/company code
Order type
Record type
Item Category
Cost center
Use (sales order)
Most characteristics already exist in other R/3 applications and it is possible to pick them up from SAP tables.Derivation rules / table lookups have to be defined.
4.1.2. Characteristic ValuesFor the characteristic values, companies may choose to use the existing master data tables in SAP.
Fixed characteristics:
Company code
Profit center
Material number
Customer (Possible party roles: sold-to party, shipped-to-party, and payer)
Country
Region
District (State or County)
Sales office
Branch
Distribution channel (Equipment, Service, Contracting, Parts, Marine)
Division (YRG, UPG, ESG, Inter company)
(Sales person) open action item
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Company Specific Characteristics:
Product hierarchy
Customer hierarchy/group
Vendor source (plant)
The following table gives an example of user-defined characteristics:
Characteristic Description
WW001 SKU
WW002 International Product
WW003 Segment
WW004 Indication
WW005 Minor Product Group (Brand)
WW006 Therapeutic Group
WW007 Therapeutic
Class
WW008 Major
Product Group
WW009 Sub-Franchise
WW010 Franchise
WW011 World Wide
Franchise
WW012 Region Sales
WW013 Customer
WW014 NTC
WW015 IND Customer
4.1.3. Derivation Rules
The following are examples of derivation rules:
Automatically from the system: profit center (from material master, plant view) and company code (from
the accounting transaction).
From the sales order: material number, customer, country, region, district, sales office, distribution channel,
division and sales person.
From material master data: product hierarchy.
From customer master data: customer hierarchy.
Derivation rule from sales offices: Branch.
Vendor source will be derived from material master data, plant or vendor number.
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4.1.4. Value Fields
(This statement is misleading) For each row of the contribution margin scheme there has to be at least one valuefield. Values fields are the fields that contain the currency amounts and quantities in CO-PA. There are two typesof value fields:
Value fields that contain amounts in currencies (amount fields).
Value fields that contain quantities (quantity fields).
Value fields that are used frequently are predefined in the standard R/3 System. These include fields for revenue,sales quantity, freight, and others.
In the following areas, value fields will be necessary to display performance figures for profitability segments:
Area Value Fields
Sales quantity Sales Quantity
Equivalent Units (Sales Quantity X Unit Per Vial)
Gross sales Revenue fields
Discount, rebate, freight, commission,
packaging,
Transport insurance
Fields assigned to SD-conditions, SD-Interface
Fields for calculated values in CO-PA
COGS manufactured products Cost component fields
COGS merchandise Cost of goods field
COSS Cost of services sold
Other corporate COGS Global Manufacturing Standard (Full Standard Cost)
Global Manufacturing Standard less Markup
Manufacturing Conversion Standard Cost
Settlement orders
Sales orders(Make to order manufacturing)
Revenue fields, cost fields
Direct postings from FI Fields for direct posted primary costs
Manual postings Liability fields for rebate, rebate in kind, allowance, commission
CO-PA will not perform any inter company and intra group profit elimination. (I think it is misleading.) Thefollowing table gives some examples of the source of value fields.
Source Description Value Fields
SD Billing Document (Sales and ServiceOrder)
Quantity
Sales RevenuesSales Deductions
Costs of Goods Sold
CO-PC Cost Estimate (Standard Price) Variable Cost of Goods Mfd
Fixed Cost of Goods Mfd
FI General Ledger Posting Bonuses
Freight Costs
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Source Description Value Fields
CO-OM Cost Center
Internal Order
Sales and Administration Costs
Marketing Costs
Variances
PS WBS Element
Network Operation
Contracting, project revenue , project
costs
CO-PA Additional Costs Costed Discounts
Costed Bonuses
The following table gives an example of user-defined value fields:
Value Field Description Type
VV001 Gross Sales Value
VV002 Spillover (OBI Only) ???? Value
VV003 Rebates Value
VV004 Non-government Chargebacks Value
VV005 Cash Discounts Value
VV006 Other NTS Value
VV007 Medicaid Value
VV008 Government Chargebacks Value
VV009 Other Revenue Value
VV010 Intco Sales Value
VV011 Standard Cost Value
VV012 Manufacturing Variances Value
VV013 Inventory Adjustments Value
VV015 Royalty Expense Value
VV016 Interco COGS Value
VV017 Carrying Cost Value
VV018 Freight Value
VV019 Total Comp Salary Value
VV020 Direct Benefits Salary Value
VV021 Indirect Benefits Salary Value
VV022 Total Comp Wage Value
VV023 Direct Benefits Wage Value
VV024 Indirect Benefits Wage Value
VV025 Travel Exp General Value
VV026 Business Meals Value
VV027 Entertainment Value
VV028 External Training Courses Value
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Value Field Description Type
VV029 Internal Training Courses Value
VV031 Automobile Expense Value
VV032 Petty Cash Expenditure Value
VV033 Employee Moving Value
VV034 Recruiting Costs Value
VV035 Other Exp Related To Emp Act Value
VV036 Departmental Supplies Value
VV037 Work Order Supplies Value
VV038 Prod Development Supplies Value
VV039 Equip Prch Non IM Value
VV040 Equip Prch IM Value
VV041 Mechanical Stock Supplies Value
VV042 Equip Rental Non IM Value
VV043 Equip Rental IM Process Value
VV044 Space Rental Value
VV045 Telephone,Telex & Telegraph Value
VV046 Utilities Value
VV047 Building & Grounds R&M Value
VV048 Equip&Parts Non IM R&M Value
VV049 Equip&Parts IM R&M Value
VV050 Waste Removal Value
VV051 Moving & Alteration Value
VV052 Project Maintenance Value
VV053 Bank & Credit Card Fees Value
VV054 Misc Postage Value
VV055 Misc Insurance Value
VV056 Oth Prch Goods & Services Value
VV057 External Legal Services Value
VV058 External Audit Fees EB Value
VV059 Selling Expense Value
VV060 R&D Value
VV061 Marketing Management Value
VV062 Marketing Expense Value
VV063 Other Income EB Value
VV064 Other Expenses EB Value
VV065 CurrGain/LossTransact Value
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Value Field Description Type
VV066 CarryCostRec&InvBTOffset Value
VV067 Allocated Corp Exp BT Value
VV068 Profit Sharing for JV BT Value
VV069 Interest Income BT EB Value
VV070 Interest Expense BT EB Value
VV071 Top-down Distribution Qty
VV072 Units Qty
VV073 Taxes Value
4.2. Planning
CO-PA allows planning at detailed levels such as product and customer. The planning will consist of salesquantities, revenues, cost of goods and profit margin. The system will be used to transfer planned sales quantitiesfrom Sales and Operations Planning (S&OP) to CO-PA.
The following are examples of business requirements:
Revenue and Cost is planned at the SKU level by month for each combination of:
o Legal Entity Source (legal entity that ships the product and receives the legal revenue).
o Market/Franchise (Market/Franchise that receives management revenue).
The global requirement for planning is to plan values for:
1. Sales Quantity (Units) Input
2. Equivalent Units Input
3. Conversion Factor Calculated (1 / 2)
4. Revenue Input or Calculated (Price * Quantity)
5. Average Selling Price Input
6. Local Standard Cost (Future Price) Derived from Material Master
The following additional value fields will be planned based on local requirements:
o Freight / Insurance
o Packaging for shipment
o Royalties
The following diagram depicts the process transfer from plan data into CO-PA:
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Copy, revalue and use top down distributions as planning aids. The copy function can be used for data transfer toCO-PA. Revaluation and top down distribution functions use predefined percentages and factors to re-state a plan.
4.3. Actual Data
The following tables provide examples of value flows.
This next table is too obviously a copy and paste from an equipment manufacturer (I bet it was synopsis) I am notgoing to touch it now, let me know if you want me to come up with something more generic all together.
COCO--
PAPA
COCO--
PAPA
QuantityQuantity ++ AverageAverage priceprice ((oneone
internalinternal,, oneone externalexternal custcust .) on.) on
productproduct groupgroup andand LELE--levellevel oror
manuallymanually-->> RevenueRevenue ..
SS--PricePrice oror averageaverage percentagepercentage ofof
GM onGM on productproduct groupgroup andand LELE--levellevel= COGS
COCO--
OPAOPA
COCO--
CCACCA
PSPS
SOPSOP
SettlementSettlement
AssessmentAssessment
TransferTransfer
SettlementSettlement
CostCost Center PlanCenter Plan
(OH)(OH)
InternalInternal OrderOrder
(OH)(OH)
PlannedPlanned
QuantityQuantity
Project planProject plan
CSCSSettlementSettlement
ContractContract plan/plan/
service planservice planRevenueRevenue andand costscosts
RevenueRevenue andand costscosts
ManualManual PlanningPlanning ::
if necessaryif necessary
CostsCosts
CostsCosts
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To get this information from other modules to CO-PA we use the following methods:
1. Settlement of make-to-order sales orders, service orders/contracts and projects (Work break down structure= WBS):
Margin at STD
Total Cost of Sales - STD
Delivery out of stock:S-Price or V-PriceMake-to-order sales orders: Settlement of the sales order result analysis cost element for the all costs
Contracting: Settlementof the WBS, results analysis cost element for all costs
Service/Repair: Settlement of the service order or contract, primary or results analysis cost elementfor all costsParts: S-Price or V-PriceCost Intercompany
Delivery out of stock:S-Price or V-Price
Make-to-order sales orders: Settlement of the sales order result analysis cost element for the all costsContracting: Settlementof the WBS, results analysis cost element for all costs
Service/Repair: Settlement of the service order or contract, primary or results analysis cost elementfor all costs
Parts: S-Price or V-Price
Direct posting for adjustments
Std cost of Outside Sales (incl.
deduction + sales costs like freight,
packaging)
Total Sales
Delivery out of stock:Condition from the sales orderMake-to-order sales orders: Settlement of the sales order result analysis cost element for the revenues XXXX
Contracting: Settlement of the WBS, results analysis cost element for the revenues XXXX
Service/Repair: Settlement of the service order or contract, primary or results analysis cost elementfor the revenues
Parts: Condition from the sales orderSales - Intercompany
Direct Posting for revenue adjustmentsTotal Sales - Outside
Service/Repair: Settlement of the service order or contract, primary or results analysis cost elementfor the revenues
Parts: Condition from the sales orderSales Service / Parts
Delivery out of stock:Condition from the sales order
Make-to-order sales orders: Settlement of the sales order result analysis cost element for the revenues XXXX
Contracting: Settlement of the WBS, results analysis cost element for the revenues XXXXSales - Equipment
Margin at STD
Total Cost of Sales - STD
Delivery out of stock:S-Price or V-PriceMake-to-order sales orders: Settlement of the sales order result analysis cost element for the all costs
Contracting: Settlementof the WBS, results analysis cost element for all costs
Service/Repair: Settlement of the service order or contract, primary or results analysis cost elementfor all costsParts: S-Price or V-PriceCost Intercompany
Delivery out of stock:S-Price or V-Price
Make-to-order sales orders: Settlement of the sales order result analysis cost element for the all costsContracting: Settlementof the WBS, results analysis cost element for all costs
Service/Repair: Settlement of the service order or contract, primary or results analysis cost elementfor all costs
Parts: S-Price or V-Price
Direct posting for adjustments
Std cost of Outside Sales (incl.
deduction + sales costs like freight,
packaging)
Total Sales
Delivery out of stock:Condition from the sales orderMake-to-order sales orders: Settlement of the sales order result analysis cost element for the revenues XXXX
Contracting: Settlement of the WBS, results analysis cost element for the revenues XXXX
Service/Repair: Settlement of the service order or contract, primary or results analysis cost elementfor the revenues
Parts: Condition from the sales orderSales - Intercompany
Direct Posting for revenue adjustmentsTotal Sales - Outside
Service/Repair: Settlement of the service order or contract, primary or results analysis cost elementfor the revenues
Parts: Condition from the sales orderSales Service / Parts
Delivery out of stock:Condition from the sales order
Make-to-order sales orders: Settlement of the sales order result analysis cost element for the revenues XXXX
Contracting: Settlement of the WBS, results analysis cost element for the revenues XXXXSales - Equipment
Value Field Data Source
Value Field Data Source
EBIT
Direct posting
OperatingExpensesAffiliates
Royalty,gain/loss fixed assets, commission income, DirectPosting or cost center assessmentOther Income/Expenses
Direct Postingfrom FIIntangiblesAmortization
Allocationof all admincost centers + direct postingAdministrative Expense
Allocationof all salesand marketing costcenters(balance between actual costsand creditedhours), credit memo(UPG) + bad debt reserve (direct posting)Selling Expense
Allocationof all engineeringcost centers(Balance between costs and possiblecreditedhours) withoutcapitalization of intangiblefixedassets and project system settlementEngineerExpense
Margin at Actual
Total Cost of Sales
Total OtherCosts
Direct postingfrom FIOperatingFX
Allocation of all service office cost centers(Variancebetween actual costs and creditedhours)Total variances
Settlementfrom the productionorders, direct posting and cost center assessment for contracting engineer
Delivery out of stock: Cost Center assessementMake-to-ordersales orders: Settlementof the salesorder result analysiscost elementfor the all costsContracting: Settlementof the WBS, resultsanalysiscost elementfor all costsService/Repair: Settlementof the serviceorder or contract, primaryor resultsanalysiscost elementfor all costs
Parts: S-Price or V-PriceWarrantyExpense
Direct postingfrom FI, Cost center assessmentDirect Charges
Allocationof all serviceoverheadcost centers(Not includedin the rates of theservice engineers)Service overhead
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To get the revenue and the COGS from the monthly results analysis, the result analysis cost elements haveto be linked to the appropriate value field (revenue internal/external or COGS internal/external). Warrantyestimated and actual will be assigned to a separate value field estimated or actual.
2. Set-up data transfer from the make-to-stock sales revenues during the invoice process.
Transfer with a link of the conditions in the sales order with the appropriate value field (revenueinternal/external, COGS internal/external, etc.). Automated transfer of the data with each invoice valuatedwith the standard cost (S-Price) of this product.
3. Settlement of variances from production orders.
After the monthly variance calculation the variances will be settled to CO-PA. Therefore the variancecategories (price variance, quantity variance etc.) have to be assigned to the value field variances.
4. Assessment cycles for allocation of the cost center costs.
The last step in the period end process of cost center accounting is the assessment of the overhead costs toCO-PA. In an assessment cycle it has to be defined which sender (which cost center or cost center groupand which cost element or cost element group) is assigned to which profitability segment. E.g. for the costcenters of the sales offices, the information sales office in the characteristic is necessary to get the P&Lof each sales office.
5. Settlement of the internal orders.
To get the costs and potential revenues of the internal orders, which are not settled to a cost center, a monthend settlement has to be run. The cost elements have to be linked to the appropriate value field here as well.
6. Direct posting from the General Ledger with the profitability segment as cost object.
With data entry on special GL accounts (these accounts have to be defined after finishing the chart ofaccounts) the controlling object is the profitability segment as a combination of the characteristic values.These costs do not appear on cost centers or internal orders. They are only visible in CO-PA and profitcenter accounting.
4.3.1. Transferring Billing Documents Online
Transferring billing documents from the SAP Sales and Distribution (SD) module simultaneously to FI, CO-PCAand CO-PA. The billing documents provide the base data for populating the value fields in CO-PA. The systemmust transfer billing documents from SAP SD simultaneously to FI, CO-PCA and CO-PA.
I dont understand what this means Transferring Incoming Sales Orders Online
Valuate incoming sales orders (as expected revenues) and transfer them from SD to CO-PA in order to obtain anearly estimate of anticipated profits and to get information about the expected loss on pending orders. By analyzingthis data, users can obtain early contribution margins for business segments. The system must transfer salesincoming orders from the SD module to Profitability Analysis.
Consideration - Transferring of incoming orders will only apply to legal entities/sales organizations that will beimplementing the SD module.
4.3.2. Settlement of Service OrdersSales Orders will be used for Service Sales in some cases. These service sales orders will be used to collect bothrevenues and costs associated with the service. For period end closing and reporting purposes it is essential to settlethese sales orders to profitability segments. The costs/revenues will be settled to cost elements as specified in thesettlement structure of the order. The system must be able to settle revenues and costs from service orders tospecific cost elements. These cost elements will be linked value fields in Profitability Analysis.
4.3.3. Direct and manual postings
By using the post document function in FI to assign sales deductions and costs directly to profitability segments(e.g. customers, products) in CO-PA it is possible to post sales deductions or actual costs that are first accrued atthe end of the period for the purposes of estimating profits to the appropriate profitability segments at a later point
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in time. This makes it possible to compare your anticipated costs with the final actual costs. Both of these can bedisplayed in profitability reports.
A requirement would be the ability to post to a profitability segment when entering an FI document for thefollowing GL accounts.
Revenue accounts that allow manual postings (e.g. liabilities for allowance, rebate, rebate in kind,
commission).
COGS at Standard accounts that allow manual postings.
Consideration - Revenue and COGS at standard accounts that allow manual posting must be assigned to a fieldstatus group that requires postings to profitability segments.
4.4. Assessments
Assessments are used to transfer cost center costs at the end of the period to Profitability Analysis. Assessmentsmove costs using secondary cost elements meaning these allocations are only reflected in the Controlling Module,not in the general ledger in the Financial Module. Assessments are broken down into cycles. An Assessment Cycleis a collection of rules for cost allocation. A given cycle can contain a number of segments. A segment consists ofthe following elements:
Sender objects whose values to be allocated are computed using the same rules.
Receiver objects whose allocation bases are computed using the same rules.
The sender-receiver relationships defined in a cycle are processed iteratively. Iteration processing is generally usedwhen a sender object is also a receiver object. The cycle processing continues iteratively (repeatedly) until thesender/receiver object is fully credited. This can increase the amount of time needed to process the cycle.
If users want to process hierarchies separately, they must define a cycle for each level of the hierarchy. Then theyprocess the cycles in succession.
4.5. Process Description
4.5.1. Global Settings
One operating concern will be created, costing-based. Data is stored and can be reported in 2 currencies:
Company code currency
Operating concern currency (currency = US$).
All Controlling areas assigned to an operating concern will have the same fiscal year variant. In defining the datastructure, assign all required characteristics and values to the operating concern. These characteristics are nowvalid for all operating concerns. Harmonized global decision and maintenance of the characteristics and values isnecessary. Avoid frequent changes because of impact on the table structure.
4.6. Valuation
Valuation can be used for the invoice process of standard products with standard costs (S-Price). During the
invoicing, the revenue and sales quantity will be posted to CO-PA. At the same time, the valuation will add thecalculated standard costs (split by material, labor, overhead) to the appropriate revenue. The use of further possiblevaluation e.g. imputed commissions will be decided in the specific deployments.
Valuation enables companies to calculate cost of goods manufactured/sold, as well as anticipated costs and salesdeductions. These valuations can be used in Profitability Analysis for actual postings as well as for planningpurposes.
The following are examples of valuation requirements:
1. Valuation of Cost of Goods sold for manufactured products:
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Product cost estimate will be used to determine the cost of goods. The cost will be transferred to
Profitability Analysis and assigned to value fields based on the cost component split and will usethe current standard cost estimate.
All other sites: the standard cost stored in the material master will be used to determine the cost of
goods sold.
2. Valuation of Cost of Goods Sold for merchandise/services (trading goods, raw materials, packagingmaterials). For all sites the standard cost stored in the material master will be used to determine the cost ofgoods sold.
3. Valuation of rebate, commission, royalties, freight: Will use conditions in CO-PA to calculate anticipatedbusiness costs that are not yet known at the time a sales invoice is processed. These conditions will bedefined as either fixed rates for percentages.
4. Valuation of management standard costs: Will use conditions in CO-PA to record the followingmanagement standards for corporate analysis purposes:
Global Manufacturing Standard
Global Manufacturing Standard less Plasma Markup
Manufacturing Conversion Standard
Global Manufacturing Plasma Capacity
5. Plan Valuation for Cost of Goods: Future Price from Material Master.
For all saleable produced products, a standard cost estimate has to be established. Use standard cost accounting formanufactured products.
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4.7. Information Systems
The diagram listed below illustrates typical controlling area tasks report option and questions.
4.7.1. Reporting and Analysis
Companies require a management tool for the purpose of sales reporting and analysis. It has to support the analysisand controlling of the profitability of market segment structures according to the following parameters:
Market/Franchise/Profit Center.
Product/Product hierarchy.
Customer.
Country.
It must also allow summarization of these parameters by organizational units, for example summarization by legalentity/company code.
The goal of this reporting and analysis tool is to provide the sales, marketing, planning, and managementorganizations with decision-support from a market-oriented point of view. Specifically, the tool should provideprofit margin analysis (Revenue, Cost of Goods at Standard, Margin).
The most important benefit of CO-PA is the flexible analyzing structure. The CO-PA information system is anonline reporting tool. It allows evaluating the data collected in profitability analysis. The system will be used toanalyze data using any of the characteristics in the CO-PA system. When using the dynamic drilldown facility,management can draw on any important business ratios (so-called key figures). They can display severalprofitability segments for any key figure, or several key figures for any profitability segment.
Companies may require the ability to:
1. Display sales / contribution margin / performance figures on different levels.
2. Navigate through a multidimensional "data cube" (drilldown or switching hierarchies).
3. Report in local (company code currency) and global (USD) currency.
4. Answer ad hoc inquiries according to sales key figures.
5. Run reports that compare actual fiscal year data.
6. Run reports that compare budget/forecast versions.
Profit
Center
Accounting
Profit
Center
Accounting
Overhead Cost
ControllingOverhead Cost
Controlling
Product Cost
ControllingProduct Cost
Controlling
Profitability
AnalysisProfitability
Analysis
CostElement
Accou
nting
CostE
lement
Accou
nting
How can we reduce our
overhead costs?
Are the areas of
responsibility effective?
How high are the costs
- of a product?
- of a manufacturing order?
- of a project?
How profitable are
individual
market segments?
How effective are the sales
organizations?
Whichexpenses
arealsocosts?
How
efficient
are my
enterprise
areas
(profit
centers)
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7. Run reports that compare budget/forecast versions for actual.
8. Generate an intercompany profit report per article/package and country/market code.
9. Evaluate expected losses on pending orders.
10. Depreciations to the realized selling price.
11. Determine commission for products sold.
12. Run weekly sales report by product/market.
Considerations
Conversion of data from the missing periods January March for YXXXX.
Reporting requirements are met.
Work with costing based profitability analysis.
Sales reporting will be done based on standard costs.
Revenue accounts will need to be created in CO as cost elements with type 11 or 12 (amendments in
current controlling and FI account field status necessary).
4.8.2. Contribution Margin
The following illustrations are examples of a Contribution Margin scheme:
Sales Equipment
Sales Service/Parts
Sales - Contracting
Margin at STD
Total Cost of Sales - STD
Cost Intercompany
Std cost of Outside Sales (incl.sales costs likefreight only if invoiced(recoverable) to customer, packaging)
Total Sales
Sales - Intercompany
Total Sales - Outside (incl. Deductions and freight revenue)
EBIT
OperatingExpenses
Operating Income
Affiliate
Other Income/Expenses
Intangibles Amortisation
AdministrativeExpense
Selling Expense
Engineering Expense
Margin at Actual
Total Cost of Sales
Total OtherCosts
Operating FX
Variances
Warranty Expense
Direct Charges (freight costs not billed to the customer non-recoverable)
Service overhead
Value Field Value Field
RevenueCost of sales std
Margin at std
Warranty
Variances
Service OH/FX
Margin at Actual
Engineering
Selling
Admin
EBIT
XX
X
X
(X)
XX
X
X
X
X
X
X
X
X
X
XX
X
X
(X)
X
Product /
CustomerSales Office Profit Center
Company
Code
XX
X
X
X
X
X
X
X
X
X
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4.8. Reconciliations
To verify the correctness of performance figures, valuation and data in Profitability Analysis it is required toreconcile the posted totals with total results in financial accounting and PCA on an aggregated monthly level.Financial analysts will perform this reconciliation based on SAP reports and their own analysis.
It may be required to reconcile COPA to SD, FI and PCA in the following areas:
Sales (gross and net) accounts with value fields gross sales by company code and market.
COGS (standard costs) from financial accounts with value fields COGS (cost components) for
manufactured products and value field COGS for merchandise by company code and market.