Enhance Cost Center Variance Reporting for Manufacturing Organizations

  • by Surajit Mohanty, Independent Consultant
  • November 11, 2013
Discover how having detailed activity types map to each work center level can provide you with detailed variance analysis at the cost centers.
Learning Objectives

Learn how to:

  • Use multiple activity types to help get better control and visibility from production-driven costs in product costing and cost center accounting.
  • Use standard SAP functionality to meet the business requirement to analyze the planned and actual costs and hours in cost centers coming from work centers (resources).
Key Concept
Activity types specify the manufacturing activities produced in plant-related cost centers. Multiplying activity types used in the production process through the assigned production cost centers creates more transparency and provides businesses with more control over the budgeting and actual overhead cost management. Multiple activity types make the work center data available in the cost centers. Thus, the standard SAP cost center reports show data from a detailed work center level.

The variance analysis between the plan hours (costs) and actual hours (cost) for each activity type (such as labor, machine, or setup, for up to six activity types) at each work center is important for cost accounting and plant managers. This analysis helps users to control the performance and to manage the efficiency of a plant or department. In SAP ERP Central Component (SAP ECC), the solution to access this data quickly and efficiently is only available with SAP ERP on HANA. Currently, most organizations design custom ABAP reports to integrate the work center or activity type data with corresponding cost centers. Therefore, this solution helps organizations to limit complex ABAP development.

Using multiple repetitive activity types for each type of overhead costs at the work center or cost center level helps information from work centers flow over to cost center accounting in a detail level. Therefore, the standard cost center accounting report can be used to provide the requisite information for each work center at the cost center level. I use two manufactured materials to demonstrate the benefit of using multiple repetitive activity types. I describe this solution using standard SAP functionalities (without using any customization) from the following SAP modules: Cost Center Accounting (CO-CCA), Product Cost Planning (CO-PC), and Production Planning for Process Industries (PP-PI). This solution is not limited to the PP-PI only; it can be used for any type of manufacturing industries.  This method is also a workaround for organizations that are still using SAP ERP without SAP HANA.

Surajit Mohanty

Surajit Mohanty is an independent consultant with more than 14 years of SAP Financials consulting experience. In the past he has worked with various consulting firms such as IBM, Deloitte, and BearingPoint. He has vast experience in SAP CO (Controlling/Management Accounting) and FI areas spanning across nine end-to-end implementations. He has delivered solutions to a broad range of clients with various roles in the areas of product costing, material ledger average costing, transfer pricing, profitability analysis, revenue recognition, accounts receivable and payable, sales and use taxation, SAP General Ledger, and integration of the SAP General Ledger with materials management, production execution, and sales and distribution areas. He lives in Schaumburg, IL, with his wife and son.



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