SAP CO: Activity Based Costing (CO-OM-ABC) in S/4 HANA

About SAP CO: Activity Based Costing (CO-OM-ABC) in S/4 HANA

Activity-Based Costing (ABC) in SAP provides a more accurate way of allocating overhead costs based on the actual activities that contribute to overhead. SAP CO-OM-ABC, especially in S/4 HANA, offers a streamlined way of handling this. Let’s break down your steps for understanding: 1.

Activate Activity-Based Costing in Controlling Area

: Here you activate the ABC functionality for a specific controlling area. 2.

Maintain Business Process Standard Hierarchy

: Set up a standardized hierarchy for business processes in your controlling area. 3.

Cost element creation-43 category

: Cost elements of category 43 are created to capture the expenses related to activity types. 4.

Activity type-Labour -Master Data

: This is the creation of labor activity types that you will use for ABC. Activity types represent the kind of work being performed. 5.

Production Cost center -Master data

: Cost centers are departments or units where costs accumulate. 6.

Cost center with Activity type planning

: Here you plan costs for activity types at specific cost centers. 7.

Template Allocation-BP Environment Creation

: This is the setup of the environment where business processes and their associated costs can be modeled. 8.

Business Process creation -Master data

: Define individual business processes. 9.

Assign Template to all Business Process

: Use templates to allocate costs consistently across business processes. 10.

Business Process Group Creation

: Group related business processes together. 11.

Business Process Planning-Cost Element wise

: Plan costs for each business process based on specific cost elements. 12.

Business Process Planning-Activity type wise

: Plan costs for business processes based on activity types. 13.

Business Process & Activity type rate calculation

: Calculate rates for business processes and activity types based on your planning. 14.

Template Allocation-001 Environment

: This step might be about initializing the standard allocation environment. 15.

Material Master creation

: Define the materials that will be used in your processes. 16.

Bill of Material (BOM)

: This lists all the components/materials required for a product. 17.

Work Center

: This defines where work gets done (machines, labor groups, etc.) 18.

Routing

: This outlines the path that production takes, including steps and their associated costs. 19.

Production Version

: Defines the specific combination of BOM and routing for production. 20.

Cost estimation & Release

: Calculate estimated costs for production and release them for further processing. 21.

Production Order creation

: Create a specific order to produce a certain amount of material or product. 22.

Activity Confirmation

: Confirm the actual labor hours and machine hours consumed during production. 23.

Template Allocation -Execution of Business Process

: Apply the template allocations to the actual business processes. 24.

FI Expenses to Direct Cost centers

: Post financial accounting expenses directly to cost centers. 25.

Creation of Distribution Cycle: Cost spilt to Business Process

: Define how costs will be distributed or split across different business processes. 26.

Execution of Distribution Cycle

: Run the distribution cycle to allocate the costs. 27.

Actual Business Process Rate Calculation

: Calculate the actual rates based on incurred costs. 28.

Revaluation of Production Order

: Adjust the values of the production orders based on the actual rates. 29.

Variance Calculation

: Determine differences between planned and actual costs. 30.

Settlement

: Distribute any variances to appropriate accounts or objects. In essence, SAP's ABC model in CO-OM-ABC lets you move from traditional cost center accounting, where costs are often allocated based on simplistic measures, to a more detailed view where costs are allocated based on actual business processes and activities. This gives management a more accurate view of product costs and can highlight areas for potential efficiency gains or cost reductions.