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Profitability Analysis
       CO-PA
Course Objectives

 Understand    the functions in Profitability Analysis.
 Explain Profitability management in SAP.
 Understand CO-PA structures and master data.
 Identify the source of actual values.
 Understand planning.
 Use the CO-PA information system.
Table of contents

Course Map

         Module 1: Overview

         Module 2: Profitability Management


         Module 3: Master Data

         Module 4: Planning

         Module 5: Actual data flow

         Module 6: Information System
Profitability Analysis at A Grp

   Profitability Analysis will enable A Grp to analyze the
    profitability of market segments according to the
    following characteristics:               ct                ri
     Products                                               st
                                                           Di
                                                       s
     Customers                                      le
                                                   Sa
     Sales Districts (i.e. USA West,
      USA East, Saudi Arabia etc.)
     Others

                                        Customer



                                                                Product
CO Module Overview

CO    Profitability Analysis                                                 EC
PA                                                                          PCA
      How profitable are individual market segments?




                                                                             Profit Center Accounting
                                                   CO
      Overhead Cost Controlling                    PC   Product
      ?How can we reduce our overhead                   Cost
CO
       Are the responsibility areas working            Controlling
OM
      efficiently?
                                                   What are the
       How high are the organisational activity
                                                   Manufacturing
      costs? Are they within their budgets?
                                                   Costs of a
       How can we optimise our internal
                                                   ?product
      business processes?

CO
      Overhead Cost Controlling                                       How
CEL   ?What costs occur within the organisation                 Profitable are
                                                                ?Individual areas
Flow of actual values in Profitability
Anal.
                                         CO
 CO                                      PA
                                                         Profit. segments
       Profitability Analysis


         Overhead Cost                  Product Cost
              Controlling                Controlling

         •                                      Product
             Cost Centers                     Cost Collector
         •
         •
                                                Standard
                                              Cost Estimate


                Cost and Revenue Element Accounting

  FI     ML                                     Revenues
                                                Discounts
                                                                   SD
Table of contents

Course Map

         Module 1: Overview

         Module 2: Profitability Management


         Module 3: Master Data

         Module 4: Planning

         Module 5: Actual data flow

         Module 6: Information System
Aspects of Profitability Management
PCA                                       PA

                                           Profitability Analysis
Responsibility Accounting                   By Market segment
       (Company oriented)                        (Market oriented)
                                                                             Profitability
                                                                             Segments
       Revenue       2000                Revenue                     2000
                                                                            External Market
       Salaries       468                Discounts                    100

       Materials      230                COGS                         230

       Profit                            Contr. Margin               1440

         Profit Centers                  Advertising                 250




      Procurement           Production   Sales              Distribution
Terms used in Profitability Analysis

   Accounting Methods
     Period Accounting
     Cost of Sales Accounting

   Values
     Gross Sales
     Net Sales
     Variances

   Ratios
     Economic Profit
     Contribution Margin
Methods of Determining Profits

       Period accounting method            Cost of Sales method

     •Revenues                        •Revenues
     •Sales deductions                •Sales   deductions
     •Changes in stock                •Cost of sales
     •Capitalized internal services    (incl. variances for period)
     • Work in process




              Total activities                  Gross result

     •Total
          costs:                      •Salesand distribution costs
       Material costs                 •Administrative costs
       Personnel costs                •Research & Development
       Other costs


                  Result                           Result
Aspects of Profitability Management


                          CO-PA             EC-PCA
   Characteristics
                     costing-based      profit center


      Aims of           Sales and          Enterprise
    profitability      profitability       controlling
    accounting         controlling

   Calculation                         period accounting
                      cost-of-sales
   of profits                          and cost-of sales
                          method
                                           methods


                      profit-related   profit-rel. key fig.
                        key figures    balance sheet fig.
    Key figures


   Reconciliation                       posted values
                       posted and
   with FI
                     imputed values
Profitability Analysis by Market
Segment
                                                                  Product
                                                 Region     Customer
                               Business Unit            Sales office

                                 Reporting Dimensions
 Sales Quantity
 Sales Revenue
   Customer discount
   Sales commission
                                       Determine and analyze the
   Direct sales costs
                                       profitability of market segments
 Net revenue
   Direct material costs                                       Revenue
   Variable production costs
 Contribution margin I                                                  fit
                                                                  Pro
   Indirect overhead
   Fixed production costs
                                                                        Cost
 Contribution margin II
   Variances                                ss
                                          Lo
 Contribution margin III

 Operating profit
Table of contents

Course Map

         Module 1: Overview

         Module 2: Profitability Management


         Module 3: Master Data


         Module 4: Planning

         Module 5: Actual data flow

         Module 6: Information System
Master Data – Currency of Op.
Concern

         CO   Profitability Accounting
         PA       (costing based)

                   Operating Concern
                          9100
                        Currency
                        B0 = SAR
Master Data in Profitability Analysis


                                         Cost
                      Cost Element     Element
                                      Accounting


      Profitability                  Profitability
       Analysis                       Segment




                 Characteristics
                  Value Fields
Profitability Segments

                                              t
                                         tr ic
                                        s
                                      Di ia
                    es E As
                S al S
                INDO RAMA SYNTHETIS
     Customer




                                              Product (SBU)
                                                  Ethylene Glycol
Master Data in Profitability Analysis

                Profitability Segment - object within Profitability Analysis to which
                costs and revenues are assigned. A profitability segment
                corresponds to a market segment.
                You can calculate the profitability of a profitability
Profitability   segment by setting off its sales revenues against its costs. A
 Segment        profitability segment in an operating concern is defined by a
                combination of characteristic values. Characteristics can be
                concepts that already exist in the R/3 System (customer, product,
                sales organization, and so on).
Categories of Characteristics (1)


                               Fixed Characteristics
 Characteristics
   delivered
    by SAP
                             Predefined Characteristics




  • Characteristics   are valid in all clients
  • Characteristics   are available for all Operating Concerns
Categories of Characteristics (2)


                     Fixed Characteristics
 Characteristics
   delivered
    by SAP
                   Predefined Characteristics



                   Characteristics copied from
Characteristics      SAP Reference Tables
   created
 by Customer
                            Custom
                         Characteristics
Categories of Value Fields


 Value Fields
  delivered     Predefined Value Fields
   by SAP




 Value Fields
   created        Custom Value Fields
 by Customer
Segments
Table of contents

Course Map

         Module 1: Overview

         Module 2: Profitability Management


         Module 3: Master Data


         Module 4: Planning

         Module 5: Actual data flow

         Module 6: Information System
CO-PA Planning Objectives

 Plan Integration
 Plan Versions
 Creation of a sales plan using planning level and planning
  packages
 Plan Data Transfer
CO-PA Planning Objectives

 Plan Integration
 Plan Versions
 Creation of a sales plan using planning level and planning
  packages
 Plan Data Transfer
Plan Integration
Profit planning - V1




                               Sales                     Profit planning – V2
                               Planning
                               planning
                               SOP




            Sales
                                                                                Cost of goods
            volume
                                                                                manufactured


                    Production                                 Product
                       LTP
                                                               costing



                                                                                Activity price
         Activity quantities
                                          Cost centers
CO-PA Planning Objectives

 Plan Integration
 Plan Versions
 Creation of a sales plan using planning level and planning
  packages
 Plan Data Transfer
Plan Version ‘0’ SABIC

    General Version Definition              Settings for CO-PA

     Version                   0
                               0       Version Locked

     Plan                               Currency type             P
                                                                  B0 1
     Actual
                                       Exchange Rate               P 2
                                                                   M
                                       1.   The currency type
                                            determines the currency or
     Fiscal year dependent                  valuation view in which the
     parameters in CO-OM                    amounts are to be displayed
                                            or planned.
1    Integrated Planning                    B0 - Operating Concern
                                            Currency
                                       1.   Controls the exchange rate
1.     Plan records are posted
                                            type, i.e. Buying rate, selling
       as line items from respective
                                            rate or P – Standard
       areas.
                                            translation for planning.
CO-PA Planning Objectives

 Plan Integration
 Plan Versions
 Creation of a sales plan using planning level and planning
  packages
 Plan Data Transfer
Overview of Planning Framework
Overview of Planning Framework

   Maintain Planning Level-Package-Set-Personalization
   Copy Sales Plan
   Upload of COPA Plan - Offline Planning
   Manual Profit Planning
   Valuation Planning Method
   Event Planning Method
   Period Distribution Planning Method
   Ratio Planning Method
   Planning Forecast
   Revaluation Planning Method
CO-PA Planning Objectives

 Plan Integration
 Creation of a sales plan using planning level and planning
  packages
 Plan Data Transfer
Plan Data Transfer



 Microsoft Excel
                   Qu
                     an
                                    St



                   Re tities                 SOP
                     ven
                        ue /             t




                               CO
                               PA
Table of contents

Course Map

         Module 1: Overview

         Module 2: Profitability Management


         Module 3: Master Data


         Module 4: Planning

         Module 5: Actual data flow

         Module 6: Information System
Actual Values Overview

   Flow of Actuals in Profitability Analysis
     Overview
     Flow from the Sales and Distribution (SD) Module
           Flow from Billing Document
     Flow from the FI/MM – direct postings
         General Ledger Posting
         MM Postings

     Flow from the Product Costing
           Settlement of Production Variances to PA
Actual Values Overview

   Flow of Actuals in Profitability Analysis
     Overview
     Flow from the Sales and Distribution (SD) Module
           Flow from Billing Document
     Flow from the FI/MM – direct postings
         General Ledger Posting
         MM Postings

     Flow from the Product Costing
           Settlement of Production Variances to PA
Flow of actual values in Profitability
Anal.
                                      CO
 CO                                   PA
                                                      Profit. segments
       Profitability Analysis


         Overhead Cost               Product Cost
          Controlling                 Controlling
         •                                    Product
           Cost Centers
         •                                 Cost Collector
         • Internal Orders
                                             Standard
                                           Cost Estimate


        Cost and Revenue Element Accounting

  FI    MM                                    Revenues
                                              Discounts
                                                                SD
Sources of value fields

                                Value
   Source Transaction            Field




Billing Document         Quantity
                         Revenues

                         Sales deductions
                         Cost of Goods Sold



Direct Posting from FI   Freight costs
                         Inventory re-valuation
Actual Values Overview

   Flow of Actuals in Profitability Analysis
     Overview
     Flow from the Sales and Distribution (SD) Module
           Flow from Billing Document
     Flow from the FI/MM – direct postings
         General Ledger Posting
         MM Postings

     Flow from the Product Costing
           Settlement of Production Variances to PA
Flow from sales and distribution (1)

                                              CO
V                                NO POSTING   PA
A
L
U     Inventory Inventory
E   - Finished Product (FG)
             119430
F                             Stock
               4,975.00-
L
O                                             FI
W
      Cost of Goods Sold
            462002            Change Stock
      4,975.00



Business          Goods Issue
process
                   MM
Flow from sales and distribution (2)

     CO
V    PA
A
L
U
E
    FI     Receivables         Standard   Cost of Goods
                …                Price         Sold
F
L          10,000                 +
O                              Product
W             Sales              Cost
             810000            Estimate

                    10,000 -




Business                                       Sales/Billing
process
                                                   SD
Actual Values Overview

   Flow of Actuals in Profitability Accounting
     Overview
     Flow from the Sales and Distribution (SD) Module
           Flow from Billing Document
     Flow from the FI/MM – direct postings
         General Ledger Posting
         MM Postings

     Flow from the Product Costing
           Settlement of Production Variances to PA
Flow from FI/MM


V
A
L
U
E

F   FI
L
O
W

    CO
    PA
Flow from FI/MM

    CO
V   PA
A
L
U
E
    FI   Accr. GR/IR
            219914
F
L        15.00
O
W        Demurrage
         &Detention
           484013

                 15.00 -
Actual Values Overview

   Flow of Actuals in Profitability Accounting
     Overview
     Flow from the Sales and Distribution (SD) Module
           Flow from Billing Document
     Flow from the FI/MM – direct postings
         General Ledger Postings
         MM Postings

     Flow from the Product Costing
           Settlement of Production Variances to PA
Flow from CO-PC
                                                       Goods Issues
                                                       of materials from
      CO                                               stock
      PC              ‘Production Order’

Product Costing   Plan costs     + Actual costs
                                       ...
                                      ...              Confirmations/
                                                       activity allocation
                                    Delivery
                                    Variances
                      Delivery
                      to stock




                                                  CO
                                                  PC

                                                          Calculate          FI
                                                          variances
                      MM
                                                          Settlement         CO
                    Warehouse
                                                                             PA
Flow from CO-PC

Variance                        PA Assignment
           Cost Element Group                   Value Field
Category                            lines


           +




           +




           +
Table of contents

Course Map

         Module 1: Overview

         Module 2: Profitability Management


         Module 3: Master Data


         Module 4: Actual data flow

         Module 5: Planning

         Module 6: Information System
Report Output



                Drilldown List




Detail List
Course Summary

You should now:
 Have an understanding the functions in Profitability
  Analysis.
 Understand CO-PA structures and master data.
 Identify the source of actual values.
 Understand planning.
 Use the CO-PA information system.

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Co pa power point

  • 2. Course Objectives  Understand the functions in Profitability Analysis.  Explain Profitability management in SAP.  Understand CO-PA structures and master data.  Identify the source of actual values.  Understand planning.  Use the CO-PA information system.
  • 3. Table of contents Course Map Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Planning Module 5: Actual data flow Module 6: Information System
  • 4. Profitability Analysis at A Grp  Profitability Analysis will enable A Grp to analyze the profitability of market segments according to the following characteristics: ct ri  Products st Di s  Customers le Sa  Sales Districts (i.e. USA West, USA East, Saudi Arabia etc.)  Others Customer Product
  • 5. CO Module Overview CO Profitability Analysis EC PA PCA How profitable are individual market segments? Profit Center Accounting CO Overhead Cost Controlling PC Product ?How can we reduce our overhead Cost CO  Are the responsibility areas working Controlling OM efficiently? What are the  How high are the organisational activity Manufacturing costs? Are they within their budgets? Costs of a  How can we optimise our internal ?product business processes? CO Overhead Cost Controlling How CEL ?What costs occur within the organisation Profitable are ?Individual areas
  • 6. Flow of actual values in Profitability Anal. CO CO PA Profit. segments Profitability Analysis Overhead Cost Product Cost Controlling Controlling • Product Cost Centers Cost Collector • • Standard Cost Estimate Cost and Revenue Element Accounting FI ML Revenues Discounts SD
  • 7. Table of contents Course Map Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Planning Module 5: Actual data flow Module 6: Information System
  • 8. Aspects of Profitability Management PCA PA Profitability Analysis Responsibility Accounting By Market segment (Company oriented) (Market oriented) Profitability Segments Revenue 2000 Revenue 2000 External Market Salaries 468 Discounts 100 Materials 230 COGS 230 Profit Contr. Margin 1440 Profit Centers Advertising 250 Procurement Production Sales Distribution
  • 9. Terms used in Profitability Analysis  Accounting Methods  Period Accounting  Cost of Sales Accounting  Values  Gross Sales  Net Sales  Variances  Ratios  Economic Profit  Contribution Margin
  • 10. Methods of Determining Profits Period accounting method Cost of Sales method •Revenues •Revenues •Sales deductions •Sales deductions •Changes in stock •Cost of sales •Capitalized internal services (incl. variances for period) • Work in process Total activities Gross result •Total costs: •Salesand distribution costs Material costs •Administrative costs Personnel costs •Research & Development Other costs Result Result
  • 11. Aspects of Profitability Management CO-PA EC-PCA Characteristics costing-based profit center Aims of Sales and Enterprise profitability profitability controlling accounting controlling Calculation period accounting cost-of-sales of profits and cost-of sales method methods profit-related profit-rel. key fig. key figures balance sheet fig. Key figures Reconciliation posted values posted and with FI imputed values
  • 12. Profitability Analysis by Market Segment Product Region Customer Business Unit Sales office Reporting Dimensions Sales Quantity Sales Revenue Customer discount Sales commission Determine and analyze the Direct sales costs profitability of market segments Net revenue Direct material costs Revenue Variable production costs Contribution margin I fit Pro Indirect overhead Fixed production costs Cost Contribution margin II Variances ss Lo Contribution margin III Operating profit
  • 13. Table of contents Course Map Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Planning Module 5: Actual data flow Module 6: Information System
  • 14. Master Data – Currency of Op. Concern CO Profitability Accounting PA (costing based) Operating Concern 9100 Currency B0 = SAR
  • 15. Master Data in Profitability Analysis Cost Cost Element Element Accounting Profitability Profitability Analysis Segment Characteristics Value Fields
  • 16. Profitability Segments t tr ic s Di ia es E As S al S INDO RAMA SYNTHETIS Customer Product (SBU) Ethylene Glycol
  • 17. Master Data in Profitability Analysis Profitability Segment - object within Profitability Analysis to which costs and revenues are assigned. A profitability segment corresponds to a market segment. You can calculate the profitability of a profitability Profitability segment by setting off its sales revenues against its costs. A Segment profitability segment in an operating concern is defined by a combination of characteristic values. Characteristics can be concepts that already exist in the R/3 System (customer, product, sales organization, and so on).
  • 18. Categories of Characteristics (1) Fixed Characteristics Characteristics delivered by SAP Predefined Characteristics • Characteristics are valid in all clients • Characteristics are available for all Operating Concerns
  • 19. Categories of Characteristics (2) Fixed Characteristics Characteristics delivered by SAP Predefined Characteristics Characteristics copied from Characteristics SAP Reference Tables created by Customer Custom Characteristics
  • 20. Categories of Value Fields Value Fields delivered Predefined Value Fields by SAP Value Fields created Custom Value Fields by Customer
  • 22. Table of contents Course Map Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Planning Module 5: Actual data flow Module 6: Information System
  • 23. CO-PA Planning Objectives  Plan Integration  Plan Versions  Creation of a sales plan using planning level and planning packages  Plan Data Transfer
  • 24. CO-PA Planning Objectives  Plan Integration  Plan Versions  Creation of a sales plan using planning level and planning packages  Plan Data Transfer
  • 25. Plan Integration Profit planning - V1 Sales Profit planning – V2 Planning planning SOP Sales Cost of goods volume manufactured Production Product LTP costing Activity price Activity quantities Cost centers
  • 26. CO-PA Planning Objectives  Plan Integration  Plan Versions  Creation of a sales plan using planning level and planning packages  Plan Data Transfer
  • 27. Plan Version ‘0’ SABIC General Version Definition Settings for CO-PA Version 0 0 Version Locked Plan Currency type P B0 1 Actual Exchange Rate P 2 M 1. The currency type determines the currency or Fiscal year dependent valuation view in which the parameters in CO-OM amounts are to be displayed or planned. 1 Integrated Planning B0 - Operating Concern Currency 1. Controls the exchange rate 1. Plan records are posted type, i.e. Buying rate, selling as line items from respective rate or P – Standard areas. translation for planning.
  • 28. CO-PA Planning Objectives  Plan Integration  Plan Versions  Creation of a sales plan using planning level and planning packages  Plan Data Transfer
  • 29. Overview of Planning Framework
  • 30. Overview of Planning Framework  Maintain Planning Level-Package-Set-Personalization  Copy Sales Plan  Upload of COPA Plan - Offline Planning  Manual Profit Planning  Valuation Planning Method  Event Planning Method  Period Distribution Planning Method  Ratio Planning Method  Planning Forecast  Revaluation Planning Method
  • 31. CO-PA Planning Objectives  Plan Integration  Creation of a sales plan using planning level and planning packages  Plan Data Transfer
  • 32. Plan Data Transfer Microsoft Excel Qu an St Re tities SOP ven ue / t CO PA
  • 33. Table of contents Course Map Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Planning Module 5: Actual data flow Module 6: Information System
  • 34. Actual Values Overview  Flow of Actuals in Profitability Analysis  Overview  Flow from the Sales and Distribution (SD) Module  Flow from Billing Document  Flow from the FI/MM – direct postings  General Ledger Posting  MM Postings  Flow from the Product Costing  Settlement of Production Variances to PA
  • 35. Actual Values Overview  Flow of Actuals in Profitability Analysis  Overview  Flow from the Sales and Distribution (SD) Module  Flow from Billing Document  Flow from the FI/MM – direct postings  General Ledger Posting  MM Postings  Flow from the Product Costing  Settlement of Production Variances to PA
  • 36. Flow of actual values in Profitability Anal. CO CO PA Profit. segments Profitability Analysis Overhead Cost Product Cost Controlling Controlling • Product Cost Centers • Cost Collector • Internal Orders Standard Cost Estimate Cost and Revenue Element Accounting FI MM Revenues Discounts SD
  • 37. Sources of value fields Value Source Transaction Field Billing Document Quantity Revenues Sales deductions Cost of Goods Sold Direct Posting from FI Freight costs Inventory re-valuation
  • 38. Actual Values Overview  Flow of Actuals in Profitability Analysis  Overview  Flow from the Sales and Distribution (SD) Module  Flow from Billing Document  Flow from the FI/MM – direct postings  General Ledger Posting  MM Postings  Flow from the Product Costing  Settlement of Production Variances to PA
  • 39. Flow from sales and distribution (1) CO V NO POSTING PA A L U Inventory Inventory E - Finished Product (FG) 119430 F Stock 4,975.00- L O FI W Cost of Goods Sold 462002 Change Stock 4,975.00 Business Goods Issue process MM
  • 40. Flow from sales and distribution (2) CO V PA A L U E FI Receivables Standard Cost of Goods … Price Sold F L 10,000 + O Product W Sales Cost 810000 Estimate 10,000 - Business Sales/Billing process SD
  • 41. Actual Values Overview  Flow of Actuals in Profitability Accounting  Overview  Flow from the Sales and Distribution (SD) Module  Flow from Billing Document  Flow from the FI/MM – direct postings  General Ledger Posting  MM Postings  Flow from the Product Costing  Settlement of Production Variances to PA
  • 42. Flow from FI/MM V A L U E F FI L O W CO PA
  • 43. Flow from FI/MM CO V PA A L U E FI Accr. GR/IR 219914 F L 15.00 O W Demurrage &Detention 484013 15.00 -
  • 44. Actual Values Overview  Flow of Actuals in Profitability Accounting  Overview  Flow from the Sales and Distribution (SD) Module  Flow from Billing Document  Flow from the FI/MM – direct postings  General Ledger Postings  MM Postings  Flow from the Product Costing  Settlement of Production Variances to PA
  • 45. Flow from CO-PC Goods Issues of materials from CO stock PC ‘Production Order’ Product Costing Plan costs + Actual costs ... ... Confirmations/ activity allocation Delivery Variances Delivery to stock CO PC Calculate FI variances MM Settlement CO Warehouse PA
  • 46. Flow from CO-PC Variance PA Assignment Cost Element Group Value Field Category lines + + +
  • 47. Table of contents Course Map Module 1: Overview Module 2: Profitability Management Module 3: Master Data Module 4: Actual data flow Module 5: Planning Module 6: Information System
  • 48. Report Output Drilldown List Detail List
  • 49. Course Summary You should now:  Have an understanding the functions in Profitability Analysis.  Understand CO-PA structures and master data.  Identify the source of actual values.  Understand planning.  Use the CO-PA information system.

Editor's Notes

  1. Profitability Analysis (CO-PA) enables A Grp to evaluate market segments, which can be classified according to product, customers, sales districts or any combination of these, or strategic business units , Business segment, Business field with respect to your company's profit or contribution margin (gross margin) . It represents market-oriented approach. The aim of the system is to provide your sales, marketing, product management and corporate planning departments with information to support internal accounting and decision-making .
  2. Controlling provides you with information for management decision-making. It facilitates coordination, monitoring and optimization of all processes in an organization. This involves recording both the consumption of production factors and the services provided by an organization. All data relevant to costs flows automatically from Financial Accounting to Controlling . As part of this process, the system assigns the costs and revenues to different CO account assignment objects like cost centers, business processes, projects, or orders. The relevant accounts in Financial Accounting are managed in Controlling as cost elements or revenue elements as appropriate. How profitable are individual enterprise areas? Profit Center Accounting (EC-PCA) provides a focus on internal areas of a company that have responsibility for achieving certain profit or productivity goals. Profitability Analysis (CO-PA) provides a focus on the results of a company’s doing business with the external marketplace. It provides the ability to define which aspects or segments of that market are relevant for analyzing operating results, such as profit by customer, product, geographic area, sales organization, etc. You use Cost Center Accounting for controlling purposes within your organization. It serves as a tool for monitoring overhead costs and assigning them to the location at which they occurred in line with their source . Product Cost Controlling calculates the costs arising from the manufacture of a product or the provision of a service. It enables you to calculate the minimum price at which a product can be profitably marketed.  
  3. Actual Postings represent the most important source of information in CO-PA. You can transfer billing documents (used in A Grp) from the Sales and Distribution (SD) application component to CO-PA in real time. You can also transfer costs from cost centers, orders and projects (in next phase), as well as i.e. demurrage costs and revenues from direct postings (G/L account postings in FI, orders received in MM, and so on) or asses costs from CO to profitability segments. In costing-based CO-PA, you can valuate incoming billing documents to automatically determine anticipated sales deductions , costs or even estimated costs , such as Estimated Port Charges. You can also revaluate your data periodically to adjust the initial, real time valuation or add the actual costs of goods manufactured.
  4. Profitability Reporting:   Profitability Analysis (CO-PA) lets you analyze the profitability of segments of your external market. These segments can be defined according to products, customers, countries, and numerous other characteristics, as well as your internal organizational units such as company codes (i.e. 9100) or distribution channels (I.e. direct, wholesale, e-Commerce). The aim is to provide your executive management, sales, marketing, planning, and other groups in your organization with decision-support from a market-oriented viewpoint. Responsibility Reporting:   EC-PCA lets you analyze internal profit and loss for profit centers. This makes it possible for you to evaluate different areas or units within your company. You can structure profit centers according to region (branch offices, plants), function (production, sales), or product ( product groups, as in A Grp ). Profit Center Accounting is a component of the "Enterprise Controlling" module.
  5. The period accounting approach distinguishes between individual cost and revenue elements (such as material costs). The total costs for the period are compared with the total operating output for the period. The output of products manufactured within the period but not yet sold (stock increases), are added to the sales revenues, and the costs of the products produced in past periods but sold in this period (stock decreases), are taken away. Together with additional capitalized internal activities and other revenues, this yields the total operating output for the period. In the cost-of-sales accounting approach there is no differentiation according to cost elements. Here the sales revenues are compared with the manufacturing costs for the products sold (cost of sale). The manufacturing costs may include material and personnel costs, which were incurred in previous periods. Costs which cannot be directly assigned to the sale, such as sales and administration costs, are displayed separately. The cost-of-sales procedure therefore also indicates whereabouts in the company costs were incurred.
  6. Profitability controlling in the R/3 System is subdivided according to various aspects: Scope of business activities encompassed (Cost-of-sales accounting or period accounting) Representation of profits (account-based or costing-based) Valuation base of costs (actual, standard) Scope of costs (partial/full costs) Profitability Analysis (CO-PA) calculates profits according to cost-of-sales method of accounting .
  7. Profitability Analysis (CO-PA) calculates profits according to cost-of-sales method of accounting . Profit Center Accounting (EC-PCA), on the other hand, supports both period accounting and cost-of-sales approach. Both of these methods are used at the same time in your organization.
  8. Contribution Margin is equal to sales revenues less variable costs. This amount is available to offset fixed expenses and produce an operating profit for the business. Variable Costs vary in proportion to sales levels. They can include direct material and labor costs, the variable part of manufacturing overhead, and transportation and sales commission expenses. Fixed Costs remain constant (or nearly so) within the projected range of sales levels. These can include facilities costs, certain general and administrative costs, and interest and depreciation expense. All above terms are used for Breakeven Point calculation to know an answer for a question in which segments we are successful?
  9. Operating concern currency - in costing-based Profitability Analysis, actual data is always updated in the operating concern currency. Even if all amounts are stored only in the operating concern currency, it is possible to report using other currencies. However, reporting translation is only possible using period-average translation rates.
  10. The structure of an operating concern is determined by the: characteristics (profitability segments) value fields such as revenues, rebates, etc. (costing-based Profitability Analysis) cost and revenue elements – you have to create revenue cost elements under category ’11 – Revenues’ and ’12 - Sales deduction’ to allow the update of the SD conditions in costing-based CO-PA.
  11. Module name: CO-PA Course Code: CO PA01 Profitability segment is a reflection of a market segment.
  12. Characteristics Question: "What do I want to report on?" Examples: Affiliates, Region, Products, Customers Characteristic Values Question: "What values can I have for these characteristics?" Examples: Region South; Region North Profitability Segments Question: "What is the technical definition of my sales channel?" Example: combination of Country Japan, Region Tokyo , Product Ehtylene Glycol . Value Fields Question: "What performance measures do I want to track and analyze?" Examples: Gross Sales, Surcharges, Discounts, Cost-of-Sales
  13. Characteristics are the criteria in Profitability Analysis ( CO-PA ) according to which you can analyze your operating result and perform differentiated sales and profit planning and reporting. A combination of values for the characteristics in an operating concern is called a Profitability Segment, i.e. values for characteristic Division are as follow: Basic Chemicals, Polyolefins, PVC/Polyester, Intermediates, Fertilizers, Metals, Intercompany Div. Some of the standard (fixed) characteristics, also in A Grp are: Billing type, Business area, Company code, Controlling area, Cost object, Customer, Distribution channel, Division, Order, Partner profit center, Plant, Product, Profit center, Record type, Sales order, Sales order item, Sales organization, Version, WBS element. It is possible to view the information in PA by any combination of characteristics maintained in transaction KEQ3, i.e. we can view any segment that is defined by a combination of characteristic values.
  14. Several essential and obvious characteristics (like "sales organization"," customer", "product", etc.) are pre-defined automatically for every operating concern; these are known as fixed characteristics . In addition to the fixed characteristics, up to 50 non-fixed characteristics can be added to an operating concern. Often, only 10 to 20 of these are required to meet most companies' reporting needs. Specific characteristics for A Grp: Copied characteristics: Sales group, Bill to party, product hierarchy User-defined characteristics Business Segment Business field It is possible to view the information in PA by any combination of these characteristics, i.e. we can view any segment that is defined by a combination of characteristic values.
  15. In costing-based Profitability Analysis, value fields store the base quantities and amounts for reporting. Value fields can either be highly summarized (representing a summary of cost element balances, for example) or highly detailed (representing just one part of a single cost element balance). Generally, value fields are highly detailed with regards to sales performance figures (like types of revenues, discounts, surcharges, etc.), and more summarized for other items relating to period costs (like types of period expenses). New operating concerns generally have 20 to 60 value fields . Unlike characteristics, there are no fixed value fields for a new operating concern.   It is not necessary to create value fields for calculated items, such as net sales, contribution margin, etc. These items are normally calculated from the base values stored in the value fields during the report execution progress (to minimize necessary data storage requirements).
  16. Module name: CO-PA Course Code: CO PA01 Example of analysis of profitability segments according to SABIC’s characteristics: Division = Basic Chemicals Customer = Atlantic Methanol Product = Butadiene
  17. A grp plans at material level in Excel spreadsheets and then upload planning data into the SAP. In bottom-up planning, plan data can be entered manually for each sales representative and then brought together in a single plan version. Once planning has been finalized, the plan data can then be transferred over to production planning, thereby allowing production plan data to be reconciled with sales planning.
  18. Plan version (CO-PA) The version enables you to keep two or more sets of data for the same object. You can maintain and evaluate several plan versions at the same time. You may wish to have different versions of plan data based, for example, on the type of assumption for the forecast (optimistic, pessimistic), when the plan was created (original plan, updated forecast), how binding the plan is.
  19. Taking into account a typical sales and profit planning process, a professional planning tool has to:   Support the individual planning tasks by guiding the user to those planning levels he/she needs to plan. For example, a key account manager needs to plan on the key customer, sales organization and product level.   Support the individual planners by providing personalized access to the desired plan data, using planning packages   Provide a set of relevant planning functions (methods) , such as valuations and simulations (forecast, revaluations, etc.) in order to apply the desired planning packages by using planning methods and parameters. It is possible to plan on many different levels in CO-PA during a planning process. For example, it's possible to plan on the product group level, or the product level, or the customer/product level, or maybe just the customer level. In fact, it is possible to plan on any profitability segment in CO-PA. By design, the system ensures that the data remains consistent across all levels throughout the planning process, meaning that subtotals will always roll up to totals. Derivation occurs automatically behind the scenes when planning data is saved. Since this is true, values planned under one or more characteristic values might automatically be summarized under other characteristics as well.
  20. Integrated Planning in controlling, where planning is conducted separately for multiple business activities, but the different plans are linked to ensure consistency and to drive realistic corporate-wide planning. Thus, the separate planning results for sales, service, production, procurement, general, and administration activities coincide to form one corporate operational plan. It is possible to transfer sales plan information back and forth between costing-based Profitability Analysis (CO-PA) and Sales and Operations Planning (SOP). This allows for synchronizing planned sales quantities between these areas. This flow of planning data is but one example of many possible planning strategies that can be used in R/3. In A Grp integrated planning between CO-PA and PCA is not used but both modules are fed with data from Sales and Profit Plan prepared in Excel spreadsheet.
  21. Actual Postings represent the most important source of information in CO-PA. You transfer billing documents (used in A Grp) from the Sales and Distribution (SD) application component to CO-PA in real time. You can transfer costs (i.e. demurrage costs) and revenues from direct postings (G/L account postings in FI, orders received in MM, and so on) and settle variances from cost objects (production orders) from CO-PC to profitability segments. In costing-based CO-PA, you can valuate incoming billing documents to automatically determine anticipated sales deductions , costs or even estimated costs , such as Estimated Port Charges. You can also revaluate your data periodically to adjust the initial, real time valuation or add the actual costs of goods manufactured.
  22. Using direct postings in FI you can post actual sales reductions, such as annual volume-based rebates, or actual costs, such as freight costs (estimated when the period was closed in order to allow short-term analysis) to the corresponding profitability segments. This supplements the estimated costs with the actual costs.
  23. The goods issue is triggered by a delivery in SD. This affects the values in Materials Management and Financial Accounting. Balance sheet and stock change postings are made in FI when the goods issue is posted according to a price in material master . Note that the goods issue posting does not cause any data to be posted in costing-based CO-PA . The cost of goods sold is only transferred to costing-based CO-PA when the billing document is transferred.
  24. The following data is transferred from bills and debit and credit memos to CO-PA. Revenues Sales deductions (shipping, discounts, and so on) Accruals (e.g. from rebate agreements – at first posted in FI) The cost of goods sold is only transferred to costing-based CO-PA when the billing document is transferred according to a price in material master and a material cost estimate valid on the date of a delivery. This enhancement helps to reconcile COGS posted in FI in a moment of a delivery with COGS posted in CO-PA during billing. It is extremely important while there is a huge time gap between a delivery and a billing.
  25. Using direct postings in FI you can post actual sales reductions, such as annual volume-based rebates, or actual costs, such as demurrage costs (estimated when the period was closed in order to allow short-term analysis) to the corresponding profitability segments. This supplements the estimated costs with the actual costs. This type of posting will not take place often but can be used to post any type of automatic transaction to CO-PA. Examples include Inventory Revaluations, I.e. manual with transaction MR21 or with Post Closing step during Material Ledger period-end closing while system uses the periodic unit price that was calculated by the last price determination for the material to revaluate the material stock of the previous period. The data is posted to a profitability segment found on the basis of the information found in the FI document. If the information there is not very detailed (not many characteristic values), the data is posted to a higher aggregation level.
  26. You assign the values to a profitability segment directly in the FI posting transaction . There you can call up a special assignment dialog box for each posting line by clicking the Prof. segment field. In this dialog box the system displays the characteristics that you can choose from the operating concern you are working in. You can predefine what is displayed on this screen by defining a “characteristic group” for the activity RFBU in Customizing. The characteristic group defines which characteristics are displayed for selection. System can determine a profitability segment by means of substitution for automatic postings (transaction OKB9). The corresponding posting is then passed on to Profitability Analysis (CO-PA). Typical business transactions for which a profitability segment is found automatically include: price differences that are posted in purchasing due to differing order prices or differing prices in invoice receipt (as period costs) revaluation of material stocks (as period costs) - expenses or revenues. inventory differences (as period costs)
  27. After finishing the production process (CO production orders), or at the end of the period (product cost collectors), the production order variances will be settled to a price difference account and to CO-PA.
  28. You can settle (transfer) the production variances calculated in Product Cost Controlling for product cost collectors (settled periodically) and CO production orders to CO-PA. The individual variance categories (such as material price variance, material quantity variance, etc.) are transferred separately. The PA transfer structure ‘Z9’ consists of items called assignment lines. In these assignment lines you assign a cost element group and a variance category to a value field of the operating concern. To assure correct settlement to Profitability Analysis, you must assign each combination of the cost element group and the variance category to one value field in the operating concern. Note the following when you use a PA transfer structure: Every debit cost element must be in the PA transfer structure. You can either group all cost elements into a cost element group or define a number of groups for materials, internal activities, business processes, other overhead costs, etc. These groups are entered under the section “cost elements”. Every variance category must be represented in the PA transfer structure. The variance categories are specified by the system and are entered under the “source” section. Each debit cost element or combination of cost element group and variance category can only be assigned to one value field (n:1 relation). The PA transfer structure ‘Z9’ is assigned to the settlement profile ‘PP01’ which is defaulted for order types: RM01 - PCC for Repetitive Manufacturing, RM02 - PCC for Process Orders and CP01 - Standard CO production order.
  29. Module name: CO-PA Course Code: CO PA01 If you want to execute a report with the output type 'graphical report output', the system displays the same data as with the old list. However, GUI elements are used, which are embedded in a splitter control. This means that the screen is made up of a number of areas , which the user can freely define. In addition to the more attractive display, a further advantage of this display type is that various functions can be called up using drag and drop . This makes it possible to change the order of columns by marking a column and dragging it to a different position on the screen. It also allows navigation functions, such as drilldown or drilldown switch.