Over/under absorption of overheads

Question

Hi SAP Gurus,
Request for your help to resolve my following queries.
We calculate plan activity rates & execute a costing run. Also we calculate the overhead in costing sheet with plan rates. I would like to know, what happens for the actual costs booked? How the under/over absorption is handeled in SAP?How this is settled? How this is charged to production? Is there any accounting entry passed at the time of adjusting under/over absorption?
(Points will be assigned )
Regards,
makrand

Answer 1

Thanks Markand. I am quite a beginner in SAP COPA. I have this question, may be not exactly the one you asked but somewhat related.
I am a bit confused by seeing the difference in total overhead spent as shown to me by cost center (Z3611, Z3612, Z3614) and the gross profit & income statement in COPA (via KE30).
When I ran the cost center transaction, it shows me that my company has spent 900k$ for the month of November for production expenses (pdex) (Not including the line "Under/over absorption). Now, when I see the income statement coming from COPA, it shows me that we had standard overheads of 800k$ + Spending variance of 100k$ and then 150k$ of other overhead variances (volume ovhd variance & Production ovhd variance). (I do understand the significance of volume & production ovhd variance)
The standard overhead+ spending variance gives me 900k$ which is the total actual money spent on overheads. But what is confusing to me is the rest of 150k$. I was of the view that this 150k is that part of 900k$ which was not productive or not capitilizable to inventory. In other words, volume & efficiency variance. I was of the view that the total overhead variances when added to standard overheads should give me the total overhead spending of the month; which means 800+100+150 but it gives me the total of 1050k$.
I am worrying that the income statement is taking 150k$ twice as cost. First in standard+spending variance and then as volume/production variance.
why does my (Standard overhead+ Total ovhd Variance) does not match 900k$ (the actual money which left the hand) shown in cost center.
May be the better way to ask this question is why COGS in COPA income statement is like
COGS = Standard Overhead + Spending OVHD Variance + Volume OVHD Variance + Production OVHD Variance + (all other non-ovhd costs)
Why is it not
COGS = Standard Overhead + Spending OVHD Variance + (all other non-ovhd costs) because for me Volume OVHD variance & Production OVHD variance are just the part of total ovhd spending i.e they are already in the addition of (Standard OVHD + Spending OVHD Variance).
I am told that 150k$ is charged additionally to COPA due to high activity rate. But I did not really understand. For me, the actual money which left the hand was 900k$ (variances or no variances). Then why the income statement shows 1050k$.
I hope you will be able to help me as I have not received a simple answer from anyone yet. Thanks alot in advance!!