Overhad Absorption
Hello,
I have question regarding how to obsorb under or over obsorbtion of overhead in costing system.
eg in budget we planned total cost for one cost center as 5000$ and capacity as 500 hourse, hence we derived the rate as 10$ per hourse for that cost center.
Later on the same rate is considered for standard cost calculation and also for actual cost while doing confirmation of production order activity.
like around 400 hourse booked for that cost center, hence system will consider only 400 hourse X 10 % = 4000 $ cost. And in actual case instead of 5000$ business has spend around 6000$. Hence in the given case hourse are considered correctly but the overhead are underobsorbed for 2000 $ (6000$ Actual - 4000$absorbed).
Same amount will flow to COPA by way of variance.
So my question is how to consider this difference in costing system and COPA. Is the revaluation of production order will help to resolve this, if yes then can you please guide me detailed steps for this.
Thanks in advance
Harry
Hi Harry,
Taking ypur Example :
Plan : 5000$ @ 10$ per Hour .Total : 500 Hours
Actual : 400 Hours , Actual Cost : 5000$
First , actual debit to cost center will be ( 400 * 10 ) = 4000$ when you do direct activity allocations .
Then you have to run KSII( Actual Price Calculation) = Actual Rate will be = 5000/400 = 12.5$ per hour . At that time delate factor ( 2.5$) * 400 = 1000$ will again be debited . Hence after KSII .. debit = credit and balanced matched .
Here i am considering no activity is being booked in process orders
Now , comming to process orders . In process orders we confirm activities at plan rate . The debit is at plan rate and KSII given you actual rate .
The difference ( delta between plan and actual rate ) in process order is booked thru process order revaluation CON2 .
This will ensure that all overhead costs are absorbed to the product and cost center balance is nill , if you design is to load 100% cost to product.
Please revert back for any further clarifications.
Regards
Sarada
Similar Messages
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Over Absorption in Production Cost Center.
Dears,
We are getting the over absorption in cost center after doing of actual price calculation settlement. we have done the following transactions at month end. eventhough we are getting over absorption (i.e., credits are more than debits) Credits are activity costs are transferred from production cost center to production/process orders or product collectors.
KO8G settlement of internal orders to cost centers.
KSV5 execution of distribution cycle.
KSII execution of actual price calculation.
CON2 revaluation at actual prices.
CO88 Settlement of Production/Process Orders.
Even after doing of the above trnasactions we are getting over absorption.
kindly advise me in order to resolve this issue.Hi Divraj,
The same issue i am replicating in the development server i created one assessment cycle i gave one service cost center as sender and one cost element group, the group contains 10 primary cost elements(GL's), i done postings with 10 gl's respect to this service cost center, in my assessment cycle i gave one assessment cost element in segment header the sender rule is posted amounts, the receiver tracing factor contains variable portions, actual activity and no scaling, in receiver i gave cost center group contains 4 production cost centers, sender values is share in 100%, version is zero the receiver tracing factor tab contains variable portions as actual activity and one activity i maintained, the receiver weighting factor contains 4 production cost centers and factor percentage is 100%.
Now i execute the assessment cycle in KSU5 i am getting senders in cycle but receivers i am getting zero, when i took the actual activity, variable portions and no scaling i have to maintain activity price in KP26 and this cost center i have to maintain in process order that is fine please explain me how the cost will distributed to production cost center please explain the procedure in detailed.
Hopefully i will get clarity on the concept................ -
Reporting Direct Production Cost Center Over/Under Absorption
Hi,
I am trying to find a way to report Manufacturing Cost Center Over/Under Absorption in a similar way COGS are reported in CO-PA. I mean - I would like to breakdown Direct Manufacturing Cost Center Over/Under Absorption into cost elements (just like COGS are broken down in COPA when invoice is posted).
I wonder if this is possible in SAP without Material Ledger implemented. If yes - can it be achieved by using a standard functionality or does it require an additional development?
Thank you,
KThanky you for your reply Ranjan,
My intention was to show Cost center over/underabsorption broken down by cost componets (activity Labour, Machine, Overhead). Currently it is shown as a balance on cost center. I would like to be able to recognize which part of Direct manufacturing CC balance refers to Labour, which to Machine and which to Overhead. Is it possible to achieve in sandard report or additional settings/development is required.
Regards,
Karol -
Dear experts,
We did cost center assessment and COPA assessment. But our financial profit is not matching with COPA profit. We considered all the cost elements except Increase/decrease of WIP, Inc/dec of FG and COGS. Actually the difference between Finacial profit and COPA profit should be under or over absorption. But that amount is not matching with under/over absorption in cost centers(diff between debits and credits in cost centers after excluding assessment cost elements and COGS elements). Vast difference it is showing. How to match this financial profit and COPA profit. Please help me.
Regards
JayHi Piet,
I would need some inputs regarding matching of FI vs Costing Based COPA reports on the following issues:
1. Costing based COPA reports are normally build on Billing.
1.a How would production variances be mapped against qty billed.
1.b How would production variances related to SFG be mapped against FG qty billed.
1.c How would material purchase related price variances be mapped against FG qty billed.
1.d How would material valuation related price variances be mapped against FG qty billed.
2. There would be certain incomes or expenses which may not be allocable at all to the product for determining its contribution. I presume, here we can build some logic for allocation.
But the prime concern is issue no.1, for which, I have at least not been in a position to arrive at a logic.
Would appreciate, if you can suggest on the above issues.
Thanks in advance. -
Issue of under absorption and over absorption
Dear All,
Audit is going on in our client and auditor found that there is and over absorption of cost in cost center, which mean we are valuating our product at higher price and thus showing less profit in system.
They are referring the cost center report S_ALR_87013611 - Cost Centers: Actual/Plan/Variance.
Example
Labour cost in primary cost element against cost center 1210 is Rs 5000
Power cost in primary cost element against cost center 1210 is Rs 25000
And activity cost corresponding to that cost element is
Labour 7000 Rs
Power 35000 Rs
So system is showing over absorption of 12000 (5000+25000-7000-35000)
So please suggest as how to correct this as auditor saying that absorption should be equal to Zero Always, and hence want to correct the price of material also.
Kindly suggest the solution for that.
BittuThanks a lot Santosh for your reply
from that many days i am working on your solution but not able to understand how system is calculating the Total Price it the time of KSII
I give an example kindly have a look at it.
In T-code S_ALR_87013611
Cost Elements Act. Costs
801000 Labour Charges 794,541.34
Debit 794,541.34
43001 SETUP 1.02-
43002 MACHINE 1,535,432.85-
43003 LABOUR 1,023,218.50-
43004 ELECTRICITY 235,888.97-
Credit 2,794,541.34-
Over/Underabsorption 2,000,000.00-
Activity Types Act. Acty
43001 Setup 93.7 HR
43002 Machine 10,236,219 S
43003 Labour 20,464,370 S
43004 power 62,076 KWH
In KP26
Activity Type Plan Capicity UOM Price (Fixed)
43001 200.0 20.0 HR 4.00
43002 400 30 S 10.00
43003 500 40 S 8.00
43004 600 50 KWH 8.00
Activity Type master is created as follows
ATyp categor 1
Price indicato 2
Act. price indicator 6
So when we do KSS2 System split Underabsorption value equally amount the cost element
Cost Center Act Type Control cost
1101100 43001 198,635.34
1101100 43002 198,635.34
1101100 43003 198,635.34
1101100 43004 198,635.32
794,541.34
But when we do KSII
OTy Object AUn Activity Quantity Total price Price (Fixed)
ATY 1101100/43001 HR 93.747 9,931.77 9,931.77
ATY 1101100/43002 S 10,236,219 6,621.18 6,621.18
ATY 1101100/43003 S 20,464,370 4,965.88 4,965.88
ATY 1101100/43004 KWH 62,076.029 3,972.71 3,972.71
25,491.54 25,491.54
How system is calculating total price value here kindly suggest
Regards
Bittu -
Doubt in Absorption costing reporting through SAP
Dear Experts,
My clent want absorption costing.
Fixed production OH is considered under closing stock valuation and will be opening stock in next month.
I am explaining my prob through example.
March -
April
Sales----
5000 -
10000
Production -
10000 -
5000
Rs -
Rs
Selling price per unit----
100 -
100
Variable production cost per unit -
50 -
10
Fixed Production OH cost incureed -
100000 -
100000
Fixed production cost per unit -
10 -
10
Selling and distribution cost----
50000 -
50000
Particulars -
March -
April
Sale (5000100):(10000100) (A)----
500,000 -
1,000,000
COGS
Opening Stock -
nil -
300000
Add:
Variable Production cost (1000050):(500050)-----500000 -
+250000
Fixed Production OH (10000100);(500010)------100000 - 50000
Under absorbed Prod OH -
nil -
+50000
opening stockvariablefixed+under prod oh -
600000 -
650000
Less : Closing stock (5000*60) -
300000 -
Nil
(B) -
300000 -
650000
GP (A - B) -
200000----
350000
Less: Selling-- -50000--
-50000
Net profit -
150000 -
300000
In the above example closing stock contains my fixed overhead and transfer the same with opening stock in April as 300000(250000 variable oh+50000 fixed OH)
But in copa when i am doing reporting for the month of april revenue of 1000000(10000100) units and cost(var+fixed) 600000(1000050 as variable oh + 10000*10 as fixed OH) will transfer from product costing to Copa.
But fixed oh is 150000 (50000+100000) in above example.
How to transfer 150000 as fixed OH in copa instead of 100000 for the month of april.
Your help will be highly appreciated.
regards
RRHi,
If on 1st April you have this information thro a product costing report then the easiest way to transfer to COPA is via KE21N transaction
regards
Waman -
Can Absorption costing transfer in COPA?
Hi All
I would appreciate your help. Please provide me details explanation over.
1) Can we transfer Absorption Costing in COPA?
2) What is the procedure?
( It is my request please use full form rather than short words).Hi Shobhi,
Absorption costing is charging all fixed and variable costs of production to sales effected in a period.To major extent it is possible to transfer Absorption costing to COPA. I am not sure about how to give effect of difference in openeing and closing stock.
The procedure for costing based copa is as follows.
You get Revenue as well as cost (standard cost) of goods sold through billing documents. The sales which cannot be effected through billing documents can be accounted through Financial entries having real cost object as "PSG" i.e. profitability segments.
Now coming to production order variances, at the period end, you can transfer all these to COPA.
Your production cost centers will have some debit/credit balances which can be assessed to COPA. So variable cost is abosrbed to COPA.
About fixed cost ,service cost center balance and cost related to HR , Marketing etc can be assessed to COPA. So this way you can absorb all the cost to COPA.
Following example will help you in understanding.
Assume the standard cost consist of Rs 100 for material and Rs 20 for Activity totalling Rs120 .Consider a production order where it is debited with Rs 100 for material and Rs 40 for activity totalling 140 Rs. Now credit is Rs 120 (standard cost) so the balance Rs 20 is transferred to COPA after variance calculation and settlement of variance.
Consider a production cost center where activity cost is absorbed and the debit to this cost center is
Rs 60 and activity cost is Rs 40 which is credit. So the balance of Rs 20 can be transferred to COPA through cost center assessment.
The balance of Adminsitration,marketing cost center is Rs 10 respectively which can be assessed to COPA through cost center assessment
Now COPA report will look like as follows
Sales Rs 200
less Standard cost Rs 120
Gross margin Rs 80
Less Production order Variance Rs 20
Balance Rs 60
less Cost center balance Rs 20
Net margin Rs 40
Less Admin/Mktg Cost Rs 20
Balance net profit Rs 20
You see the Profit and Loss account as follows
Sales 200 Rs
less
Material cost Rs 100
Other cost Rs 60 (Debited to Production Cost centers)
HR /Mktg cost Rs 20
Balance Profit Rs 20
In the above example, how to account for difference between Opening stock value of WIP and closing stock value of WIP is not clear to me. May be experts can throw some light on this.
Regards,
makrand -
Absorption&Variable(Direct)method Costing, are possible both method on SAP?
Hello my dear Gurus:
In our actual project; we are trying to include on SAP the Absorption and Variable (Direct) costing methods; this of course within the Controlling modules (Product costing (actual costing), CCA, IO's, etc.) In order to comply with the external (Absorption) and internal (Variable/Direct) costing requirements. So the Big question we already know that the absorption method is plain, BUT how can we include the variable (Direct) method costing with any development (i.e: Parallel Accounting costing (Alternative Valuation Run)). or configuring the Cost Components attributes that the (Fixed costs) are not included in the inventory valuation (TCODE OKTZ).
Our first impression is that SAP it is only capable to execute the analysis under the Absorption method without the Variable(direct) costing.
Please if you have both methods implemented, please let me know how you did it?
Kinds regards!Hi,
Yes. This Variable/direct/Marginal Costing is possible in SAP. All you have to do is to create a Profitability Report. First you need to deduct all variable costs from the Revenue to arrive at the contribution/Gross Margin. And then, you need to deduct Fixed costs from the Contribution to get the Profit. You can also find breakeven point and breakeven volume for the business. The only challenge is to segregate the costs into variable and fixed as accurately as possible.
Trust this helps to a large extent,
Cheers, -
Production costs full absorption
Hi,
I have few service cost centers and production cost centers.
At the month end we are allocation service cost centers expenses to production cost centers using various statistical key figures.
At the month end we want to absorb full cost in production cost centers.
for that we are first KSII transaction code.
Still we find some amount in cost center as under absorption with minus value.
how can we absorb full value?
We have not activated splitting in OKTZ?
Please guide me
SateeshHi,
Any suggestions?
Srinivas -
What is Over Under Absorption means?
Hi guyz,
When I'm running Cost Center Actual/Plan/Variance Reporting, there is a field that is called Over/Under Absorption.
What does it mean by Over/Under Absorption?
Thanks guyzHi Meila,
It can be a surplus or deficit in actual costs compared to planned costs on the receiver side, but does not have to be.
Imagine your sending cost center is a grinding mill in a cement plant. It is planned to produce 100.000 t cement in the month, for what the mill would run 1000 h. The rate is 100u20AC /h. Therfore the planned absorption would be 100.000u20AC. In the end of the month it turns out that actually the Mill ran 1200 h and 120.000 t Cement were produced. Each of the daily cement production orders would show no unplanned costs, but the mill cost center would have an overabsorption of 20.000u20AC.
best regards, Udo -
How the Landed Cost Absorption will be null
Dear ,
I create a new PO amount is 1000 $ with landed cost shipment is 50 $ . After received the shipment system creates the following GL entries.
Receiving Entry :
DR Accrual Account = 1050
CR Accrual Account = 1000
CR Landed Cost Absorption = 50
Material Entry :
DR Inventory Account = 1050
CR Accrual Account = 1050
After create a invoice and match with receipt and shipment the "Accrual Account" is "0" which is ok. But what about Landed Cost Absorption which is still reamins the balance in GL "50" $ after complete the full cycle. Please advise when or how the Landed Cost Absorption will be "0"Hello
Please accept my appology for this delay,
I know it is too late for this reply, but I just following this discussion for the general benefit of this community (sure, if you still following this, it will be greate)
Generally, by referring to Oracle Support Document ID 782920.1, Landed Cost Absorption account should not be zero if the following conditions are met:
1. Default Charge Account (in Receiving options of LCM enabled organization) is different that account used for Landed Cost Absorption Account, and
2. Estimated LC amount differs than Actual LC
Accordingly, the opposite is true, you have to use the same account for LCM charge and absorption and LC estimated amount(s) are the same as actual LC actual charge amounts
For complete explanation just review the following oracle support document:
How Landed Cost Management and Accounts Payable Accounting flow (Doc ID 1310019.1)
Regards -
Vi for use with Atomic Absorption Spectrometer?
I have just gotten a Perkin Elmer 303 atomic absorption spectrometer,
which came with an ~ 1963 Beckman 10" wide strip chart recorder as an
output, that has 1, 10 and 100 millivolts full scale spans and several
chart speeds
I want to use LabVIEW 8 to collect the atomic absorption data with this
instrument , and want to know what vi's might be available- so I do not
have to invent it myself.
So it will be a voltage Vs time situation, with the time on the original
recorder being given by the chart speed.
Thanks in advance.
DanIf you're using any NI digital to analog converter boards, they come with tons of vi's to do just this. What are you planning to use for a DAQ board?
Once you decide on a board and install the appropiate software (e.g., NI-DAQ), the proper example libraries will be installed into labview. Then you can just use the example finder to select some version of doing an analog input. You can probably find other examples on ni.com by searching for Continuous Analog Input. This isn't specific to AA, it's just a simple voltage measurement, and a 'relatively' slow one at that (you don't need more than a couple Hz to keep up w/ a strip chart recorder).
I'd bet the NI sales people would love to give you more (and more specific) info.
~j5
2006 Ultimate LabVIEW G-eek. -
I have no modem firmware iPhone absorption disappeared
Hi
I have a problem iPhone 5s. His version 8.1(12b411) of the problem is I have gone absorption device search and found impression absorption disappears modem firmware also has a version I installed it but it does not help I do not know what to do please helpMy impression iPhone Search does not find modem firmware intake and my problem is gone it can help me please
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Over/under absorption of overheads
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,
makrandThanks 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!! -
Problems with over/under absorption on production cost centers - GBB AUI
Hi,
I have a problem with over/under absorption on production cost centers after month end closing.
We are using material ledger CKMLCP and actual activity rates from direct cost centers are settled directly to products using GBB AUI account determination.
Unfortunately from time to time there appears a significant balance on production cost centers after running CKMLCP. What might be the reason? I have analysed line items on cost centers but cannot find any answers.
We are using assignment of cost elements to particular activity types (function splitting), and I have checked that all cost elements are assigned to proper activity types.
Best regards,
KarolHi,
DP90 is used for Resource related billing, is broad term basically when you performing service that time you have to raise billing on the basis of resources which you had spend for perticular service
DP90 is run on the basis of DYNAMIC ITEM PROCESSOR,
http://help.sap.com/saphelp_di471/helpdata/en/59/54fc37004d0a1ee10000009b38f8cf/frameset.htm
I will tell you one process from the prspective of CS module
Create notification >> Create service order >> Confirm service order >> Resource releted billing (genrates sales document) >> Invoice to customer with refrance to sales document.
Now here DP90 is used to determine material,IN SALES DOCUMENT because CS module don't have billing feature as like SD Billing.
In CS module activities/Operation,but in SD module we speciefy material codes
So DIP determines XYZ activity/operation is ABC material in SD
kapil
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