Let the System Calculate your Activity Rates Automatically

by Paul Ovigele

September 4, 2011

Paul Ovigele, Ovigele Consulting

The decision to enter activity rates manually or let the system calculate them, normally varies in different organizations. Some users prefer calculating the rate manually because they have more control of the outcome, and (most likely) they had been doing it that way before SAP was implemented in their company. Other users prefer letting the system calculate the rate as it ensures that the source data (budget, hours, etc) is consistent with the rate calculation and there is less room for the errors that you could get when using a spreadsheet for the calculation. It also enforces the SAP concept of an integrated system and maintains an audit trail back to the source of the data. There are also some users that initially enter the rates manually, but after a year or so (or when they get more comfortable using the system) they let SAP calculate the rates automatically.

If you plan to calculate activity rates through the system (using transaction KSPI) the minimum data that you need to maintain is the cost center budget (via transaction KP06) and the planned activity quantities (via KP26). If a cost center uses only one activity type, then the system will then divide the budget for that cost center by the planned activity quantities for the activity type, to come up with an activity rate. However, if a cost center uses more than one activity type then you need to decide how the budget will be split into the different activity types, before dividing this budget by the respective activity quantities. You have 3 broad choices for accomplishing this task:

(1)    Using Equivalency Numbers: These are weighted factors that you enter fo r each activity type linked to a cost center (in transaction KP26) so that the plan costs of that cost center are distributed proportionally to the activity types;

(2)    Using Activity-Dependent Planning: This is where you enter the cost center budget according to activity type (in transaction KP06). Therefore, for a particular cost element, you specify how much of the budget goes to the specific activity types;

(3)    Using Splitting Structures: This is the most flexible of the three methods, but also the most complicated to set up. It involves setting up a splitting structure (transaction OKES) and assigning cost centers to this structure (transaction OKEW). Defining a splitting structure includes the following tasks:

(i)                Assigning the relevant cost elements (or group) to activity types that they should be based on. This way you can specifically map the cost elements that relate to particular activities to their corresponding activity types. This is very similar to activity-dependent planning, which also assigns specific cost elements with activity types, however, with this approach you do not need to enter the cost element/activity type assignment every time you enter the budget. The rule only needs to be defined once, and you only need to enter the budget by cost center and cost element and the splitting structure will determine which activity types the cost element amounts should be posted to.

(ii)          ;     Defining a factor to use when splitting the cost center budget among several activity types. This rule is in effect in cases where you assign one cost element (or group of cost elements) to more than one activity type in the splitting structure. You can therefore specify a rule so that the cost center budget is split into the activity types according to factors such as activity quantity, equivalence numbers, statistical key figures etc.

The activity rate is one of the components of the standard cost. As you probably know, you can itemize the standard cost into cost components (defined in transaction OKTZ) so you can analyze the high cost elements in your cost of goods sold. If you enter the activity rates manually you will only be able to perform this analysis down to the activity type level (labor, machine time, etc). However, if you let the system calculate the rates you will be able to analyze your cost of goods sold according to the primary cost elements that made up the standard cost (payroll, utilities, depreciation, etc.) by utilizing the primary cost component split functionality (also set up in transaction OKTZ).

For more infrormation on how to optimize your SAP Financials landscape, I've put together my top tips in the book 100 Things You Should Know About Financial Accounting with SAP  which is published by SAP Press.

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