Applied Overhead

You can apply both percentage overhead and quantity-based overhead to reference objects. You can assign overhead rates to a product by creating a costing sheet in Customizing for Product Cost Planning. Using this costing sheet, you specify the level of overhead and the conditions under which it is calculated.

This graphic is explained in the accompanying text.

You can calculate the following:

Material and production overhead
Administration and sales overhead
The costing sheet thus specifies the cost elements under which the sales and administration costs are updated in costing. The cost component structure determines the cost components under which these costs are shown. It flags these cost components as sales and administration costs.

In make-to-order production, sales and administration costs are generally allocated to the product as overhead rates. The cost of goods sold for the product is passed on to Profitability Analysis. (See also: Product Cost by Sales Order)

In order-related production, repetitive manufacturing and process manufacturing, the sales and administration costs are generally passed on from Cost Center Accounting directly to Profitability Analysis. The cost of goods manufactured for the product is passed on to Profitability Analysis. (See also: Product Cost by Order or Product Cost by Period)

Prerequisites

To be able to calculate overhead:

A costing sheet needs to be created in Customizing.
The costing sheet must be assigned to the valuation variant in Customizing.
In the initial screen of the cost estimate, a costing variant must be entered which either contains that valuation variant or that assigns the costing variant to the order type.

To be able to define particular overhead conditions for certain reference objects:

An overhead group must be entered in the master record of the reference object (such as the material master or cost object)
An overhead key must be entered in the costing sheet that is linked to this overhead group in Customizing for Product Cost Controlling.

Features

Applied Overhead Using Planned Data

The overhead is calculated using the information in the itemization for the material costed. Because the system updates an itemization for each cost component view, you can calculate applied overhead for a specific cost component view. Overhead is only calculated on one basis, such as the cost of goods manufactured or cost of goods sold. As a general rule, the cost of goods manufactured is used as the basis for calculating overhead. You make the assignment in the costing type in Customizing.

When calculating overhead, the system inserts a costing category of type G. The applied overhead is updated under the cost elements that you specified in the costing sheet in Customizing for Product Cost Controlling.

In costing with a quantity structure, overhead is calculated automatically when you carry out costing.
In unit costing, overhead is calculated when you save the cost estimate. You can calculate overhead manually by choosing the menu option Calculate overhead.
To calculate overhead in unit costing:
- You must assign all costing items to cost elements. Costing items that have not been assigned to cost elements will not be included in overhead calculation.
- You must enter the key of the costing sheet in the master record of the reference object. To define overhead conditions for certain reference objects, you must enter an overhead key in the master record of the reference object and create a costing sheet that refers to this key.

Applied Overhead Using Actual Data

You can calculate actual overhead for cost objects in Cost Object Controlling. For more information, see Actual Overhead in Cost Object Controlling.

More Information

Implementation Guide (IMG) for Product Cost Controlling

In Product Cost Planning under Basic Settings for Material Costing Overhead .
In Cost Object Controlling:
- Under Product Cost by Period Basic Settings for Product Cost by Period Overhead
- Under Product Cost by Order Basic Settings for Product Cost by Order Overhead
- Under Product Cost by Sales Order Basic Settings for Product Cost by Sales Order Overhead