Building a Cost Analysis Model

One of the most significant features of a Profitability and Costing model is its ability to integrate operational costs into a model in a way that enables it to generate an analysis of costs using its built-in calculation engine.

The dimensions involved in a Cost Analysis model are loosely demonstrated in the following diagram, which shows how the calculation engine operates for a particular combination of <Version> and <Period>. Starting from the base costs, <Line Items> and <Services>, and resources in each <Responsibility Center>, it can project these costs across the Activites performed in each <Responsibility Center> and further project them across <Cost Objects> using Resource Driver Splits and Activity Drivers.

<Cost Objects> are combinations of items across your <Cost Objects> dimensions. This provides excellent granularity for determination of individual costs, which is enhanced by the ability to summarize results through the group features implicit in the <Cost Objects> and Attributes hierarchies.

The steps involved in setting up a basic Cost Analysis model are:

• Define your required dimension hierarchies
• Define the Assignments that control your cost distribution to Activity and Cost Object cost levels
• Create Views that enable you to enter basic costs and driver values
• Enter your basic Costs and Driver Values
• Create Views to display your results

Setting up an <Activities> Costing model can be considered separately from a <Cost Objects> Costing model.