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The quantity consumption ("Pull") methods in the SAP System are:

The primary difference between quantity consumption ("Pull") and pure cost distribution ("Push") methods is that the former is based on allocation of activity and business process quantities, which are then valuated using prices in a second step. Allocation takes place using a cost element specific to an activity type or a business process. As explained below, the ability to create multiple quantity and cost flows opens up a wide range of possibilities for using Activity-Based Costing (ABC) techniques in the overall framework of Activity-Based Management (ABM).

Method of Quantity Consumption (Pull)

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Resource Consumption

The methods for quantity-based assignments of resources to business processes (Pull) in the SAP System are direct activity allocation and indirect activity allocation in plan and actual, target=actual activity allocation, and template allocation in processes.

In direct activity allocation, the resource driver is represented by an activity type that illustrates the activity produced by a cost center resource (such as employee hours or kilowatt-hours, among others). Direct activity allocation is the most exact method, but at the same time the most time-consuming, because you must measure and enter the exact quantities of activities and processes consumed. This usually occurs as manual confirmation of quantities on both the sender and the receiver sides. The costs appearing on the business process via direct activity allocation can consist of fixed as well as of variable portions.

In indirect activity allocation in plan and actual, the resource driver is represented by the tracing factor of the corresponding cycle, similar to the way it is represented in the pure cost distribution approach. The difference, however, lies in the fact that the resource driver is not used for cost distribution, but rather as the basis for allocations of activity or process quantities. Indirect activity allocation appears in two variations. In manual indirect allocation, you assign the known activity quantities on the cost center to the business processes in relation to the resource drivers (tracing factors). In inverse indirect allocation, you multiply the resource drivers (such as the number of orders) by a standard quantity (such as two minutes per order). This thereby determines the activity quantity of a given resource consumed by a business process. The total of all activity quantities consumed by business processes equals the total activity output of the resource by the cost center. If you use a statistical key figure as a resource driver, this results in purely fixed costs on the business process. If, on the other hand, the process output serves as the resource driver, this results in purely variable costs instead.

In target=actual activity allocation, the method used is also an inverse approach for determining resource consumption, but it is used for determining actual quantities only. The R/3 System uses individually posted actual quantities for business processes and the corresponding plan quantities in order to calculate an operating rate. For resource activity inputs which are difficult or impossible to measure, target=actual allocation multiplies the plan quantities by the operating rate in order to calculate target quantities. Assuming that the individual business process flows can be standardized for the most part, and that the plan activity quantities show a realistic picture of the true resource consumption, these target quantities can then be defined as equal to the actual quantities.

Template allocations in processes offer the greatest flexibility for allocation of activity quantities on business processes via the corresponding resource drivers. By storing a template in the master data of a given Business Process , you create an explicit description of the business process structure. Similar to a routing for direct activities, the template describes the indirect activities that occur during each execution of a business process. It defines which cost center resources are consumed by the business process and in which quantities. The great flexibility of this function is made possible by the ability to define methods for finding resource consumption data and for calculating quantities dynamically. This means you can model complex resource drivers by means of functions and formulas. Further, the template allows you to distinguish between variable and fixed activity quantities. The variable quantity factor represents a standard quantity for each business process execution, which when multiplied by the process output equals the variable activity quantity of the resource consumed by the process. The fixed activity quantity consumption, on the other hand, is independent of the business process output and can be treated as a standby resource which is consumed by the business process even if the business process is never carried out. Cost input in this manner can be divided into fixed and variable portions.

Template Allocation for Business Processes

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Process Consumption

In order to assign business processes on receiver objects based on quantities, you can use all the described methods of quantity allocation for resource consumption. Instead of resource drivers, the process driver serves as the measurement for consumption of overhead business processes by the receivers. The methods of direct and indirect process allocation and target=actual allocation will therefore not be described in detail again.

However, the template allocation in processes can be discussed further from this standpoint. The template, in addition to the objects and functions mentioned above, can also include business processes themselves. You can thereby divide a primary business process into different sub-processes. These sub-processes, in turn, can be subdivided further by a template, making it possible for you to display a multi-step process hierarchy. You can use the R/3 System to determine dynamically the sub-processes relevant to the primary business process. You can also structure the process drivers of the sub-processes easily with the aid of formulas and functions. As with resource consumption, the consumption of sub-processes can be broken down into fixed and variable quantities. With multi-step business process models, note that you must ensure a causal relationship between the process drivers of the primary business process and the process drivers of the sub-processes and the resource drivers on the task level. The allocations of the resulting resource inputs through the cost drivers of the primary business process will make sense only if you ensure proportionality between the drivers of the various steps.

You can assign process costs to cost objects or profitability segments with the template allocation in plan or in actual . Business processes are assigned to cost objects with the template allocation in cost object based on the appropriate process driver and the originating source. Again, you can determine dynamically the relevant business processes for a cost object. The R/3 System calculates the process quantities consumed automatically at the time of costing using process driver relevant data in the environment of the cost object. A wide spectrum of functions as well as user-defined formulas allows you to model complex process drivers. The process quantities consumed by the cost objects are posted as variable, in order to allow the process costs accepted by the cost object in this way to include variable and fixed amounts. You can also use cost component splitting in order to display the process costs on a cost object in an aggregate form in the Profitability Analysis component (CO-PA), by assigning the relevant allocation cost elements to cost components specific to the business processes.

Profitability segments of the profitability analysis are additional receiver objects of the template allocation. These profitability segments are multi-dimensional market segments that stand out through their various characteristics. You can analyze the profitability of a product in a specific region, customer group and distribution channel simultaneously. This multi-dimensionality is especially meaningful for service industries, which often see their products as much more than one-dimensional.

A further use of the template is in the determination of the plan process quantities required to satisfy a previously defined sales plan. The template thereby calculates the scheduled process quantities on the receiver objects based on the results of the sales and operations plan (SOP) and long-term planning (LTP).

The connection of the business process to the business transaction routing makes it possible to string together specific processes to concrete material or production orders. Thus, a work center and routing receive a process assignment, which can also be used through the production or plan calculation of the orders. The process quantities are then determined through the confirmation of the routing transactions, as is the case with activity types. According to the activity type, the cost accounting produces a credit to the process and a debit to the confirmed object. From this, the valuation produces a business process price, as is the case with the activity type.

For more information, see:

Consequences of Quantity Consumption (Pull)

The quantity consumption (Pull) method makes it possible to examine an activity quantity or process quantity flow throughout the entire value added chain of an organization. This is true as long as the user selects the appropriate resource and process drivers and makes appropriate assignments of overhead costs to their originating receiver objects (such as products and customers). The advantage of this pull approach is the use of only those quantities actually consumed by the receiver objects. You thus can answer questions dealing with the productivity of overhead processes, or with the costs of idle resource capacity. The R/3 System offers variance analysis instruments for these questions.

By using the inverse methods described above, the quantity consumption (Pull) approach allows you to transfer plan sales quantities automatically, for the most part, to the required activity quantities to be provided by the cost center resources. You can carry out realistic primary cost planning on the cost centers on the basis of this plan quantity structure. Additionally, you can identify idle capacity or under capacity of cost center resources early enough to take steps to redistribute these overhead resources if necessary.

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