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 Cost Accounting Methods


The Controlling component (CO) supports all standard cost accounting methods. You do not need to implement the different methods individually. Depending on your organization’s requirements, you can use more than one method at a time in cost accounting.


The SAP system provides all the functions necessary for planning and allocation using the different methods. The functions record fixed and proportional costs related to all levels of activity output separately. Implementing the CO component does not limit you to using one cost accounting method. Instead, you can decide which method to use in each area of your organization, depending on the way you plan and the functions you choose to use.

In the Overhead Cost Controlling area, you can use the following, widely used cost accounting methods within the SAP system:

  • Cost Assessment Method

Cost assessment is plan/actual cost accounting based on full costs. Costs are not split into fixed and proportional costs. The system uses assessment to "allocate" overhead, based on certain keys, to cost collectors, or to products.

  • Overhead Calculation

Overhead calculation is similar to the cost assessment method (standard and actual costing using full costs). Costs are not split into fixed and proportional costs. The system only calculates wage costs using the fixed hourly rates determined in cost center planning. This is to valuate the activity quantity structure of the work plan. The SAP system then applies remaining overhead costs to cost collectors or products, using overhead calculation

  • Static Standard Costing

In contrast to the above methods, standard costing divides the cost center structure into tracing factors and activity types, and activity is allocated. Costs are not split into fixed and proportional costs. In the costing, the system uses the (total) cost portions that it calculated to evaluate the activity quantity structure from the work plan.

In the Profitability Analysis component (CO-PC), you can use production costs calculated in Product Costing for valuating products sold on the basis of full costs (according to the cost-of-sales accounting method).

  • Marginal costing

In contrast to static standard costing, this method splits costs into fixed and proportional costs (based on the cost center structure divided up into activity types). The planned cost rates (determined by price calculation) are included in the costing to valuate the activity quantity structure from the work plan. Analytical cost planning, and the proportional costs it calculates, enable better decision-making. By using marginal costs, for example, you can determine short-term, lower limit prices.

In product cost planning, you can determine whether full or only variable costs are relevant for stock valuation when you specify characteristics for cost elements. You can use the latter to determine the "variable cost of goods manufactured". If you use this method to calculate the standard price, then the system only credits the cost centers with the variable portion of the activity type in Cost Object Controlling when the costs are recorded. The fixed portion of the activity type remains on the cost center. You can transfer it at the end of the period, using assessment in the Profitability Analysis (CO-PA). The advantage is that fixed costs are not proportionalized in the actual data, enabling true contribution margin accounting.

Production costs calculated using product costing can be used in profitability analysis to evaluate the products sold on the basis of marginal or full costs (corresponding to the cost of sales accounting method). Additionally, cost splitting into fixed and proportional costs enables you to display the true contribution margin on the basis of marginal costing, in the Profitability Analysis component.

  • Activity-Based Costing

(see: Overhead Cost Controlling )