This section contains a detailed example that illustrates how you can use conditions to valuate actual data in Profitability Analysis to help meet your management requirements.

The first part of this example explains the requirements. Then a suitable concept is laid out for using conditions to meet these requirements.

The section "Operating Concern" gives you more detailed information about the settings that are presumed to have been made in CO-PA and in Sales and Distribution (SD).

That is followed by a step-by-step explanation of how you work with conditions.

We want to calculate net revenue as the sales revenue minus customer discounts and price reductions, and then calculate the cost of sales based on the net revenue. This amount will then be used to calculate sales commission,

which can differ in rate in different sales organizations. In some cases, we also want to define a special commission rate for certain materials within each sales organization.

We also want to calculate our anticipated costs for outgoing freight as a percentage of the cost of sales. This percentage should differ from plant to plant.

And finally, we want to calculate anticipated costs for outgoing packaging as a percentage of the sales quantity. These costs will differ depending on the plant and, in some cases, the product being sold.

These requirements immediately tell us the three conditions that we need to calculate:

• Sales commission

• Outgoing freight

• Outgoing packaging

The sales commission is to be calculated based on the difference between the net revenue and the cost of sales. This net revenue is the gross revenue minus customer discount and price reduction. The outgoing freight and outgoing packaging are calculated on the basis of the cost of sales and the sales quantity, respectively.

Thus we can represent all of these conditions in the following form:

The revenue, customer discount, price reduction and cost of sales are all transferred from SD to CO-PA in the original billing document. In Profitability Analysis, lines 40, 60, 100, 300, and 310 need to be calculated, with the results in lines 100, 300, and 310 being passed on to the appropriate value fields.

To carry out this calculation using conditions, we first need to define a condition type for each line in the formula, with the exception of lines 40 and 60, which simply represent subtotals.

The costing sheet forms the framework within which you can use conditions for valuation. A costing sheet determines the order in which the conditions are processed and the way in which they are interrelated.

We therefore need to create a costing sheet that contains all the condition types we require.

A costing sheet ¾ ACT001 ¾ that meets our requirements would look like this:

Remember that the sales commission is supposed to be calculated based on the sales organization and the product. Thus in order to be able to maintain condition records for the condition type PROV, we first need to define an access sequence, which we will call Z100. And since the condition records are to be maintain for two different combinations of characteristics ¾ the sales organization alone, and the sales organization together with the product ¾ we need to define two condition tables: A502, which contains the fields "Sales organization" and "Product", and A503, which contains the field "Sales organization".

The outgoing packaging costs should be calculated depending on either the shipping plant or the combination of plant and product. We therefore need to define two condition tables: A505, which uses the characteristics "Plant" and "Product", and A506, which only uses "Plant". The system should access these tables as defined in access sequence Z200.

The outgoing freight is supposed to depend on what plant is delivering the goods. We therefore need another access sequence ¾ Z300 ¾ which reads a condition table that contains the characteristic "Plant". Since one condition table can be used for different access sequences, we can use table A506 again here.

Condition types REVN, DISC, DISP, and COGS are "base condition types", which are used to calculate other conditions. Base condition types do not need an access sequence. These conditions are transferred directly from the source document (billing document in SD).

Condition types COGS, DISC, DISP, and REVN are assigned to the same value fields as the corresponding SD condition types for revenues, customer discounts, and price reductions. Thus the values for these conditions are first transferred from SD to the corresponding CO-PA value fields, from where they can be used for the conditions in the CO-PA costing sheet. This ensures that there is a direct link between the original SD condition type and that defined in CO-PA.

Condition type OUPA (outgoing packaging) should be calculated based on the quantity billed in terms of the sales quantity unit. In this example, that is the quantity field VVIQT.

The functions for maintaining these components of the conditions tool are found in Customizing for Profitability Analysis. To access them, choose

In this example, we are going to assume that we are working in an operating concern that contains at least the following fields:

The following fields are transferred from SD billing documents:

When you make your Customizing settings for implementing valuation with conditions, it is recommended that you proceed in the following order:

1. Define condition tables
2. Define access sequences
3. Define condition types
4. Maintain condition records
5. Define costing sheet
6. Assign conditions to value fields
7. Define valuation strategy
8. Data Flow and Calculation of Condition Values

This order is not obligatory and is intended merely as orientation for less experienced users. Since not all the activities in Customizing are given in hierarchical fashion, every user can develop his or her own technique for working with the conditions tool.

In the example being discussed here, we need to create three condition tables. We can do this using the Customizing function Maintain condition tables:

Now we can define the required access sequences using the Customizing function Define access sequences:

Access sequence Z100 (Internal sales commission)

As a general rule, the access conditions should become more general as you go down: A table with more detailed selection criteria (2 characteristics) should thus come before a table with less detailed criteria (1 characteristic).

You should set the Exclusive indicator when you want the system to stop looking for condition records as soon as the first valid one is found for the given condition type.

This means that if the system finds a condition record for a combination of sales organization and product, it uses this record and does not search the second table for valid records for the sales organization. If we were to leave the Exclusive indicator blank here, the system would search through both tables and add together the individual condition records if more than one were found. However, this does not make sense here.

The other access sequences ¾ Z200 and Z300 ¾ look like this:

The condition types REVN, DISC, and DISP form the basis for calculating the net revenue. The values for these condition types are transferred directly from the billing document in SD. Consequently, these condition types are defined as base condition types. It is not necessary to maintain condition records. The attributes need to be defined as follows:

You can maintain condition records directly when you maintain the condition types. These condition records are maintained for the condition tables defined in the access sequence:

Once we have maintain the condition types and their condition records, we can create costing sheet ACT001 in Customizing using the Maintain costing sheet function.

Costing sheet ACT001

The number in the Step column determines the order in which the conditions are processed. The Counter column is only of interest if you want to work with more than one condition type in the same step. The fields From step and To step determine the steps to be used as the basis for calculating a given line. If you make entries in both of these fields, the system adds together the values in both of these steps and any steps that lie between them. The sum is then used as the basis for calculating the current line.

Condition types REVN, DISC, and DISP are "base condition types", whose values are transferred directly from the billing documents. We therefore do not need to enter any reference steps. The same applies to condition type COGS.

In step 40, the net revenue is calculated as the subtotal of steps 10 through 30. Since condition types DISC and DISP are negative, the system calculates the net revenue as follows:

REVN - DISC - DISP = Net revenue

Step 50 contains the cost of sales COGS, as a negative value. The sum of steps 40 and 50 form the basis for determining the sales commission:

Net revenue - COGS = Basis for sales commission

Commission (PROV) is then calculated on the basis of step 60 (From step = 60). For example, if a value of 10 % if found for sales organization 1000 and product CK-700, step 110 calculates the following:

PROV = Basis for sales commission * 10/100

The outgoing packaging (OUPA) is calculated based on the quantity sold. Thus the basis used for determining the value of this condition is a quantity field and not another condition. This means that no reference step is necessary. We will define which quantity field should be the basis for calculating quantity-dependent condition values when we assign the costing sheet to a valuation strategy.

Let us assume that 2 BOX (boxes) of product CK-700 are sold from plant 1000, the system finds a condition record "4 US$/BOX". This yields the following value:

OUPA = 2 KAR * 4 US$/KAR = 8 US$

The outgoing freight (OUTF) is calculated on the basis of the cost of sales (from step 50), which is a negative value. In plant 1000, for example, the value would be:

OUTF = (- cost of sales) * 2/100

Now that the values for the base condition types have been transferred from the billing document and the calculated conditions have been calculated, we need to assign these condition types to the value fields in Profitability Analysis so that the values can be transferred to the CO-PA line item. This assignment must always be in line with the assignments made between SD condition types and value fields when you set up the SD/CO-PA interface.

With the Assign value fields function in Customizing, you tell the system which value fields should be used as source fields for base condition types and which as target fields for the addition or reductions calculated in the costing sheet.

These assignments were already determined upon the conception of this valuation scenario and can be copied exactly here.

A valuation strategy controls the overall valuation process. You need to enter your costing sheets in a valuation strategy in order for them to take effect.

In this example, we therefore want to enter costing sheet ACT001 in valuation strategy 001. The quantity field we want to use is VVIQT (the invoiced quantity in the sales quantity unit). This quantity thus becomes the basis for calculating condition type OUPA (outgoing packaging).

This entry causes costing sheet ACT001 to be processed immediately after the system reads a material cost estimate.

You must assign a quantity field to the costing sheet here whenever the costing sheet contains a quantity-dependent condition type.

To show how the condition values are calculated, here is the entire data flow that take place when a billing document is transferred from SD to Profitability Analysis.

The following values are transferred to the CO-PA line item according to the definition of the interface with SD:

The following values are then transferred from the CO-PA value fields to the individual CO-PA condition types according to the assignments we made earlier:

The costing sheet "ACT001" is assigned the quantity field "VVIQT", which contains the value "1 BOX".

As defined in our valuation strategy "001", the system now processes the individual steps in this costing sheet:

Condition type "REVN" is a base condition, so no condition records are read and no calculations performed. "REVN" contains the value "100.00 US$", which was copied from field "VV010".

Condition type "DISC" is a base condition, so no condition records are read and no calculations performed. "DISC" contains the value "-6.00 US$", which was copied from field "VV030". This value is negative, because the condition type was defined as negative.

Condition type "DISP" is a base condition, so no condition records are read and no calculations performed. "DISP" contains the value "-5.00 US$", which was copied from field "VV050". This value is negative, because the condition type was defined as negative.

The net revenue is a totals row that contains the sum of the value in steps 10 through 30:

Condition type "COGS" is a base condition, so no condition records are read and no calculations performed. "COGS" contains the value "-40.00 US$", which was copied from field "VV140". This value is negative, because the condition type was defined as negative.

The basis for calculating commission is a totals row that contains the sum of the values in steps 40 through 50:

Condition type "PROV" is an addition for which condition records are to be found using access sequence "Z100". The line item contains the sales organization "0001" and the product "CK-701".

According to access sequence "Z100", the system should first look for a condition record in condition table "A502". However, this table does not contain an entry for sales organization "0001" and product "CK-701". Consequently, the system also searches condition table "A503" for a valid condition record. Here it finds a percentage of 2% for sales organization "0001", and thus copies this value.

Condition type "PROV" references step 60, the totals for "Basis for calculating commission". This means that the percentage found should be applied to the value in this step. This yields:

Condition type "OUPA" is a quantity-based addition for which condition records are to be found using access sequence "Z200". The line item contains the plant "1000" and the product "CK-701".

According to access sequence "Z200", the system should first look for condition records in condition table "A505". There it finds an entry of 3.90 US$/BOX for the plant "1000" and the product "CK-701". Condition table "A506", which is also contained in the access sequence, also has a condition record for plant "1000". However, the system does not read this table because the Exclusive indicator is selected.

Condition type "OUPA" does not reference another step. However, this condition type is quantity-dependent, so the quantity field "VVIQT" is used as the basis:

Condition type "OUTF" is a reduction for which condition records are to be found using access sequence "Z300". The line item contains plant "1000".

According to access sequence "Z300", the system should first look for condition records in condition table "A506". Here it finds a percentage of 2% for plant "1000", and thus copies this value.

Condition type "OUTF" references step 50, the cost of sales "COGS". This means that the percentage found should be applied to the value for this condition type. This yields:

If the system is unable to find any valid condition record using the specified access sequence, it automatically enters "0" for the relevant condition type. No error message is displayed. Thus in our example the cost of sales would have been multiplied by 0%, which gives us outgoing packaging costs of 0.00 US$.

After all the steps have been calculated, the costing sheet gives us the following values:

The condition values are then transferred to the CO-PA line item according to the value field assignment made earlier. Note that this only applies to the conditions calculated in the costing sheet ¾ the base conditions (here, condition types "REVN", "DISC", "DISP", and "COGS") are not written back to the value fields. Their value field assignment merely shows the value fields from which their values were taken.

This line item is then posted.