In most cases, monthly settlement is appropriate for the purposes of Overhead Cost Controlling, final costing, and the preparation of reconciliation data for Profitability Analysis.

SAP provides you with various tools for the period-end closing process so that you can assign periodically incurred costs, determine target costs, and determine variances. You can implement these instruments flexibly in the R/3 System within the framework of your overall business concept.

After locking the posting period for further actual postings, these actual postings are then available as a data basis for the period closing operations. The entry of actual quantities and actual costs provides the basis for determining the operating rate on the corresponding cost centers or cost objects and thus of the target costs. The target costs form the basis of the primary cost management instrument: the target/actual comparison using targeted variance analysis.

In the period-end closing process, periodic allocations occur between Cost Center Accounting, Activity-Based Costing and Internal Orders on the one side, and Cost Object Controlling and Profitability Analysis on the other.

1. In Overhead Cost Controlling, you first assign the overhead costs.
2. If you don’t require proportionalization of the fixed costs, you can predistribute the fixed costs in Cost Center Accounting.
3. After optional actual activity price calculation, you determine the operating rate of all planned activity types for the cost centers on the basis of the plan data, and the target costs on the basis of the proportional costs. The variances are determined on the basis of the target costs and the actual costs.
4. The variances are transferred to Profitability Analysis together with the remaining fixed costs in Cost Center Accounting, using the assessment method.
5. You can also settle the balances between the accrued and balance sheet value approaches to accrual objects (usually to accrual orders).
6. In Cost Object Controlling you first execute periodic assignment of overhead costs for the production processes. This approach largely replaces the application of overhead to direct costs, which often does not reflect the true cost source.
7. If you have already executed actual activity price calculation in Cost Center Accounting, you have the option of revaluating the activity relationships between cost centers and cost object with actual activity prices.
8. You then assign any overhead to your orders.
9. Any inventory value remaining in production is displayed as work in process and posted correspondingly in Financial Accounting.
10. After final costing or the periodic target/actual comparison of the cost of goods manufactured, you can determine production variances. These variances can be analyzed and settled to Profitability Analysis to determine the profit for each product.

All quantities, costs, revenues and variances determined are available as key figures for business control. In planning, you ensure acceptance of the affected responsibility areas (cost center mangers, product managers, etc.). Only in this way is a cost center manager likely to accept the variance from the plan or the target produced on their cost center as belonging to their responsibility area, and be prepared to improve the situation.

The plan-based value approaches created by Cost and Revenue Controlling form the basis for efficient cost management in all areas of an organization. Target/actual comparisons on cost centers, plan costing, final costing and results analysis provide you with essential information. Introducing suitable measures for variances from target or plan values enables you to effectively control business process flows.