Procedure for Overhead Allocation
Use
You can choose between several different methods for the periodic transfer of process costs and cost center costs to CO-PA:
Features
Assessment
From an accounting viewpoint, assessment cycles allocate your planned or actual costs for cost centers or business processes to profitability segments in CO-PA on the basis of reference values, percentages, or fixed amounts.
For detailed information about assessment, see the section
Assessment in the online documentation for Cost Center Accounting (CO-OM-CCA).
Indirect activity allocation
Whereas assessment lets you split cost elements or cost element groups on the basis of reference values, activity allocation lets you allocate on the basis of the activities performed.
This function is especially useful for cost centers whose activities cannot be measured directly, because you can create a quantity structure based on certain assumptions and then valuate and allocate this just as you would allocate activities directly. An example of such a cost center whose activity cannot easily be measured would be an "Order Processing" cost center. To allocate the costs for this cost center according to their cause, you can create a quantity structure based on the quantity "Number of orders processed" and then valuate this with an activity price.
Processes can also be allocated using indirect activity allocation. This function is especially useful for instances where the process quantities cannot easily be measured directly, because you can create a quantity structure based on certain assumptions and then valuate and allocate this just as you would allocate activities directly. An example of such a process for which the activity cannot easily be measured would be the process "Creating Quotations". To allocate the costs for this process according to their cause, you can create a quantity structure based on the quantity "Number of quotations" and then valuate this with an activity price.
For detailed information about the indirect allocation of activities, see the section
Allocating Activities Indirectly in the online documentation for Cost Center Accounting (CO-OM-CCA).
Template allocation
In
Template Allocation, you can determine in detail which profitability segments used the processes (as well as cost centers/services) and then use this information for allocating the costs. Here you can use a
template to define formulas and functions that select cost drivers from Profitability Analysis or other sources in order to assign the costs most accurately to their cause.In Customizing, you assign this template to "characteristics", which are used to select the cost drivers. Then you need to assign "update characteristics", which ultimately determine the profitability segments to which the overhead costs are allocated.
Your company uses a process "Customer Service" to differing degrees for different customer groups. You therefore define a template for the customer group "Wholesale" that is used to determine cost drivers. When you allocate these process costs to CO-PA, you can add further characteristics, such as "Key customer". These characteristics are ultimately the ones to receive the process costs that you allocate.
You can use template allocation for both actual and planned data.
For detailed information about template allocation, see the section
Template Allocation for Actual Data in the online documentation for Activity-Based Costing.
Activities
To assess overhead to CO-PA or to allocate activities indirectly, you need to define cycles, which let you allocate overhead to profitability segments in connection with your period-end closing activities. For more information, see the section
Use of Cycles in Profitability Analysis.When using template allocation for overhead, you need to define a
Template for Profitability Segments. For more information, see the section
Template Allocation to Profitability Segments in Activity-Based Costing (CO-OM-ABC).