Use

You use Predistribution of Fixed Costs as part of marginal costing. You can use predistribution of fixed costs for Cost Centers and Business Processes .

It is also useful in marginal costing, as part of overall costing, to determine cost of goods manufactured based on full costs. As a result, along with allocation of variable (marginal) costs via internal activity allocation, you must also allocate fixed costs from sender cost centers or sender business processes on the cost objects . Because the fixed preparation costs are not proportional to the operating rate, you should not allocate them based on the activity output of the sender cost centers/sender business processes.

Predistribution of fixed costs solves this problem by distributing the fixed costs in their entirety on the cost centers or business processes that plan the activity inputs. This enables you to prepare the activities of sender cost centers or sender business processes within the framework of a reconciled activity plan. Remember: the sender cost center or sender business process did not cause the fixed costs for the provision of these activities because the activity input was planned by other cost centers or business processes.

Features

For each activity type of a sender cost center or for each business process, the system distributes the fixed plan costs of version 0 as actual costs on the cost centers or business processes that planned the activity inputs.

The distribution of the fixed costs on the receiver cost centers or business processes is proportional to the fixed portion of the plan activity input quantities. The amount of the fixed cost predistribution equals the plan activity input on the receiver cost center or receiver business process multiplied by the fixed plan price of the sender cost center or sender business process. This amount is posted in the actual.

This ensures the absorption of activity-independent costs by the cost centers or business processes planning the given activity input, regardless of the operating rate.

The following graphic illustrates the predistribution of fixed costs:

Integration

If you use fixed cost predistribution for activity types belonging to a cost center or for business processes, this affects actual allocations and period-end closing.

Actual Activity Allocation

For activity types or business processes used in predistribution, the receiver category determines whether the actual activity allocation assigns the total costs or only the variable costs to the receivers (cost center or business processes).

The system thereby prevents activity receivers from being debited twice with fixed costs.

This applies to all actual activity allocations, whether or not fixed cost predistribution actually posts fixed costs on the receivers.

order settlement

You cannot used plan-integrated Orders or projects as receivers. The system always debits these with fixed and variable costs.

If orders and projects settle on cost centers or business processes participating in predistribution of fixed costs, the system prevents these cost centers or business processes from being debited twice with the fixed costs. The fixed costs from activity allocation are in this case reallocated from the order back to the sender cost center (assuming this cost center predistributed its fixed costs). This occurs whether or not fixed cost predistribution actually posts fixed costs on the receivers.

The following graphic illustrates the predistribution of fixed costs with planning integrated orders:

Target Cost Calculations

When you use predistribution of fixed costs, the system uses other target cost formulas to determine Target Costs (for more information, see Target Cost Calculation ).

Actual Price Calculations

Variance Calculation

Input Side :

If the sender activity type or sender business process predistributes fixed costs, you cannot calculate prices in target nor in actual. The total quantities in the relevant data records then refer solely to the variable portion of costs.

Input quantity variances exist for activity inputs only if you implement actual price calculation without revaluation, meaning you use the same price in both plan and in actual. If you revaluate activity inputs in actual, you must update the input price variances for variance calculation in the actual data records.

Output Side :

If the cost center or business process in question predistributes its fixed costs, this will not result in volume variances , but it will produce over- or under-absorption of the fixed costs. This variance arises if the cost center or business process allocates activities in actual (and, thus, fixed costs) to objects outside of Cost Center Accounting or Activity-Based Costing. The variance is thus displayed as remaining variance .

The system multiplies the plan costs of the input side by the operating rate in order to calculate the target credit for variance calculation . This is equivalent to multiplying the plan price by the actual activity. As the result thereby includes the operating rate variance, the difference between target and actual credit equals the output price variance .

In the case of fixed cost predistribution, the system corrects the fixed portion of the target credit so that the operating rate variance is no longer included. The difference between target and actual credit then includes the allocation price variance and the over-absorption of fixed costs described above. The over-absorption of fixed costs then becomes part of the fixed allocation price variance (see Variance Calculation ).

Activities

For more information on carrying out predistribution of fixed costs, see Executing Predistribution of Fixed Costs