SAP Glossary for Finance & Controlling

SAP GLOSSARY

SAP GLOSSARY FOR FINANCE & CONTROLLING

To help clarify the meaning of sometimes confusing SAP terms (okay, always confusing!) the good folks at SAP have provided a glossary with their online Help facility. A number of these entries are relevant to finance and controlling area and have been listed in this document. They are in alphabetical order within the following sections:-

. Basis (the technical core of SAP - however there are a number of basis terms it is necessary to understand) . Fixed Asset and Financial Accounting . Controlling . Inventory valuation and product cost controlling

This glossary contains :-

. the SAP term . the SAP component to which it applies . an explanation of the term.

OF 11 SAP GLOSSARY

BASIS ABAP BC Advanced Business Application Programming. Programming language developed by SAP for application development purposes (used by IT to develop reports and interfaces). Authorization BC Authority to perform a particular action in the R/3 System. Each authorization refers to one authorization object and defines one or more permissible values for each authorization field listed in the authorization object. Authorizations are combined in profiles which are entered in a user's master record. Batch input BC Interface that facilitates the transfer of large amounts of data to an SAP system. You can use batch input to transfer both legacy data and external data to the SAP system BAPI BC Business Application Programming Interface. Standard interface that facilitates the integration of R/3 with the processes and data of other business application systems. Client BC The system environment. It defines the database available to the system. There will be separate development client and production client among others. If an action or object is at “client level” then it is available to all within the client (examples an ABAP report, or basic material master or customer information). Customizing BC Setting system parameters to influence the way in which SAP works for an organisation. Also called configuration. Number CA The process of assigning numbers to objects (for example, materials and documents). There are two types of number assignment: assignment . Internal, where numbers are assigned automatically by the system (recommended to be used wherever possible) . External, where numbers are assigned manually by the user Report Painter BC Tool for creating reports that meet specific business and reporting requirements. The Report Painter enables the user to report on data from multiple applications. The Report Painter uses a graphical report structure which forms the basis for the report definition. When defining the report, the user works with a structure that corresponds to the final structure of the report when the report data are output. The R/3 System is delivered with several row and column models. These models can be used as 'building blocks' to help the user create reports quickly and simply (typically used by end-users). Report Writer BC Tool for creating reports that meet specific business and reporting requirements. The Report Writer enables the user to report on data from multiple applications. Using functions such as sets, variables, formulas, cells and key figures, the user can create complex reports that meet specific reporting requirements. More difficult to use than Report Painter (typically used by IT or super-users). Transaction BC Logical process in the R/3 System.From the user's point of view, a transaction is a self-contained unit (e.g. generate a list of customers, change the address of a customer, book a flight reservation for a customer, execute a program). In terms of dialog programming, it is a complex object consisting of a module pool and screens, and is called with a transaction code.

OF 11 SAP GLOSSARY

FIXED ASSET AND FINANCIAL ACCOUNTING

FIXED ASSET ACCOUNTING Asset Accounting FI-AA Asset Accounting is a sub-ledger accounting module in Financial Accounting, in which all business activities for fixed assets are recorded Chart of FI-AA The chart of depreciation contains the defined depreciation areas. It also contains the rules for the evaluation of assets that are valid in a depreciation given country or economic area. Each company code is allocated to one chart of depreciation. Several company codes can work with the same chart of depreciation. The chart of depreciation and the chart of accounts are completely independent of one another Depreciation area FI-AA A depreciation area shows the valuation of assets for a particular purpose (for example, for individual financial statements, balance sheets for tax purposes, cost-accounting values, and so on). Alongside 'real' areas, it is possible to define derived areas. The values for these derived areas are calculated from two or more real areas. Depreciation key FI-AA Key for calculating depreciation amounts. The depreciation key controls the following for each asset and for each depreciation area: . automatic calculation of planned depreciation . automatic calculation of interest . maximum percentages for manual depreciation Low-value asset FI-AA Asset for which the acquisition and production costs, reduced by the existing turnover tax, does not exceed a certain pre-defined amount. Low-value assets can be completely written off during the acquisition period. Valuation method FI-AA The valuation method determines how an asset is valued during its useful life. The most important parameter belonging to a valuation method is the key for the automatic calculation of planned depreciation. Other parameters include the useful life, period control, changeover key ect.

FINANCIAL ACCOUNTING Account FI Specification of which accounts to post to from a business transaction. See also "Additional account assignment". assignment FI Account FI Automatic system function which determines automatically for the user during any posting transaction the accounts in financial accounting determination to which the amount(s) in question should be posted. Additional account FI All entries in a line item that are made in addition to account number, amount and posting key. These can include: payment terms, payment assignment method, cost center.

Automatic posting FI Posting that is made automatically by the system in certain transactions. e.g: Output and input tax postings , Postings for the exchange rate difference , Postings for cash discount paid and received. Each individual automatic posting is represented by a separate line item. Bill of exchange FI Promise to pay in the form of an abstract payment paper detached from the original legal transaction. (BOM) BoE payment request = Request to a customer to pay his or her debts by bill of exchange. This procedure is common in Spain, Italy and France. Requests for payment by bill of exchange are posted in the SAP system as noted items. BoE usage = Presenting a bill of exchange to a third party for purposes of refinancing. BoE collection = Special usage of a bill of exchange, whereby a bank undertakes to present a bill to the drawee at the end of its term. If a bank undertakes the collection of a bill of exchange, it levies a collection charge on the customer.

OF 11 SAP GLOSSARY

FIXED ASSET AND FINANCIAL ACCOUNTING Business areas FI A business area is an organizational unit of financial accounting that represents a separate area of operations or responsibilities within an organization. Financial accounting transactions can be allocated to a specific business area. They are used in external segment reporting across company codes based on the significant fields of operation (for example, product lines) of a business enterprise. All essential balance sheet items, such as fixed assets, receivables, payables, and inventories, and all items of the profit and loss statement can be assigned directly to a business area. The balance sheet items for banks, capital, and taxes, however, cannot be directly assigned to business areas. They need to be assigned manually. This means that business area financial statements cannot be drawn up for commercial and tax lax. Business area balance sheets and income statements are used only for internal reporting purposes. The system can determine the appropriate business area from information such as the material, plant, or cost center you enter in a business transaction like a goods movement. Assignments you make, for example, between cost centers and business areas, or the combination of information you specify, for example, a plant and a particular division, form the basis the system uses to determine the appropriate business area to assign to an item. Cash management FI/TR The cash management position shows the short-term activity in your bank accounts. This display draws data from two sources: position FI postings to G/L accounts relevant to Cash Management memo records (payment advice notes) entered for planning purposes Clearing business FI Additional account assignment in the document that is used to calculate receivables and payables between business areas. area Collective invoice FI/SD Billing document for several deliveries to one customer which is created at the end of each period. Commodity code MM Official key as defined in the European Communities' harmonized system for describing and coding commodities. Commodity codes are relevant to Intrastate and to EC foreign trade statistics. Company code FI The smallest organizational unit for which a complete self-contained set of accounts can be drawn up for purposes of external reporting. The process of external reporting involves recording all relevant transactions and generating all supporting documents for financial statements such as balance sheets and profit and loss statements Consumable MM Material or service that is the object of procurement and whose value is settled via the cost element accounts or fixed asset accounts. material No inventory is held, and there may not even be a material master record. Credit control area FI Organizational unit that represents an area responsible for granting and monitoring customer credit. This organizational unit is either a single company code or comprised of several company codes when credit control is performed across multiple company codes. In a credit control area, credit information can exist for each customer. Cross-company FI Posting transaction involving several company codes. The system creates a document for each company code involved. Cross-company code posting code postings are used to process centralized purchasing or centralized payment, for example Customer FI/SD Business partner, with whom you have a relationship involving the transfer of goods and/or services. A customer can deal with several sales areas. The customers of a sales area can be assigned to a customer hierarchy. Within a customer hierarchy, it is possible to determine pricing agreements for the highest hierarchy level (e.g. head offices) that can also be valid for the subordinate hierarchy levels (e.g. branches). For a customer designated as a ship-to party, the different unloading points and receiving points can be determined. A customer can have the following partner functions: sold-to party , bill-to party , payer , ship-to party Dunning FI-AR The process of customer and internal notifications to ensure collection of unpaid bills. evaluated receipt MM Procedure for automatic settlement based on goods receipts. Evaluated receipt settlement involves an understanding between the vendor settlement and the buying entity whereby the former does not issue invoices in respect of purchase orders issued by the latter. Instead, an invoice document is posted automatically in the buying entity's system on the basis of data from the PO and goods receipts. Use of this procedure precludes invoice variances (for example, the charging of too high a price by the vendor). Invoice Verification MM/FI Term for the entry and checking of incoming (vendor) invoices (also known as "invoice matching", "invoice validation", and "invoice clearance"). In invoice verification, vendor invoices are compared with the purchase order and the goods receipt, and are checked in three ways :content , price , quantity.

OF 11 SAP GLOSSARY

FIXED ASSET AND FINANCIAL ACCOUNTING Logistics LO-LIS The information systems in LIS can be used to plan, control, and monitor business events. They are fleixble tools for collecting, aggregating Information System and analyzing data from the operative applications. The level of detail in which information is displayed is freely definable. Informative key figures enable you to continually control target criteria and to react in time to exceptional situations. Data can be analyzed using either standard analyses or flexible analyses. The Logistics Information System is made up of the following information systems: . Sales Information System . Purchasing Information System . Inventory Controlling . Shop Floor Information System . Plant Maintenance Information System . Quality Management Information System One-time customer FI/SD Term for a collective customer master record used for the processing of transactions involving miscellaneous customers that are not included among a vendor's regular customers. If a transaction is entered for a one-time customer, the customer data must be entered manually. One-time vendor FI/MM Term for a collective vendor master record used for the processing of transactions involving miscellaneous vendors that are not included among a customer's regular suppliers. If an RFQ or a PO is sent to a one-time vendor, details of the latter's address must be entered manually Plant LO Organizational unit within Logistics, serving to subdivide an enterprise according to production, procurement, maintenance, and materials planning aspects. A plant is a place where either materials are produced or goods and services provided. A plant can assume a variety of roles: . As a maintenance plant, it includes the maintenance objects that are spatially located within this plant. The maintenance tasks that are to be performed are specified within a maintenance planning plant. . As a retail or wholesale site, it makes merchandise available for distribution and sale. A plant can be subdivided into storage locations, allowing stocks of materials to be broken down according to predefined criteria (e.g., location and materials planning aspects). A plant can be subdivided into locations and operational areas. Subdivision into locations takes geographical criteria into account, whereas subdivision into operational areas reflects responsibilities for maintenance. The preferred shipping point for a plant is defined as the default shipping point, which depends on the shipping condition and the loading condition. For the placement of materials in storage (stock put-away), a storage location is assigned to a plant. The storage location depends on the storage condition and the placement situation. The business area that is responsible for a plant is determined as a function of the division. As a rule, a valuation area corresponds to a plant. Posting gross MM Posting method used for entering invoices containing cash discounts. The cash discount amount is only taken into account when the invoice is paid and posted as a cash discount amount not affecting net income. Reconciliation FI G/L account, to which transactions in the subsidiary ledgers, (such as in the customer, vendor or assets areas), are automatically updated. account It is generally the case that several subledger accounts post to a common reconciliation account. This ensures that the developments in the subledger accounts are accurately reflected in the general ledger (i.e. in line with balance sheet conventions). You can set up a reconciliation account for, say, all overseas customers. Vendor MM/FI External supplier: a business partner from whom materials or services can be procured. The information on a vendor is structured according to purchasing organization, allowing each purchasing organization to store its own specific data on the vendor concerned. In Financial Accounting, a vendor is generally a creditor, whereas in logistics various roles can be specified for a vendor (such as "ordering address", "goods supplier", or "invoicing party").

OF 11 SAP GLOSSARY

CONTROLLING

Controlling CO Instrument that supports management's decision-making processes : planning , monitoring , reporting , consulting , informing. Includes financial controlling , investment controlling , cost and profitability controlling .

Account CO Allocation of the costs and revenue of a transaction to a debited entry (cost object, cost center, cost collector) on a specific posting date. assignment CO Debit entries can be: cost centers, orders, projects, cost objects Activities and CO Planning and allocation of activities requires recording quantities measured in activity units. Valuations of activity quantities are carried out activity prices using activity prices (allocation prices). In Overhead Cost Controlling (CO-OM), costs are divided into fixed and variable portions based on the activity quantities. Classifying cost center activities as separate activity types should therefore take the relevancy of specific costs into account. Activity prices can be posted manually or calculated automatically based on the costs assignable to the activities. Different activity prices can be calculated using plan costs and/or actual costs. Planning, allocation, and monitoring of costs can occur at the activity type or cost center levels. Actual costs can be posted on the cost center level only. Assignment of costs so posted proceeds with the aid of the splitting function. Activity inputs from one cost center to other cost centers, orders, or business processes represent utilization of the cost center's resources. A cost center may include one activity type, multiple activity types, or no activity types. Example: Sample activity types in production cost centers would be machine hours or finished units. Allocation price CO Value used in internal activity allocation for the internal movement of costs between cost objects, such as cost centers. The allocation price may be entered manually or be determined iteratively (could be used for service cost centers to pass on costs to production cost centers). Assessment CO Assessment is a method of internal cost allocation in which you transfer the costs of a sender cost center to receiver CO objects (orders, other cost centers, and so on) under an assessment cost element. The system supports both the hierarchical method (where the user determines the assessment sequence) and the iterative method (where the system determines the sequence via iteration). Example: You can assess the costs from the cost center "Cafeteria" to receiver cost centers in proportion to the statistical key figure "employees" for each cost center. Receiver cost center A has 10 employees, while receiver cost center B has 90. In this case, the system would assess 10% of the costs to cost center A and 90% to cost center B. The credit entered on the cost center "Cafeteria" and the debits entered on the receiver cost centers are all stored under the assessment cost element. Depending on the system settings, you can assess all the costs of the sender cost center "Cafeteria" or only part of them CO activity CO Physical measure of the activity output/production in a cost center e.g. number of units produced , hours , machine times . Budget CO/TR The budget is the approved cost structure for an action or project in a particular period. In SAP, budgeting differs from cost planning in that it is binding. Commitment CO/FI Contractual or scheduled commitment, that is not yet reflected in financial accounting, but that will lead to actual expenditures in the future. Commitment management provides for early recording and analyzing of such commitments regarding their cost and financial effects. Commitments are managed for the following objects :CO production orders ,Production orders ,Internal orders or more normally Cost centers. Controlling area CO Organizational unit used to represent a closed system for cost accounting purposes. A controlling area may include single or multiple company codes that may use different currencies. These company codes must use the same operative chart of accounts. All internal allocations refer exclusively to objects in the same controlling area. Cost center CO An organizational unit within a controlling area that represents a separate location of cost incurrence. The definition can be based on functional requirements, allocation criteria, activities or services provided, physical location, and/or area of responsibility. Cost centers are combined into hierarchical decision, managerial, and responsibility groups. Cost centers support differentiated assignment of overhead costs to organizational activities based on utilization of the relevant areas (cost determination function) and for differentiated monitoring of costs arising in an organization (cost controlling functions). Cost centers can include activity types, which categorize the specific activities undertaken by cost centers.

OF 11 SAP GLOSSARY

CONTROLLING Cost element CO Classification of the organization's valuated consumption of production factors within a controlling area. A cost element corresponds to a cost-relevant item in the chart of accounts. Different types of cost element include : material cost elements , settlement cost elements for orders , cost elements for allocating internal activities. Indirect activity CO Method of periodic allocation to determine the input of activity indirectly allocated from the sender (cost center/activity type) from the allocation perspective of the receiver. If entering the activity consumed by the receiver is not possible, this method can be used to distribute the total activity quantity from the sender to the receivers Direct activity CO Direct internal activity allocation is a method of internal cost allocation, by which valuated activities from cost centers can be assigned by allocation cause to cost receivers. Activities represent the output of a cost center (such as production hours or machine hours). These outputs are defined in the R/3 System with activity types. The activity types are valued with prices which are either fixed by the user (political prices) or calculated automatically. To calculate the iterative prices, the R/3 System divides the cost center planned costs assigned to the activity types by the planned activity (or capacity depending on how the System is set up). On allocation the activity produced by the cost center is multiplied by the activity price. These are the costs to be allocated. The sender cost center is credited with this amount and the receiver object is debited accordingly Internal cost CO Allocation of costs based on the quantity of activity produced on a cost center. The activity quantity is multiplied with the planned activity allocation price (standard rate). The result is the costs to be allocated. The sender cost center is credited by this amount and the receiver cost center is debited correspondingly. Internal order CO Object used to monitor sub-areas of costs and, in some instances, revenues. Internal orders can monitor costs of temporary measures, costs and revenues related to the offering of a specific activity, or, alternately, can be used for detailed monitoring of ongoing costs. Internal orders are divided into the following categories: . Overhead orders monitor sub-areas of indirect costs arising from temporary measures. They can also be used for detailed monitoring of ongoing plan and actual costs independently of organizational cost center structures and business processes (e.g. promotions) . Investment orders monitor investment costs which can be capitalized and settled wholly or in part to fixed assets. . Imputed orders monitor period-based accrual between expenses posted in external accounting and imputed costs in internal accounting. . Orders with revenues monitor the costs and revenues arising from activities for partners outside the organizational boundaries, or from activities not belonging to the core business of the organization Overhead Cost CO Component in Controlling (CO) used for planning, managing, and monitoring overhead. Overhead Cost Controlling allows you to analyze Controlling responsibility areas (cost centers) as well as individual orders and projects as the focal points for decision-support PA transfer CO A PA transfer structure is a rule which assigns costs, revenues and quantities from other applications to the value fields and quantity fields structure in Profitability Analysis. PA transfer structures are used to settle orders, assign direct postings from Financial Accounting, and allocate internal activities from CO-OM. A PA transfer structure can consist of any number of value field assignments. A value field assignment is the assignment of individual cost/revenue element groups or variance categories to the desired value or quantity field. The value field assigments in a PA transfer structure must be: . Complete : All the cost and revenue elements which receive costs or revenues must be assigned to the structure. . Unique : Each cost or revenue element can only occur once within the structure Cost of sales or CO Whereas in cost-of-sales accounting the costs are set off against the revenue accountable to them, period accounting takes into account all period accounting the costs of the period, regardless of whether the corresponding revenue was earned in that period Primary cost CO Cost-controlling-relevant item in the chart of accounts that must have a corresponding account in Financial Accounting. It must be created element first as an account in FI before being created in CO.

OF 11 SAP GLOSSARY

CONTROLLING Profit center CO The business object "Profit center" is an organizational unit in accounting that reflects a management-oriented structure of the organization for the purpose of internal control. You can analyze operating results for profit centers using either the cost-of-sales or the period accounting approach. By calculating the fixed capital as well, you can expand your profit centers for use as investment centers. In profitability accounting at the profit center level, all costs and revenues from the profit-relevant logistic activities and other allocations are transferred as statistical postings to the relevenat profit centers. The exchange of goods and services between profit centers can be valuated using the same valuation approach as in financial accounting or another approach (valuation using transfer prices, available in Release 4.0). Profitability CO-PA The object within Profitability Analysis to which costs and revenues are assigned. A profitability segment is defined by a combination of segment characteristic values. You can calculate the profitability of a profitability segment by setting off its sales revenues against its costs. You can use concepts that already exist in the R/3 System (customer, product, sales organization, and so on) as characteristics, or you can define your own concepts (such as "order size class"). The system creates the profitability segments automatically and assigns each one a unique profitability segment number. Profitability segment 1: Product "Prod-1132"/ Customer "100267" Profitability segment 2: Industry "Chemicals"/ Country "USA"/ Product group "Laboratory instruments" Operating concern CO-PA Represents a part of an organization for which the sales market is structured in a uniform manner. You can assign several controlling areas to one operating concern. The individual segments of an operating concern are represented in the form of "profitability segments". By setting off the costs against the revenues, you can calculate an operating profit for individual profitability segments, which are defined by a combination of classifying characteristics (for example: product group, customer group, country, and distribution channel). Revenue element CO Those accounts from a chart of accounts which are used within a controlling area to record the value of products sold. Secondary cost CO Cost element used to distribute costs in internal activity allocation. element Settlement CO Full or partial allocation of calculated costs from one object to another. The following objects can be senders of settlement orders , maintenance orders , CO production orders , production orders , cost objects , customer orders , networks , projects The following objects can be receivers of settlement: assets , internal orders , profitability segments , cost centers , customer orders , materials , networks , projects , G/L accounts Statistical key CO Statistical values describing cost centers, profit centers and orders. May be used as a basis for reallocating costs between cost centers figure (examples could be headcount or floorspace). Statistical order CO Every internal order can be used as a statistical order. Statistical orders are not charged with costs in the normal sense. The costs posted to them are for information purposes only and cannot be settled. Target costs in CO CO Costs required to perform a particular activity. In Overhead Cost Controlling, target costs are calculated using the planned costs for the cost center and the planned costs for the activity. The target costs are then compared with the actual costs for the period. Transaction-based CO Allocation method by which the costs incurred in a business transaction are calculated from the internal exchange of activities and posted in allocation real time to the sender and receiver cost centers or orders. Allocations performed using this method include transaction-based transfers, and direct internal cost allocation

OF 11 SAP GLOSSARY

INVENTORY VALUATION & PRODUCT COST CONTROLLING

INVENTORY VALUATION Material valuation MM Determination of the value of a stock of materials. Valuation-relevant data includes the selection of valuation method: valuation at standard price or valuation at moving price . Moving average price : Price that changes in consequence of goods movements and the entry of invoices and which is used for valuating a material. The moving average price is calculated by dividing the value of the material by the quantity of the material in stock. It is recalculated automatically by the system after each goods movement or invoice entry. . Standard price : Constant price with which a material is valuated, without taking into account goods movements and invoices. Material ledger CO-PC The material ledger collects transaction data for materials whose master data is stored in material master. The material ledger uses this data to calculate prices for valuation of these materials. The material ledger forms the basis of actual costing and enables stock valuation in multiple curriencies using different valuation methods. Non-valuated stock MM Stock of a material held by and belonging to a company that is managed on a quantity basis only. Non-valuated stock is "available" but can only be withdrawn from the stores/warehouse after first having been transferred to "valuated" stock. Split valuation MM Option allowing the values of different stocks of a material within a plant to be managed in different stock accounts. This enables such stocks to be valuated separately. Example: Some stocks of a certain material may have been procured externally, whereas others were produced in-house. Using split valuation, you can assign your "bought-out" stocks to a different account to your "made-in" stocks and valuate the former at a different price to the latter. You can also valuate such stocks using different price control indicators

PRODUCT COST CONTROLLING Product Cost CO-PC Includes Product cost planning : Controlling . Product Costing With Quantity Structure . Product Costing Without Quantity Structure . Reference and Simulation Costing Also includes Cost Object Controlling: . Product Cost by Period . Product Cost by Lot . Product Cost by Sales Order . Costs for Intangible Goods and Services . Actual Costing/Material Ledger . Information System for Product Cost Controlling

PRODUCT COST PLANNING Base object costing CO-PC Tool for planning costs and setting prices, with which you manually enter the items in the form of a unit cost estimate. This cost estimate can be used as a component in another cost estimate and as a reference when planning other objects in the R/3 System.

OF 11 SAP GLOSSARY

INVENTORY VALUATION & PRODUCT COST CONTROLLING Bill of material PP A complete, formally structured list of the components that make up a product or assembly. The list contains the object number of each component, together with the quantity and unit of measure. The components are known as BOM items. With divergent BOMs more than one product may be produced :- . By-product : Material produced incidental to another material in a joint production process. . Co-product : Valuable material generated during a production run together with other valuable materials. An apportionment structure defines how the total cost of a material is apportioned to the individual coproducts. . Primary product : the product for whose production the process is carried out. A primary product is distinguished from other products in that its material number is stored in the recipe header. In a BOM it is possible to flag materials as backflushed (automatic posting of a goods issue for components some time after their actual physical issue for use in an order). The goods issue posting of backflushed components is carried out during confirmation Cost estimate CO-PC The business object cost estimate is a list of costs for a cost object as determined for a particular costing variant. Cost estimates provide the basis for stock valuation, price setting, determining the cost of goods manufactured, and Profitablity Analysis. A material cost estimate can be used to calculate a standard price for the online valuation of goods movements, and the cost of goods manufactured or cost of goods sold for contribution margin accounting in results analysis.Other versions of material cost estimates provide alternative valuation methods for stock valuation according to commercial and tax laws.Preliminary costing of a production order shows the planned debits (such as withdrawals, internal activity allocations, overhead) and credits (goods receipts). In simultaneous costing, cost estimates are created for the manufacturing order in respect of every movement, confirmation and so forth, displaying the actual costs linked to these business activities.A cost estimate consists of itemizations containing detailed information about the origin of the costs, and of cost element itemizations that group the costs according to cost elements. A feature of the material cost estimate is the cost component split, which sorts the costs according to the cost components (for example, material costs, personnel costs, overhead, and so on). Any number of cost estimates can be created for a single costing object.For materials, these cost estimates can have different parameters, such as validity periods and valuation methods. With order-related costing objects, cost estimates include those consisting of planned costs (preliminary costing) and actual costs (simultaneous costing). Cost estimate with CO-PC Function for planning costs and setting prices for materials using the data from Production planning and control. This data--the quantity quantity structure structure--is determined by the system automatically. The quantity structures are the BOM and routing . Cost estimate CO-PC Function for planning costs and setting prices for materials without using the data from Production Planning and Control. You manually without quantity enter the items to be costed (such as materials and activities) into a unit cost estimate. structure CO production CO-PC Internal order that represents a production order from the cost accounting point of view. It is planned using a cost estimate without quantity order structure and is usually settled to inventory. Modified standard CO-PC Costing type that calculates the cost of goods manufactured for a product during the course of a planning period. It differs from the standard cost estimate cost estimate in that it uses the quantity structure that has changed during the planning period as the basis for calculating costs. Net realizable-value CO-PC Method used in joint production to determine the cost of the primary product. This method calculates the cost of the primary product by method subtracting the fixed price of the byproduct from the total cost of the manufacturing process Quantity structure CO-PC Basis for calculating costs in material costing. Normally consists of a bill of material (BOM) and a routing. Routing PP Description of the process used to manufacture plant materials or provide services in the production industry. A routing contains sequences of operations. An operation describes how a workstep is to be performed. Operations can be combined into sequences to show parallel or alternative processes. One operation can occur in several sequences. Several similar routings and their operations can be combined in one group. An operation can be divided into sub-operations to provide more detail of the operation. An operation or sub-operation refers to a work center where it is performed. An operation or sub-operation contains the required activity information. In addition, an operation can require a certain quantity of material components or production resources/tools. A routing can be used to produce several materials. It is used as a reference to create production orders or run schedule headers.

OF 11 SAP GLOSSARY

INVENTORY VALUATION & PRODUCT COST CONTROLLING Standard cost CO-PC The most important type of cost estimate in material costing. Forms the basis for profit planning or product costing where the emphasis is estimate on determining the variances. A standard cost estimate for each product is usually created once at the beginning of the fiscal year or new season. Standard cost estimates calculate the standard prices for semifinished products and finished products. The costs calculated in standard cost estimates are used to valuate materials with standard price control Unit costing CO-PC Method of costing that does not use bills of material or routings. Unit costing determines planned costs for base objects, or supports detailed planning of objects such as orders, cost objects, projects, or sales document items. Work center PP/CO-PC A work center is an organizational unit where a workstep is carried out, producing an output. The work center defines where and by whom an operation is to be carried out. A cost center is assigned to each work center in the work center master record. The work center has a particular available capacity. The activities performed at or by the work center are valuated by charge rates, which are determined by cost centers and activity types. Work centers can be: Machines or People or Production lines or Groups of craftsmen

COST OBJECT CONTROLLING Actuals CO-PC Costs actually incurred during a posting period. The actual costs of a particular undertaking can be compared to the planned costs to calculate variances for analysis purposes. In Cost Object Controlling, the cost objects are debited with the actual costs. Actual costs comprise the following: Work in process, Scrap , Variances When variances are calculated for analysis purposes, the value of the work in process and scrap can be deducted from the actual costs so that the control costs can be calculated. The control costs are then compared to the target costs. Order settlement PP Complete or partial crediting of an order. The costs which have accrued to an order are debited to one or several allocation receivers belonging to financial or managerial accounting. Order-related PP/CO-PC Type of production in which the manufactured products are delivered to inventory without reference to a sales order. The order costs are production collected on production orders and settled to inventory. Cost object controlling is generally based on the order quantity. Preliminary order CO-PC Cost estimate for an order based on the quantity structure of the order. Preliminary order cost estimates can be used to calculate planning cost estimate variances and production variances. Target costs in CO- CO-PC Costs expected to be incurred when a given quantity is produced. In Cost Object Controlling, the target costs are calculated in a cost PC estimate. The target cost version controls which cost estimate is used to calculate the target costs. For example, to determine the total variance you can calculate the target costs in a standard cost estimate for the material based on the actual lot size. Target costs are used in variance calculation. They can also be used to valuate the work in process and scrap. Valuation variant CO-PC Key that determines what prices the system selects when it valuates the quantity structure of a material cost estimate or order, or when it valuates the costing items of a unit cost estimate. A global valuation variant applies to all plants. A local valuation variant applies only to one particular plant. Variance CO Procedure used to determine the variances for cost centers, production orders, and cost object hierarchies in the course of period-end calculation closing. By doing this you can determine such things as the effects of the following factors: . changes to the resources used . changes to the output level of the cost center . changes to the quantity of goods manufactured WIP calculation CO-PC WIP is defined in Sap as unfinished products whose costs are calculated either by subtracting the actual costs of an order from the settled costs of the order, or by valuating the yield confirmed to date. Postings for the work in process calculated by this procedure are generated in Financial Accounting when settlement is carried out.