Overview

This process ensures that relevant controlling figures are ready for management accounting in a given accounting period.

The process includes activities such as preparation for cost calculation and allocation, performance result analysis, calculation of work in progress (WIP), and variance settlement.

Before you run the cost calculation, make sure you update the pricing scheme to reflect the change in standard prices. This step enables you to post primary costs manually and upload timesheet data. This way you can ensure all direct labor costs are appropriately allocated to the applicable activity type.

Overhead costs, such as electricity or general storage costs, are typically allocated via cost allocation.

It is possible to carry out variance calculation to identify and analyze instances with a difference between planned material prices for the production order and the usage or consumption. Typically, at this point the ERP system creates an automatic entry equal to the value of the difference between the planned and actual costs.

During the period end procedure, the sales order receives COGS information, and the production lots receive a secondary credit equal to the variance and settlement entries resulting in zero balance. During the settlement process, the variance of product cost collectors is posted to a special expense item in P&L.

As a result of the process, the closing figures are ready for accounting.

Perform profitability analysis flowchart

Paths

How to set up prices from product standard costs

1. Go to Manufacturing and then click Product standard costs udner Master data.

2. Set the necessary filters.

3. Review the information about the current product standard costs. See how to Perform standard cost calculations.

4. Find and drill down to the required Product standard cost document.

5. In the Product standard cost document, click  and select Price setup to create a new document. The system will automatically create and fill the document.

6. In the Price setup document, set the Approved status and post the document.

How to record primary costs manually

Inventory consumption

Paths

1. Go to Warehouse and delivery and then click Internal documents (all) under Internal inventory transfers.

2. Create a new Inventory consumption — Non-operational activities document.

3. Select a Company, a Warehouse, and a Business unit.

4. Go to the Goods tab and click Fill → Select goods by orders.

5. Select goods, specify the quantity, and click Add to document.

6. Open the Expense item selection menu and select an item depending on the context and the destination (cost of materials, direct production cost, production overhead costs, and other).

Post income and expenses for custom financial transactions

Paths

1. Create the following documents to carry out custom cost transactions in the profitability and cost management:

• the Post non-operating income and expenses document with:
  • Expense registration transaction
  • Expense write-off transaction
  • Expense reversal transaction
  • Income registration transaction
  • Income reversal transaction

• the Flow of other assets and liabilities document with:
  • Asset increase and expense decrease transaction
  • Asset increase and income incurrence transaction
  • Liability increase and expense incurrence transaction
  • Liability increase and income decrease transaction

Paths

How to register timesheets charge

1. Go to Manufacturing and then click Timesheets charge under Labor costs.

2. Click Expand by assignees and base documents to display lines by assignees and production stages.

3. Find Production stages and select the lines.

4. Click Generate.

The system will automatically:

• Create a new Timesheets charge document.
• Fill the document with data recorded in production stages.
• Apply relevant rates per work.
• Fill financial and cost controlling data.
• Allocate the labor cost between team members based on the Labor participation rates.

5. Review the information in the document, make necessary changes, and submit it.

How to perform income and expense reclassification

1. Create the Post non-operating income and expenses document with:

• • Expense reclassification transaction
  • Income reclassification transaction
  • Expense transfer between branch offices transaction

2. Select an Expense item depending on the context and the destination (cost of materials, direct production cost, production overhead costs, and other).

Paths

How to set up allocation for deferred expense balance

1. Go to Profitability & cost and then click Deferred expense allocation under Income and expenses.

2. Go to the For allocation tab.

3. Select a Company.

4. Set the end date of the accounting period.

The system will prompt you to create an allocation document considering the allocation documents created earlier in the accounting month.

5. Select a line and click Allocate expenses. The system will automatically create and fill the document.

In the Deferred expense allocation document:

• Go to the Main tab.
• Check the information in the Business unit, Line of business, and Deferred expense item fields.

• In the Allocate field, select a period option: By months, By calendar days, or Customizable. The default option is By months.

• Specify the start and end dates for allocation.
• Select the necessary check boxes if you want to apply the allocation for management and/or local accounting.
• Specify an amount according to the information in management and/or local accounting.

6. Go to the Allocation by months tab.

7. Click Allocate expenses. The system will automatically fill the information in accordance with the settings from the previous steps.

8. Check that the Expense item is filled. Open the Deferred expense item and find an Expense item for allocation purposes.

9. In the Cost share column, check the cost breakdown.

10. Select lines and click Fill → Business unit to change business units for the expense allocation.

11. Make changes in the information if necessary and post the document.

Paths

How to set up direct production cost allocation

1. Go to Profitability & cost and then click Expense allocation under Income and expenses.

2. Set a period and select a Company.

3. Click More actions → Change form and enable the Group of items form item.

4. Set the General manufacturing costs filter (depending on the actual group name).

Automatic expense allocation

1. Go to Profitability & cost and then click Expense allocation under Income and expenses.

2. Set the Document generation is required state.

3. Review the list of expenses for allocation, select them, and click Generate allocation documents. The system will automatically create and fill the Expense allocation between production lots documents.

4. Check that the To lots check box is selected and choose the By default rule option.

Pay attention to specific automatic filling rules:

• The system copies the Cost allocation rule specified in the Expense item and pastes data in the Allocation rule tab of the document.
• The system copies the Business units in accordance with the Cost allocation rule and stores this data in the document. When the structure of Business units changes, the allocation document allocates expenses to the same Business units that were specified before the changes. To update the Business unit list for expense allocation purposes, re-post the document.

5. Review the created documents.

Manual expense allocation

1. Go to Profitability & cost and then click Expense allocation under Income and expenses.

2. Set the Requires manual document entry state.

3. Review the list of expenses for allocation, select a line, and click Open. The system will automatically create and fill the Expense allocation between production lots documents.

4. Select the To lots check box and choose the Manually option.

• Allocate to production lots

1. Go to the Production lots tab, click Add to add a new line.

2. In the Picking option field, select By stages or By products.

3. Select and add a Production lot to the document.

4. Specify the Cost share.

• Allocate to other expense items

1. At the top of the form, select the To expense items check box.

2. Go to the Other items tab.

3. Add a new line and fill the Business unit, Line of business, and Expense item fields.

4. Specify the Cost share of the expense.

• Allocate to WIP

1. At the top of the form, select the To WIP check box and specify the share of the expense to transfer to WIP.

2. Review the document and post it.

Expense allocation issues

1. In the Expense allocation document, set the Allocation error state.

2. Review the list of expenses for further consideration.

3. Read and follow the system recommendations.

How to set up overhead cost allocation

Overhead costs are costs that can be attributed to the product only indirectly, for example, electricity or general storage costs. These costs are typically allocated using cost allocation to controlling objects.

1. Go to Profitability & cost and then click Expense allocation under Income and expenses.

2. Set a period and select a Company.

3. Click More actions → Change form and enable the Group of items form item.

4. Set the General manufacturing costs filter (depending on the actual group name).

Automatic expense allocation

1. Go to Profitability & cost and then click Expense allocation under Income and expenses.

2. Set the Document generation is required state.

3. Review the list of expenses for allocation, select them, and click Generate allocation documents. The system will automatically create and fill the Expense allocation between production lots documents.

4. Check that the To lots check box is selected and choose the By default rule option.

Pay attention to specific automatic filling rules:

• The system copies the Cost allocation rule specified in the Expense item and pastes data in the Allocation rule tab of the document.
• The system copies the Business units in accordance with the Cost allocation rule and stores this data in the document. When the structure of Business units changes, the allocation document allocates expenses to the same Business units that were specified before the changes. To update the Business unit list for expense allocation purposes, re-post the document.

5. Review the created documents.

Manual expense allocation

1. Go to Profitability & cost and then click Expense allocation under Income and expenses.

2. Set the Requires manual document entry state.

3. Review the list of expenses for allocation, select a line, and click Open. The system will automatically create and fill the Expense allocation between production lots documents.

4. Select the To lots check box and choose the Manually option.

• Allocate to production lots

1. Go to the Production lots tab, click Add to add a new line.

2. In the Picking option field, select By stages or By products.

3. Select and add a Production lot to the document.

4. Specify the Cost share.

• Allocate to other expense items

1. At the top of the form, select the To expense items check box.

2. Go to the Other items tab.

3. Add a new line and fill the Business unit, Line of business, and Expense item fields.

4. Specify the Cost share of the expense.

• Allocate to WIP

1. At the top of the form, select the To WIP check box and specify the share of the expense to transfer to WIP.

2. Review the document and post it.

Expense allocation issues

1. In the Expense allocation document, set the Allocation error state.

2. Review the list of expenses for further consideration.

3. Read and follow the system recommendations.

Paths

How to enter allocation statistics

1. Go to Profitability & cost and then click Enter indicators for expense allocation under Income and expense accounting.

2. Set the accounting Period.

3. Click a Business unit or a Cost center.

4. Click an Indicator, click the Enter hyperlink, enter a value, and specify a validation date.

Paths

How to run cost and overhead calculation

1. Go to Profitability & cost and then click Month-end closing under Month-end closing.

2. Choose the Final closing option.

3. Specify a period and select companies.

4. Find the Cost allocation and cost calculation procedure and click the Calculate hyperlink.

How to analyze cost calculation results

Inventory cost calculation analysis

Paths

1. Go to Profitability & cost, click Profitability and cost reports, and then open the Company inventory cost report under Inventory cost.

2. Click and select a report option:

• Company inventory cost by transactions
• Enterprise inventory cost
• Enterprise inventory cost by transactions

3. Set a period, select a Company, and generate the report.

4. Review the information about the quantity and cost at the beginning and at the end of the period.

Manufacturing cost calculation analysis

Paths

1. Go to the Movement of materials and works at company level report.

2. Set a period, select a Company, and generate the report.

3. Review the summary information about cost flows, cost allocation by production lots, and released products by companies.

4. Track the information about the material receipt, material consumption, labor costs, and overhead costs to production lots and product release.

5. Go to the Transfer of inventory and production costs by companies report.

6. Set a period, select a Company, and generate the report.

7. Review the summary information about costs (materials, kinds of work performed, and overhead costs), production lots, and released products by companies.

8. Go to the Product cost tree report.

9. Set a period, select a Company, and generate the report.

10. Make the analysis of the product cost drilled down up to primary costs.

11. Go to the Analysis of released product cost by company report.

12. Set a period, select a Company, and generate the report.

13. Track the cost of the manufactured product unit.

14. Check the overall cost of all products manufactured for the period by companies.

15. Go to the Company cost records by production lots report.

16. Set a period, select a Company, and generate the report.

17. Review the primary costs by companies (materials, labor, overhead costs) grouped by cost centers.

18. Analyze the allocation of costs per production lot.

COGS calculation analysis

Paths

1. Go to Sales, click Sales reports, and then open the Enterprise gross profit report under Sales management.

2. Click Settings and set a Period.

3. Go to the Structure tab and select the Item, Variant, Batch check boxes.

4. Save the settings and generate the report.

5. Make the analysis of sales by business units, managers, and products.

WIP calculation analysis

Paths

1. Go to Manufacturing, click Manufacturing reports, and then open the Transfer of inventory and production costs by companies report under Shop-floor manufacturing accounting.

2. Set a period, select a Company, and generate the report.

3. Analyze the information about costs in the closing balance by production lots.

Deferred expense allocation analysis

Paths

1. Go to Profitability & cost → Profitability and cost reports, open the Income and Expenses — Enterprise report under Income and Expenses, click More actions → Report options, and select the Expenses — Company report.

2. Set the necessary standard filters.

3. Go to Settings, select the Advanced mode, and click Add filter.

4. Find and expand an expense item, double-click Cost allocation option (manag.).

6. Set the Equal to condition and choose the To deferred expenses option.

7. Generate the report.

8. Check the Recorded in the current period and Allocated to deferred expenses columns for differences.

9. Pay attention to the Expense balance column and find expenses that are not allocated yet.

Paths

How to analyze overhead calculation results

1. Go to Manufacturing, click Manufacturing reports, and then open the Movement of itemized expenses by companies report under Shop-floor manufacturing accounting.

2. Set a period, select a Company, and generate the report.

3. Review overhead production expenses by companies related to a business unit and allocated to the product cost.

4. Check if all overhead costs are allocated to production lots.

Paths

How to analyze cost variance calculation results

1. Go to Profitability & cost → Profitability and cost reports, open the Enterprise lot list report under Inventory cost, click More actions → Report options, and select the Company lot list report.

2. Set a period, select a Company, and generate the report.

3. Click Settings, select the Advanced mode, go to the Fields and sorts tab, and select the following check boxes:

• Cost preliminary receipt
• Cost deviation receipt
• Cost preliminary expense
• Cost deviation expense

4. Save the settings and generate the report.

5. Make the analysis of cost calculation variances by companies, items, and production lots.

6. Go to Profitability & cost → Profitability and cost reports, open the Enterprise gross profit report under Income and expenses, click More actions → Report options, and select the Gross profit of companies report.

7. Set a period, select a Company.

8. Click Settings, select the Advanced mode, go to the Fields and sorts tab, and select the following check boxes:

• Preliminary cost
• Cost deviation

9. Go to the Structure tab, select the Item, Variant, Batch check boxes.

10. Save the settings and generate the report.

11. Make the analysis of cost calculation variances by business units, managers, and products.

How to set up P&L expense allocation by lines of business

Automatic expense allocation

1. Go to Profitability & cost and then click Expense allocation under Income and expenses.

2. Set a period and select a Company.

3. Click More actions → Change form and enable the Group of items form item.

4. Set the General business expenses filter (depending on the actual group name).

5. Set the Document generation is required state.

6. Review the list of expenses for allocation.

7. Select expenses and click Generate allocation documents. The system will automatically create and fill the Expense allocation between lines of business document.

8. Pay attention to the specific automatic filling rule: the application copies the Cost allocation rule specified in the Expense item and pastes data in the Allocation rule tab of the document.

9. Review the created documents.

Manual expense allocation

1. Go to Profitability & cost and then click Expense allocation under Income and expenses.

2. Set a period and select a Company.

3. Click More actions → Change form and enable the Group of items form item.

4. Set the General business expenses filter (depending on the actual group name).

5. Set the Requires manual document entry state.

6. Review the list of expenses for allocation.

7. Select a line and click Open. The system will automatically create and fill the Expense allocation between lines of business document.

8. Select the Lines of business manually option.

9. Go to the Lines of business tab.

10. Specify the lines of business and proportion values for further allocation.

11. Post the document.

Expense allocation issues

1. Go to Profitability & cost and then click Expense allocation under Income and expenses.

2. Set a period and select a Company.

3. Click More actions → Change form and enable the Group of items form item.

4. Set the General business expenses filter (depending on the actual group name).

5. Set the Allocation error state.

6. Review the list of expenses for further consideration.

7. Read and follow the system recommendations.

Paths

How to perform P&L expense allocation by lines of business

1. Go to Profitability & cost and then click Month-end closing under Month-end closing.

2. Choose the Final closing option.

3. Specify a period and select companies.

4. Find the Allocation of expenses by lines of business procedure and click the Allocate hyperlink. The system will start the calculation and allocation process and show the progress.

5. Go to the Income and Expenses — Company report.

6. Set the necessary filters and generate the report.

7. Review the breakdown by Lines of business in the columns.

Paths

How to set up P&L income allocation by lines of business

1. Go to the Allocations of income by lines of business workplace.

2. Create a new document.

In the Allocation of income by lines of business document:

1. Select the By company option and choose a Company.

2. Go to the Income tab and click Fill in by balance. The system will automatically fill outstanding amounts by Income items.

3. Review the information and post the document.

How to perform P&L income allocation by lines of business

1. Go to Profitability & cost and then click Month-end closing under Month-end closing.

2. Choose the Final closing option.

3. Specify a period and select companies.

4. Find the Allocation of income by lines of business procedure and click the Allocate hyperlink. The system will start the calculation and allocation process and show the progress.

5. Go to the Income and Expenses – Company report.

6. Set the necessary filters and generate the report.

7. Review the breakdown by Lines of business in the columns.