Period-End Closing Sales Order - Overhead Cost

Objective

After completing this lesson, you will be able to calculate overhead costs for period-end closing

Period-End Closing Activities

The image shows two sections - Order-Related Controlling and Product Cost by Sales Order. Each section lists a series of steps involved in their respective processes, such as template allocation, revaluation using actual prices, overhead costs, work in process, variance calculations, results analysis, and settlement.

For valuated sales order stock, the period-end closing process for production orders assigned to a sales order is identical to the period-end closing process for Make-To-Stock (MTS) production. In particular, the period-end closing process includes calculating Work In Process (WIP) and production order variances. When you use sales order controlling, you can then execute period-end closing for the sales order. This includes template allocation, overhead calculation, results analysis, and settlement. In contrast, no period-end closing is performed for sales orders in sales-order-related production.

Overhead Costs

An illustration showing the process of allocating overhead costs to business processes, cost centers, and products/sales orders in financial accounting. It identifies key steps like recognizing resource-intensive processes, assigning costs using resource drivers, detecting non-value-added activities, and determining realistic product costs based on cost driver consumption.

You can assign direct costs from other modules, such as Financial Accounting (FI), directly to cost objects, and overhead costs to cost centers. This is a simplified rule for general cost allocation for production. Overhead costs have always been allocated using various methods (activity allocation, overhead) from the cost centers to the cost objects. When you use activity-based costing, overhead costs are first assigned from the cost centers. These overhead costs are then passed on to the cost items, primarily using the template allocation technique.

To avoid any manual effort, you can use template allocation to process overhead cost. All controlling objects, such as cost objects and profitability segments profitability analysis (CO-PA), are suitable for use as receivers.

The template allocation technique allocates the Activity-Based Costing (ABC) processes and activity types of the cost centers. In principle, all this information in the system can be used as cost drivers.

Process Template

The process template is determined dynamically based on the following parameters:

  • The costing sheet for the application of overhead is selected with the valuation variant.
  • The overhead key is either entered directly in the cost object or derived from the overhead group from the material master (costing view 1).
  • The combination of overhead key and costing sheet is used to assign a template in Customizing.

Overhead Cost Allocation Using Surcharges

The image depicts a diagram explaining cost centers and surcharge calculation methods based on percentage of base cost element, quantities, dependencies, and fixed/variable cost portions. It also shows an industrial machine or production line with gears and components, likely representing the manufacturing process related to the cost analysis.

The system provides another method for allocating overhead when it is applied to cost objects. This overhead is then credited to the cost objects (cost centers, internal orders). You can define overhead in a costing sheet, which you then assign to the cost object. The system calculates the amount as a percentage overhead on certain consumption cost elements or as an amount dependent on a specific consumption quantity.

Overhead Costs Versus Process Costs

The image contrasts conventional costing and costing using process costs for manufacturing. It breaks down material costs into direct material costs and overhead (procurement, storage, commissioning) processes. Production costs are similarly divided into direct costs for production hours and overhead costs like setup, production control, and testing processes.

It is difficult to analyze how overhead is applied to cost objects without referring to Customizing. Template allocation for processes and activity types enables overhead to be allocated in a meaningful and transparent manner without requiring much manual effort when period-end closing is performed.

Template Allocation and Overhead Costs for Sales Orders

Business Example

In the previous exercise, you confirmed two forklifts T-FL## which were produced specifically for your customer. Two of them have been delivered, but yet not billed. You want to carry out the billing. Now you perform the period-end closing for your production orders (optional in this course) and for the sales order item.

The first step is to run template allocation.

Steps

  1. Run the template allocation for your sales order using the app Run Actual Template Allocation - Sales Orders in the current period and current fiscal year. Use the following data:

    FieldValue
    Sales DocumentYour sales order number
    PeriodCurrent period
    Fiscal YearCurrent year
    Background ProcessingDo not select
    Test RunDo not select
    Detail ListsSelect
    Messages from Object Selection SeparateDo not select
    Delete messages from object selectionDo not select

    Verify the costs that have been allocated.

    1. In the SAP Fiori Launchpad, select the Run Actual Template Allocation - Sales Orders app in tile group Controlling - Product Cost by Sales Order.

    2. On the Run Actual Template Allocation - Sales Orders initial screen, enter the data provided in the table.

    3. Choose Execute.

    4. The system allocates costs for customer service.

      Result

      This means that, based on the template assignment logic of the Customizing table Assign Templates to Cost Objects, a template was assigned to this sales order.

      Note

      The customer who bought a fork lift gets a service package.
      .

  2. Calculate the overhead costs for the sales order item. Verify why actual overhead has not been calculated. Use the following data:

    FieldValue
    Sales DocumentYour sales order number
    PeriodCurrent period
    Fiscal YearCurrent year
    Test RunDo not select
    Dialog DisplaySelect

    1. On the SAP Fiori Launch Pad, select the Run Actual Overhead Calculation - Sales Orders app in tile group Controlling - Product Cost by Sales Order.

    2. On the Actual Overhead Calculation - Sales Orders initial screen, enter the data provided in the table.

    3. Choose Execute.

    4. Verify overhead costs displayed, calculated based on actual costs previously posted for delivery .

    5. Close the app.

  3. Analyze the situation on your order using the Display Sales Order Hierarchies app.

    1. Select the Display Sales Order Hierarchies app in tile group Controlling - Product Cost by Sales Order.

    2. Enter the number of your sales order and choose Execute.

    3. On the Sales Order Hierarchy screen, double-click your sales order.

      Result

      The report is displayed with your default layout.

    4. View the posted template costs for Service.

    5. Leave the app.

  4. Return to the home page.

    Result

    You have completed this exercise.

Summary

  • Period-end closing for sales orders is similar to make-to-stock production.
  • Costing sheets and overhead keys determine template allocation.
  • Overhead costs can be allocated using surcharges on consumption cost elements.

Learning

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