Planning Costs for WBS

Objective

After completing this lesson, you will be able to list methods for cost planning with a Work Breakdown Structure (WBS)

Methods of Cost Planning for WBS Elements

James and Linda Discuss Cost Planning in SAP Project System

Linda work as a controller at Hybrid Machinery and discusses with James, a project planner, about how costs must be planned in the investment project they are responsible for.

Note

This is their conversation:

Cost Planning in Projects

Characteristics of cost planning are shown. These are explained below.

You can plan costs for a project in the SAP Project System (SAP PS) based on WBS elements and/or network activities.

The various ways that you can plan costs for WBS elements are as follows:

  • Overall planning

    This is the most basic form of cost planning, where the costs for WBS elements are entered manually. You can choose to break down your figures by fiscal year.

  • Detailed planning

    This type of planning (of primary costs and activity inputs) is based on cost elements and periods.

  • Unit costing

    For each WBS element, you use a scheme for entering quantities, such as materials, internal activities, external activities, variable items, and so on. This type of planning is cost element-based.

  • Easy Cost Planning (ECP)

    ECP is a user-friendly method for performing element-based cost planning with a quantity structure. You can then use execution services to enter commitment and actual data relating to planned costs.

  • SAP Business Planning and Consolidation (BPC)

    This is a method used to plan costs in SAP Analysis for Microsoft Office, for example, Microsoft Excel, and transfer the data directly to the SAP S/4HANA planning tables in the back-end system.

Cost Planning in WBS: Manual/Activities

In addition to manual planning in the WBS, you can assign different types of orders (internal orders or maintenance orders) to WBS elements that are flagged as account assignment elements. This assignment can then be used to display the planned costs of the orders for the project. You can also assign activities to WBS elements and plan costs using these activities.

You can plan costs for a project in SAP PS using the following methods:

  • Manual cost planning in a WBS

  • Cost planning using activities (network costing)

Overall Planning Costs

Structure-oriented cost planning is introduced.

Structure-oriented cost planning is the simplest type of cost planning. It is a cost element-independent type of planning where you enter and display the plan values hierarchically. Structure planning is not by cost element, and it is not period-specific. It does not depend on specific dates (overall planning value). It can be by fiscal year (annual planning). It is suitable for a simple, first (rough) estimate of the costs for the project and its work packages.

Detailing Costs for WBS

An example of activity input planning is shown.
  1. Primary costs: material, external activities.
  2. Activity input: internal activities.

Use cost planning by cost element (detailed planning) when more precise information is available. Cost element planning covers primary costs, activity inputs, and statistical key figures. Cost element planning is independent of project scheduling. If a project or individual work package is rescheduled, you must reschedule the cost plan manually.

You must only use cost planning by cost element and period for projects that you are reasonably sure you don't have to postpone.

Plan Costs for WBS Elements

ExerciseStart Exercise

ECP for WBS Elements

An example is shown of Easy Cost Planning (ECP).

Easy Cost Planning (ECP) enables you to plan costs for WBS elements. You can access ECP for projects from the Project Builder. You choose a WBS element from the structure and then create costing items for this WBS element. Cost planning with ECP is cost element-based. The cost planning periods are determined from the basic start date of the WBS element. To enter costing items, you can also use planning forms. See the figure ECP for WBS Elements. When you do this, characteristics, such as work in hours, are valuated. The characteristic values from the planning form are linked to quantities, values, or actions in the costing items (for example, to the quantity of an internal activity in the figure). Once you have transferred the values, the costing items appear under the relevant WBS elements in the structure.

ECP can be used as a simple preliminary costing for projects. The preplanned costs are then replaced, for example, by a quantity structure of networks and activities. You can also use ECP to create planned data for the project execution phase. In this case, you can use execution services to enter commitment and actual costs for the planned costs. In Customizing, you define the plan version in which values planned by ECP are stored.

Plan Costs for WBS Elements Using ECP

Part 1 of the exercise/simulation:

ExerciseStart Exercise

Part 2 of the exercise/simulation:

ExerciseStart Exercise

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