What is Activity-Based Costing in SAP?
- Activity Based Costing is more accurate method of costing
- Focus on indirect cost (Overheads)
- Traces rather than allocate each expenses category to particular cost object
- Makes “Indirect expenses” “direct”
Steps in Activity-Based Costing Process in SAP
- Identify the activities
- Determine cost for each activities
- Determine cost drivers
- Collect activity data
- Calculate product cost
For further details and an in-depth guide, please download the PDF given below.
- SAP provides standard solutions for Activity-Based Costing
- Activities in ABC is same as business process in SAP, within the business process we have the process of cost allocation i.e. cost driver,
- Cost for each activities can be collected in business process just like a cost object
- Quantities for each activities i.e. quantity for cost driver is the basis for rate calculation of activities,
- Depending on the quantity required for manufacturing of a product the product cost will be computed,
- The booking of Indirect cost i.e. overhead or cost other than direct in nature would be routed through Business Processes
- There are two options available for collection of indirect cost on Business Processes:
- Booking in cost centre and then allocation to Business processes
- Direct booking on the business processes
- Allocation of indirect cost from business process to product takes place for following purpose
- Standard cost estimation at product level
- Actual cost booking through template allocation process
- The business process planning is same as cost centre planning, the only difference between them is a cost centre may have multiple activity types and the business process can have only one cost driver for allocation of cost,
- At cost element level the planning of input cost and planning of output quantity can be entered in business process based on that plan price of cost driver can be calculated,
- At product level we need to plan and fix the activity quantity for each business process, based on that system will compute the standard cost and also post the actual allocation,
- In business process the concept of revaluation of actual price at production order level is same as we know for cost centres.
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