Overhead Management through Template

[Former Member]

Introduction:

Overhead management is an important topic in product costing. It helps to distribute indirect product cost to the product. SAP provides few standard means of charging overhead cost to the product, like Costing sheet, allocation cycles, and Overhead template. In this document we will see the extensive usage of overhead template, the configuration required, master data maintenance and the overhead cost allocation.   

Overhead template:

Overhead template is a method of applying overheads to finished goods, semi-finished goods, materials on the basis of template. Overhead template provide more freedom to apply overheads rate from traditional methods of overhead rate as used fixed percentage on raw material or fixed percentage on labor cost through costing sheet.  It provide alternative to calculate overhead on the basis of complex formula. For example, if we want to apply overhead rate on the basis of net quantity produced, then we can apply overhead templates. We will see this in more detail in the document.

Configuration required:

Define Overhead key:

1. IMG --> Controlling --> Prod Cost Controlling --> Product Cost Planning --> Basic Settings for Material Costing --> Overhead --> Define Overhead Keys

Overhead key is a four digit alphanumerical key, which is assigned to process/production order. That link actual overhead template cost to the orders. (e.g. OH01 as Overhead key) 

Define Overhead group

1. IMG --> Controlling --> Prod Cost Controlling --> Product Cost Planning --> Basic Settings for Material Costing --> Overhead --> Define Overhead Group

Here we deifne the overhead group, and assigned to valuation area and overhead key. Overhead group is maintained in material master data in Costing view 1 tab.  

Define Costing Sheet

1. IMG --> Controlling --> Prod Cost Controlling --> Product Cost Planning --> Basic Settings for Material Costing --> Overhead --> Define Costing Sheets

If we are using overhead template then also we need to create a costing sheet but no rules need to be defined for overhead calculation in costing sheet. Here we just need a costing sheet with no credit, no base, etc. The purpose of creating a costing sheet name, so that we can assign overhead groups, template to costing sheet and then assign costing sheet to costing variant and this link takes the cost from overhead template while doing the cost estimate. 

Create Overhead template

Transaction CPT1:

There are two different types of overhead templates that need to be created, one for Plan overhead (in environment 001) and another for actual overhead (in environment 009).

Creating plan overhead template: define the name of overhead template and environment as 001 

Enter

In template Overview,

Ø  Type: select Calculation row for cost center & activity combination

Ø  Object: Define COSTCENTER/ACTIVITY e.g. 1000000001/MMM

Ø  Plan Quantity: define plan quantity with formula available. Here I have provided a quantity which will be equals to “Cell ((OderTotalQuantity – OrderTotalScrapQuantity)/ CostingLotSize))”  It means the system will take roundup value to the next highest whole number for a quantity from ration of Net Quantity produced to Costing lot size.

Ø  Plan Activation: Activate

Ø  Actual Activation: No as it’s for environment 001 i.e. for plan only 

This is just a hypothetical example that I have given, but we can chose the different options available from standard and apply mathematical formulas if required.

The standard options are given below

If there will be any error then system will give an error message. Now check where it’s marked as red, and then rectify that part. 

For example

Assign overhead template to costing sheet & overhead key

After defining the overhead template, these plan and actual overhead templates need to be assigned to costing sheet and overhead keys.

Transaction KTPF

After this all the configuration are ready, but few points need to be taken care:

Ø  Overhead group need to be assigned in costing 1 view of material master data.

Ø  Overhead key need to be assigned in process/ production orders

Ø  Standard cost estimate automatically determine overhead template cost

Ø  For actual overhead cost, we need to execute CPTD for overhead allocation at plant level and CPTA for overhead allocation for single order level.

Conclusion

In SAP there are different ways of applying overhead cost for product costing, but which one to choose is depend upon the requirement. Here I have tried to explain the usage of Overhead template and what are the configurations required for the same.