The requirement for activity types comes from the business to allocate expenses

from one cost object to another cost object either through Internal Activity allocation
or direct activity allocation or both. Mostly the activity types are used in Internal
Activity Allocation. The activities are confirmed in PP and that time, the Production
Order gets the debits on the basis of the quantity and price fed in Controlling and the
another cost object say Cost Center gets the credit since the relevant expenses are
pooled there. If the business wants breakup of costs, they can go for different
activity types, say for labour, overhead, etc. The activity types can also be utilised in
capturing Material Overhead, Production overhead, etc.

With regard to prices, you need to plan for the quantity of activity and its related
expenses in a period to arrive at the price. Say for labour cost is 10000 for a month
and you could able to have 1000 hours of labour. Hence, the price per labour hour is
10.

Trust this answers to your query or helps much in resolving your problem

Difference between activity types and skf:

Both are used as tracing figures. The major difference is that Activity type has price
on its own and its gets summed up at the time of allocation. The sum figures debited
to the receiving cost object and credited to sending cost object. Activity type cannot
stand alone.

But it is not the case with SKF. SKF are only used as tracing factors and do not have
price unlike activity type.

Example
In the case of activity allocation of Labour hours, the activity type of Labour with
price shall be used.
In the case of statistical figure, take the example of Canteen expenses and its
allocation between the Cost objects on the basis of head count of each cost object. :

Hope this answers to your query!

Dear Ravi,

Activity allocation helps in allocating the cost of the business services from one cost
object to cost object. The tracing factors which act as Cost Drivers, are called Activity
type in SAP.

In the case of confirmation of activities of Production Order(Receiver), sum of the

quantity of business activities which were already configured in the Routing of the
product and the price which has been updated manualy or automatically shall be
debited to the Production Order and the Cost Center(Sender) is credited. This is
Internal Activity Allocation.

In Direct Activity Allocation, the allocation happens manually by inputting the Sender
Cost Object, Receiver Cost Object Activity type and the quantity of the Activities. The
system picks up the price from the system. For example, IT Team expenses captured
in the IT Cost Center is allocated to the Receiver Cost Center, say, Finance
Department, for allocating the SAP Consultants on a hourly basis.

Trust this helps much!

Regards,
Ashok SINGH

Basically two types are there for activity allocation :

1. Indirect Activity Allocation : Indirect Activity allocation is the process of allocating activities from
a sender to reciever cost object based on tracing factors like..Statistical Key Fig., planned
receiver activity types etc.
Cost centers serve as senders; receivers can be other cost centers, internal orders (incl.
statistical orders), WBS elements, cost objects or business processes. Like the other periodic
allocation methods, indirect activity allocation uses cycles and segments in order to define sender
and receiver relationships.

2. Direct Activity Allocation :

This is somewhat manual approach for activity allocation based on planning layout defined. It is
based on the cost center currently being planned and the activity type being planned for the
indicated cost center. It can be calculated on fixed or variable price.

The activity types shall be used either in internal activity allocation and Direct
activity allocation. We need to input planned quantity and the prices in KB26, which
connects the activity type to Cost Center which in turn connects to the work center.
The formula for each operaiton is selected in the work centrer.

When the Production Order is confirmed, the activities gets confirmed. The
Production Order is debited with sum of planned price and quantity of activity and
equally also credit the Cost Center. Thus helps in transferring the costs from the Cost
Center to the Production Order.

Lateron, when there is under or over absorption of Cost Center, actual price per each
unit shall be computed either through the system or outside the system and fed into
the system as actual price. When we run actual price revaluation, the Proudction
order gets the debit or credit and equal opposite to the cost center. Thereby, we set
right the uner or over absorption of the the cost centers.

Trust this helps much and if so, pl assign rewards!

Regards,
Ashok SINGH

Method of internal cost allocation by which valuated activities (allocation bases) from cost centers
can be assigned to cost receivers in accordance with the cause of the cost.

The activities or allocation bases represent the output of a cost center (such as production hours
or machine hours). These outputs are represented in the R/3 System as activity types. The
activity types are valuated with prices that are either specified by the user manually or calculated
by the system automatically by means of iterative activity price calculation. To calculate iterative
prices, the R/3 System divides the cost center planned costs assigned to the activity types by the
planned activity (or capacity, depending on how the system is set up).

In internal activity allocation, the activity produced by the cost center is multiplied by the activity
price. The result is the cost to be allocated. The sender cost center is credited with this amount
and the receiver object is debited.

Indirect Activity Allocation

Use
You can use indirect activity allocations to automatically allocate planned and actual activities.

You can specify keys to allocate activity, which is not possible when you use manual activity input
in the plan or actual activity allocation. In addition, if calculating the sender activity quantities
involves too much time or expense, the R/3 System can determine the activity quantity inversely
based on the activity of the receivers.

If you execute indirect activity allocation without completing planning for the
combination cost center/activity type, you must activate the actual price indicator
in the activity type master data.

A special type of indirect activity allocation for actual allocation is the plan=actual activity
allocation. Differenct than other types of indirect activity allocation, the plan=actual activity
allocation allows for a multiple level activity network to be determined iteritavely with the operating
rate as the tracing factor.

Features
You can choose between two methods of indirect activity allocation, depending on the activity
types category. These methods are determined for each segment and can be combined in one
cycle.

Activity quantities can be determined on the sender object

For certain activity types you can determine the total activity quantity for each sender. These are
category 3 activity types, Manual entry, indirect allocation.

Using indirect activity allocation, these posted activity quantities are distributed by the senders
among the receivers defined in the segment according to their allocation bases. The
corresponding segment must use the sender rule Posted quantities. Any receiver rule can be
used, with the exception of Fixed quantities (see: Sender and Receiver Rules for Periodic
Repostings/Allocations).
 The Quality control cost center uses 1000 hours of the Testing activity type. This
cost center provides activity for the cost centers Goods receipt and Finished
products. Allocations are made on the basis of the tracing factor Number of test
items (TI). These are 4000 items for the Goods receipt cost center and 6000
items for Finished products. This corresponds to an activity input of 400 hours for
Goods receipt and 600 hours for Finished products.

The price per activity unit for the Quality control cost center is 50 USD/hr. This
results in activity output costs of 50,000 USD. The receiver cost centers are
debited with the following costs based on the tracing factor TI.

Goods receipt: (50,000 USD X 4000 TI) / 10,000 TI = 20,000 USD

Finished products: (50,000 USD X 6.000 TI) / 10,000 TI = 30,000 USD

Activity quantities can be determined for each sender, but only with great
difficulty

In this case, the R/3 System determines the activity quantity based:

 Either on receiver tracing factors with weighting factors, which can be defined for each
sender

If you use the sender rule Inversely determined quantities, you define the weighting
factors described above by choosing Sender values.

 Or through Fixed quantity values, which you define in segment definition.

If you use the sender rule Fixed quantities, you define the fixed activity quantity by
choosing Sender values.
These activity types belong to category 2 (Indirect entry, indirect allocation).

The corresponding segment can use the following combinations of sender and receiver
rules:

Sender rule Receiver rules

Inversely determined quantity Any

Fixed quantity Any

(see: Sender and Receiver Rules for Periodic Repostings or Periodic Allocations).

In the example, you calculate activities for the sender using the receiver tracing factors
with weighting factors, which are to be defined for the sender. The sender rules here are
inversely determined quantities. You can use any receiver rule.

The receiver tracing factors are:

Goods receipt: 4000 test items

Finished products: 6000 test items

You need 0.4 hour to check one item using the Quality control cost center. The sender
rule defines a weighting factor of 0.4 for the Test activity type.
 This results in an activity input of 1600 hours on the Goods receipt cost center and 2400
hours on Finished products.

The Test activity is valuated with a price of 5 USD/hr. This results in a credit to the sender
of 20,000 USD and debits of 8,000 USD to Goods receipt and 12,000 USD to the
Finished products cost center.

If you are working with transfer prices (parallel value flows), the indirect activity
allocations are carried out in the leading valuation. The plan price used for
allocation thus applies to all the valuations.

For more information on transfer prices, see the SAP Library

o Financial  EC Enterprice Controlling  Profit Center Accounting  Multiple

Valuation Approaches/Transfer Prices
o Financials  CO - Conrtolling  Overhead Controlling  Overhead Controlling
 Multiple Valuations.

See also:

Defining Periodic Repostings or Periodic Allocations

Creating or Changing Cycles

Executing Periodic Repostings or Periodic Allocations Online

Displaying the Cycle Overview

Dear Ravi,

Activity allocation helps in allocating the cost of the business services from one cost
object to cost object. The tracing factors which act as Cost Drivers, are called Activity
type in SAP.

In the case of confirmation of activities of Production Order(Receiver), sum of the

quantity of business activities which were already configured in the Routing of the
product and the price which has been updated manualy or automatically shall be
debited to the Production Order and the Cost Center(Sender) is credited. This is
Internal Activity Allocation.

In Direct Activity Allocation, the allocation happens manually by inputting the Sender
Cost Object, Receiver Cost Object Activity type and the quantity of the Activities. The
system picks up the price from the system. For example, IT Team expenses captured
in the IT Cost Center is allocated to the Receiver Cost Center, say, Finance
Department, for allocating the SAP Consultants on a hourly basis.
Fixed Price are those expenditures which remains constant in total amount irrespective of change
in Volume of production.Eg Rent will be constant even if your production volume changes.The
activity price calculated for such expenditures will also be constant per activity rate even if there is
a change in the volume of production.

Varriable price on the other hand changes with the volume of production .e.g power cost will
change if you produce more.the the activity rate say KWH/ton will also change and its price will
also change if you produce more.

Generally activities for service center fixed costs will yield fixed price.

Once you are done with planning in KP26.these plan amounts are used for standard cost
estimate.when you are doing standard cost estimate, cost will calculated from BOM(Materials
cost) and Routing(here you have activitype plan cost/hr.no.of hrs to finish goods).
once you are with standard cost estimate it will update material master.

To calculate variances(target costs Vs Actual cost),we use target cost.target cost is nothing but
your standard cost estimate cost for that particular materials(Finished or Semi -Finished).
you can check this in OKV6 T.code.

have assigned the fixed cost to an activity type for entire fiscal year.
when i running the cost estimation the system is calculating the acitivity cost including of the fixed
cost.
I want to capture the fixed for the period and not for the no of unit produced.

Eg:
Fixed cost : 25000
Variable cost :0.5/hr per unit.
BOM unit : 10 hrs

when i execute the cost estimation the system is calculating the amount as 25005 ( 25000*10)
+(0.5*10)
which is a wrong calculation.

You can define if Costs are Fixed or Variable based on the Cost Elements they are posted to.

When defining Costing Sheets, you define your Base for the Overheads. If you look there, you
should see buttons for Fixed and Variable. Select a button (say Fixed) and define the Cost
Elements against it. Next, Select the other button (Variable) and define your CEs for this.

Now any costs posted to these CEs will be treated as Fixed or Variable or Total, etc. as per your
definition.
Define a splitting structure

Create a Splitting Rule

Assign Splitting Rule for all activity types
Assign Cost Element Groups to respective activity types.
Execute Actual Cost Splitting (KSS2)

KSII (Price calculation Results – Actual)

Q.No.1
Prices for Cost Center Activity are as follows:

2001/FOH Correct
2001/LABOR Incorrect (Why for this activity price calculation is wrong as I
have assigned same rule for all activity types
2001/MACHIN Correct
2001/SETUP Correct

ACTUAL COST CENTER LINE ITEM

Cost Val.in Total

Elem. Cost element name rep.cur. quantity PUM
812001 LABOR Basic Salary 5,000.00 0.00

813004 SETUP Oil and Lubricants 70,000.00 0.00

R&M
816002 MACHIN Plant&Machinery 500,000.00 0.00

824002 FOH Postage Admin 9,803.92 0.00

824002 FOH Postage Admin 29,702.97 0.00
824002 FOH Postage Admin 40,000.00 0.00
824002 FOH Postage Admin 500,000.00 0.00
824002 FOH Postage Admin 900,000.00 0.00
824002 FOH Postage Admin 45,000.00 0.00
824002 FOH Postage Admin 80,000.00 0.00
824002 FOH Postage Admin -40,000.00 0.00
829001 FOH Directors Exp -Chair 5,000.00 0.00
829001 FOH Directors Exp -Chair 9,000.00 0.00
1,578,506.89 2,153,506.89

AT0001 Machine cost -900.00 -6.00 HR

AT0001 Machine cost -241.50 -1.61 HR
AT0001 Machine cost -150.00 -1.00 HR
AT0001 Machine cost -440,786.50 0.00 HR
AT0001 Machine cost -10.00 -0.10 HR
AT0001 Machine cost -100.00 -1.00 HR
MACHIN -9.71 9.71 51,493.31 OK

AT0002 Labor cost -720.00 -12.00 HR

AT0002 Labor cost -193.20 -3.22 HR
AT0002 Labor cost -120.00 -2.00 HR
AT0002 Labor cost -10.00 -0.20 HR
AT0002 Labor cost -100.00 -2.00 HR ACTUAL CALCU
LABOR -19.42 19.4 257.47 50

AT0003 Factory Overhead -12,000.00 -600.00 EA

AT0003 Factory Overhead -3,220.00 -161.00 EA
AT0003 Factory Overhead -2,000.00 -100.00 EA
 -
AT0003 Factory Overhead 1,379,951.74 0.00 EA
AT0003 Factory Overhead -100.00 -10.00 EA
AT0003 Factory Overhead -1,000.00 -100.00 EA
FOH -971.00 971 1,625.65 OK

AT0004 Set Up -300.00 -2.00 HR

AT0004 Set Up -300.00 -2.00 HR
AT0004 Set Up 300.00 0.00 HR
AT0004 Set Up -200.00 -2.00 HR
SETUP -6.00 6 11,666.67 OK