Cost Center Allocation

[Former Member]

Business Scenario

Cost Center : C1 ( Canteen)

Cost Center : C2

All the FI Postings related to Canteen will be sent to Cost Center C1

From C1 90% of the amount will be allocated to C2 and 10% will be retained in C1

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1st May 2010 --- $100 Posted in FI with Cost Center C1

30th May 2010 -- Allocation happened

Now after the Allocation happens, C1 will have an amount of $10 and C2 will have $90

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1st June 2010 -- $200 Posted in FI with Cost Center C1

So now C1 will contain $200 + $10 ( Portion from May month)

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1) Whether 90% of $210 will be sent to C2 or 90% of $200 will be sent C2?

2) How the SAP system knows whether $210 or $200 needs to be allocated to C2?

Thanks

[iklovski · Accepted solution]

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[Former Member · Accepted solution]

But for the month of June the Business had incurred only $200 and that's what needs to be split into 10% and 90% for C1 and C2, that should be the logical approach.

But as per your concept it takes $210 for Split - I believe this can not happen and for sure SAP must have a different approach - taking into consideration what's the NEW Cost that needs to be split and Omitting the earlier share it got due to allocation.

Thanks

[Former Member · Accepted solution]

If the cycle has checkbox "cumulative" unticked, the system will only take June values into account when you run the cycle in June (i.e. 90% of 200 will be allocated)

If "cumulative" is ticked, the system will determine 90% of the cumulative cost on C1 (90% of 300) belong on C2. It will post this vlaue LESS the value already posted to C2 in May.

In the scenario described by OP, both configurations end up posting 180 to C2 in June.

[Former Member · Accepted solution]

Thanks Nicolas - Still I am confused.

I see two Scenarios here

Scenario 1:

We can depute a Cost Center (SOURCE) , which will allocate all cost it has to the Target Cost Center 100%, during the allocation process

So once the Allocation happens the Source Cost Center will have the balance 0. If the Source cost Center Contains certain amount meaning, an allocation needs to happen

This is Simply Straight Forward approach

Scenario 2:

We can depute a Cost Center (Source) - The Source Cost Center will receive the Cost from FI, will retain 10% of the Cost to itself(source) and send the 90% to the Target Cost Center.

This 10% of cost that's been retained in C1 I am calling that as "allocated Cost for C1"

Now if the next Transaction happens in FI, that Cost will flow in to C1 - Now C1 has two Costs

1) The Cost that needs "to be allocated Cost" (The recent cost flown from FI)

2) The "Allocated Cost for C1" that happened from first FI Transaction

Whether SAP has a different approach to differentiate these Two Costs that are been sitting in C1 now?

Thanks.

[Former Member · Accepted solution]

I'll try to clarify:

general note: Allocations are run once a month, after all FI postings are done.

Scenario 2

Case 1: in cycle "cumulative" not ticked.

-->the "retained" 10% were retained in Period A. They play no role in the allocation run in Period B. Only postings from Period B are taken into accoutn

Case 2: in cycle "cumulative" is ticked.

The system does not know that 10% were retained in Period A. It knows the 100% of what came to C1 from FI in Period A and the 100% that came from FI in Period B and it knows the amount already allocated to C2 in Period A (because there is a Co-document for that amount, while there is no Co-document saying "10% retained") Thus the system knows what needs to be posted from C1 to C2 to make sure 90% of the cumulative FI-postings to C1 end up on C2.

I don't really understand scenario 1. Yes you can allocate 100% to another cost center, on a periodic or cumulative basis. I don'T see any problem arising from that unless you are doing multiple allocations per month (with multiple cycles)

[Former Member · Accepted solution]

Thank you Nicolas - No Issues with Scenario 1.

Whether my below understanding is Correct?

Scenario 2:

CASE 1 : Cumulative NOT Ticked

Period 1 : Posting happens in FI for the amount of $100

Step 1 : C1 Collects $100

Step 2 : Allocation run happens - $10 Retained in C1

Period 2 : Posting Happens in FI For the amount of $200

Step 3 : C1 Collects $200

Step 4: Allocation run happens ONLY for $200 from C1 because Cumulative Check box is NOT Checked. $20 will be retained in C1. The earlier retained amount of $10 from Period 1 will NOT be considered for Allocation

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CASE 2: Cumulative TICKED

Period A : Posting happens in FI for the amount of $100

Step A : C1 Collects $100

Step B : Allocation run happens - $10 Retained in C1

Period B : Posting Happens in FI For the amount of $200

Step C : C1 Collects $200

Step B: Allocation Run happens for $200 PLUS the $10. C1 Retains 10% of $210 i.e. $21 and the balance will be sent to C2.

[Former Member · Accepted solution]

Step 2: Allocation Run happens for $200 PLUS the $10. C1 Retains 10% of $210 i.e. $21 and the balance will be sent to C2.

That one you got wrong.

Allocation run happens for 300 (200+100) --> cumulative share of C2 is 270, but 90 of those are already on C2 from period 1 --> 180 to be allocated in period 2.

In your scenario, cumulative or not cumulative lead to the same result, only the backgroung logic is different. In other scenarios, they could give different results.

The only reason I mentioned the two settings is that Eli seemed to have a different understanding of a cumulative run.

[Former Member · Accepted solution]

Nicloas how C2 is having $300 now?

Period 1 amount $100 was allocated and now C1 has ONLY $10

Period 2 Amount $200 its the new amount that flow into C1, so $200 + $10 should be $210 correct for Allocation?

Thanks for your extreme patience

[Former Member · Accepted solution]

Moderator Comments:

This was an excellent thread that I believe will help many others understand the Cost Center Distribution of Costs. From the last responses it appears this thread has been answered and the conclusion has been successful. Thank you to all for not only opening the message but also for those that assisted in answering.

Kind Regards,

Brendan.

ERP_CO_CCA