Overhead

Use

Overhead costs are costs which can only indirectly be attributed to the product, such as
electricity or general storage costs. You can allocate these overhead costs in the following
ways:

 Overhead application

In the conventional method, overhead is applied to the reference object as a percentage

rate or a quantity-based rate. The overhead is applied by means of costing sheets.

 Template allocation

Here, cost drivers are used to assign overhead to the reference object on a source-
related basis according to usage. The overhead is applied by means of templates.
Sender objects can be business processes or cost centers/activity types.

 Integration of business processes into the routing

Assigning process costs to routing operations is particularly suitable for direct production
processes. On the other hand, indirect processes should be assigned using templates.

Integration

Overhead is assigned from Financial Accounting (FI) to the cost centers in Cost Center
Accounting (CO-OM-CCA). If you use Activity-Based Costing (CO-OM-ABC), overhead is
passed on from Cost Center Accounting to the business processes of Activity-Based Costing.

The overhead costs are in turn passed on from Cost Center Accounting or Activity-Based
Costing to Product Cost Controlling (CO-PC).

You can transfer the costs from Cost Object Controlling to the following:

 Financial Accounting (FI), to valuate finished and unfinished products, for example
 Profit Center Accounting (EC-PCA)
 Profitability Analysis (CO-PA)
 Material Ledger/Actual Costing (CO-PC-ACT)
You can pass on overhead costs that have not been applied to a cost object (such as sales and
marketing costs) directly from Cost Center Accounting or from Activity-Based Costing to
Profitability Analysis.

Features

You can calculate both planned and actual overhead costs. You can also apply overhead to
process costs. You can use overhead calculation for all the cost objects in the R/3 System.

You can calculate planned overhead costs in the following:

 Product Cost Planning (non-order-related material costing)

 Preliminary costing of manufacturing orders (production orders and process orders), and
product cost collectors
 Sales order cost estimates
 Order BOM cost estimates
 Calculation of planned costs for general cost objects
 Preliminary costing for internal orders

You can calculate actual overhead costs at period-end closing in Cost Object Controlling
based on the actual costs or quantities incurred thus far.

For more information about calculating overhead in manufacturing orders, product cost
collectors, general cost objects, and sales order items see the following sections:

 Product Cost by Order

 Product Cost by Period
 Product Cost by Sales Order
 Costs for Intangible Goods and Services

For more information about calculating overhead costs, see the following sections in the R/3
Library:

 Overhead Cost Controlling

 Activity-Based Costing

Control of Requirements Type Determination

The requirements class is selected through the requirements type.
You can select the requirements type in different ways:

 Through the MRP group or strategy group in the MRP view of the material's master
record

 Through the item category and the MRP type in the MRP view

The item category is determined through the item category group in the sales and
distribution view of the material master record, and through the order type of the sales
document (inquiry, quotation, or sales order).

The Source field under Check Control of Requirements Type Determination in Customizing
for Product Cost Controlling determines what method is used. You have the following options:

1. Strategy material master, then item category and MRP type

The MRP group or the strategy group in the MRP view of the material master record
determines what requirements type is used.
If you have not specified this information, the requirements type will be selected through
the item category of the sales order item and the MRP type in the MRP view of the
material master record.
If you have maintained both an MRP group and a strategy group, the system uses the
strategy group (precedence to strategy group).

You can enter the strategy group directly in the MRP view. If you have specified a
strategy group, you do not need to enter an MRP group.

2. Item category and MRP type

The item category is derived from the item category group in the Sales view of the
material master record and from the order type of the sales document. Together with the
MRP type in the MRP view of the material master record, the item category determines
what requirements type is selected. The MRP group in the material master record is
irrelevant here.

The advantage of this method is that the selection of the requirements type depends on
the business process (such as quotation, sales order, or repair).

3. Item category and MRP type with verification of allowed requirements type
 Example for source indicator 0: Strategy for material master

The MRP group is 0020 (sales-order-related production).

The MRP group points to the strategy group 20 (sales-order-related production),

which combines a range of planning strategies such as main strategy 20 (sales-
order-related production), alternative 21 (sales-order-related production/project
settlement).

The strategy specifies a requirements type for the customer independent

requirements (such as sales-order-related production without charging). The
requirements type specifies a requirements class containing default values for
the calculation of overhead, for results analysis, and for settlement.

The requirements class determines the account assignment category of the sales
order item. You use the account assignment category to control whether costs
can be collected on the sales order item.

Example for Source indicator option 1: Item category and MRP type

In the Sales view of the material master record, you have entered the item
category group NORM (normal item).

 Item category TAN is selected for standard orders (order type TA). Requirements type
KE (sales-order-related production without charging) is selected for item category TAN.

 Item category REN is selected for returns (such as order type RE). No requirements type
is selected for item category REN. The only purpose of the sales order item is to
manage returns from customers in the Sales and Distribution component.

The system specifies the requirements type in the sales order.

For more information on the control of requirements type determination, see the IMG for Product Cost
Controlling under Cost Object Controlling  Product Cost by Sales Order  Control of Make-to-Order
Production  Check Control of Requirements Type Determination.