An activity type describes a service a cost centre provides — machine hours, labour hours, setup hours — and gives a unit in which that service is measured when it is supplied to another cost centre or to a product.
Why they are needed
Consider spreading production department cost across products. Dividing total cost by total units gives a fiddly product and a simple one the same cost, which is plainly wrong.
Recording that a product used two machine hours, and multiplying by a cost per machine hour, apportions cost in line with what actually happened. That cost per hour is the activity rate, and the unit it is measured in is the activity type.
| Activity type | Unit | Typically supplied by |
|---|---|---|
| Machine time | Hours | Production cost centre |
| Direct labour | Hours | Production cost centre |
| Setup | Hours | Production cost centre |
| Engineering effort | Hours | Engineering cost centre |
| Inspection | Count | Quality assurance cost centre |
How the rate is derived
The rate is cost centre cost divided by the activity supplied. The arithmetic is trivial; estimating the numerator and denominator is the real work.
- Build up planned cost for the cost centre: personnel, depreciation, consumables, by expense type.
- Estimate planned activity: how many hours the cost centre expects to supply in the year.
- Divide: planned cost ÷ planned activity = planned activity rate.
Enter planned activity with KP26 and planned cost with KP06. Let SAP calculate the rate with KSPI, or enter it directly in KP26.
Political prices
Rates do not have to be calculated. A rate can be fixed as a management decision — a political price.
This is used when, say, new equipment has pushed depreciation up sharply but product cost is to be held. The trade-off is that the difference between planned cost and allocated amount stays on the cost centre and has to be dealt with separately.
Recording actual activity
Once planning is done, actual consumption has to be captured, usually automatically from other modules.
| Source | What is recorded |
|---|---|
| PP (Production Planning) | Labour and machine time from production order confirmations |
| PS (Project System) | Effort from network activity confirmations |
| CO (direct entry) | Manual entry with KB21N |
Recording activity credits the supplying cost centre and debits the receiving order or cost centre in the same step, using a secondary cost element.
Actual activity rates
At period end the rate can be recalculated from actuals rather than plan, which is what KSII does.
Dividing actual cost by actual activity gives the true rate for the period. Revaluing with it (MFN1) corrects amounts that were charged provisionally at plan rates and clears the difference left on the cost centre.