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Primary Cost and Secondary Cost Planning
Primary Cost and Secondary Cost Planning
When you create a cost element, you must assign a cost element category. This
Assignment determines the transactions for which you can use the cost element.
21 - Internal Settlement
31 - Order / Project results analysis
41 - Overhead Rates
42 - Assessment
43 - Internal activity allocation
50 - Project related incoming orders: Sales
51 - Project related incoming orders: Others
52 - Project related incoming orders: Costs
61 - Earned Value
Planning primary costs involves entering those costs that arise from the consumption of goods
and services supplied to the organization from external (as opposed to internal) sources.
Primary costs include:
Labor costs
External services
Material costs
Operating supplies
Accrual costs
Features:-
In primary cost planning, you can enter costs and consumption quantities for each cost
center/cost element. This means that primary costs can be planned by quantity, as well as by
value.
In primary cost planning, which is based on value, the system records only the plan costs for
each cost element. To do this, use, for example, planner profile SAP101 and standard planning
layout 1 - 101.
During primary cost planning that is based on quantity, you plan the consumption of goods and
services that the organization procures from external sources. No valuation occurs. For
example, you can use planner profile SAP101 and standard planning layout 1 - 101, which
includes the characteristics Fixed consumption and Variable consumption for planning.
If you only know the quantities of the resources consumed, you also use resource planning to
carry out a quantity-based primary cost planning using planner profile SAPR&R and standard
planning layout 1 - 1R1. The SAP system executes the valuation using the prices you have
stored.
Primary costs can be planned using different methods:
o Activity-independent primary cost planning
o Activity-Dependent Primary Cost Planning
Example:-1
Suppose Cost Center 1000 stores machine hours cost, Machine Hour is an activity. When we do
a planning for Cost Center 1000 w.r.t activity MACHINE, its an activity dependent planning. In
KP06 & in KP26 we can input the activity quantity and compute the prices using KPSI or
manually input prices in KP26.
Salary of Plant Supervisor is not dependent on any activity of MACHINES. Hence, it will be
activity in-dependent planning.
Example:-2
A) Activity dependent planning:
Suppose your company is a manufacturing one and Product 1 is manufactured in a
manufacturing Unit which is a Production CCtr (CCtr master data). While manufacturing the
product there are manufacturing activities carried out like operation of machines (machine
hours), some Labour activities called as Labour Hours and Machine set up activities called as
Set up hours etc. So all these are manufacturing activities in quantitative terms like hours/min
etc. So to charge this cost to product we need activity rate and to calculate that rate we need
to plan activity dependent planning in manufacturing cost center level. So in all such cctr we
define activity dependent planning. These activity type are being used by PP in Qty structure
routing to capture cost of activities
Even in some other scenario also (under special environment) we can use activity planning
where activity rate is required.
B) Activity Independent Planning: Where only expenditure is required to plan and no activity
rate is required to be calculated basically where no manufacturing activities are performed like
Finance/Purchase departments (Cctr).
You plan activity-independent primary costs, subdivided by cost element, on the cost centers
to which you later also assign the actual costs. Most cost elements are planned in this way (for
example, material costs, raw material and operating supply costs, etc.).
If you want to further subdivide the plan total of each cost element, see Detailed
Planning or Resource Planning .
Detailed planning below the cost element level is useful, for example, if several items are
summarized under one cost element.
Example
You plan salaries on a production cost center based on the manufacture of the finished product
X. The planned activity type is Production hours FST. Your activity-dependent primary cost
planning, for example, using planner profile SAP101 and standard planning layout 1 - 101)
contains the following values:
Activity Type FST: 1000 hrs.
In addition to primary costs, secondary costs are often incurred during the production of cost
center activity. This is because a cost center must often take activity from other cost centers
to produce its own activity. Secondary costs on the cost center result from internal allocations,
such as activity allocations or assessments.
To get meaningful periodic comparisons of plan and actual data, you must plan secondary costs
as well as primary costs.