Back to the Basics: Overhead Cost Allocation Methods
Part three in a series of core functions in SAP Controlling
Name: Overhead cost allocation methods
Purpose: Assign cost based on specific criteria
Where used: Controlling, overhead management
Transaction code: Various, see below
Cost allocation methods are used in SAP ERP and S/4HANA. Accurate cost allocation helps the organization in decision making.
The methods and techniques are identical in both deployments, with S/4HANA offering processing speed, Fiori apps, and a path toward continuous accounting.
Overhead cost
These costs are not directly assigned to the procurement of goods or services sold by the organization. The cost objects of overhead management are:
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General cost allocation methods
Cost objects in overhead management act as cost collectors during the accounting period. Depending on the responsibility matrix of an organization, overhead cost can be allocated to other cost objects using several methods. In each method, there will always be a sender of the allocated cost, a receiver of the allocated cost, and a method of assigning cost from senders to receivers (also known as a “tracing factor”).
Periodic cost allocations
Prior to S/4HANA, cost allocations were intended to be a periodic process: costing sheets can be executed repeatedly, while cycles can be reversed and re-executed.
With S/4HANA we have optional continuous accounting capability with features such as real time overhead calculation and attributed profitability segments.
S/4HANA 1909 introduced the Universal Allocation feature with the Manage Allocations(F3338) app, seen below:
