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Activity Postings Part 1: Activity Types in Review

TomKingMy company began its odyssey with SAP back in 2007, and I was a charter member of the FICO team by virtue of my work with product costing in our legacy world.  I quickly found out that the way SAP handles costing and controlling was like something from a parallel universe.  The concepts were familiar, but the structures and processes were alien to me.  One of the first items that I ran into was the activity type.  Ah, I thought, a familiar concept! 

We had implemented a form of activity-based costing in the legacy world, and this must be SAP’s version of a cost driver.  However, when I looked at SAP’s activity-based costing, I found business processes and templates, but not activity types.  I discovered that activity types were not the cost drivers that I was used to, but instead just a device for allocating costs from cost centers to other cost objects.  There was some similarity to our old legacy cost drivers, but the methods for assigning costs to the activities and then assigning the activities to the other cost objects were alien to my way of thinking!  I clearly had to find out more about activity types and how costs moved from cost center to cost object.

Unfortunately, the knowledge didn’t just burst upon me, but I learned more and more as I prepared for each of our go lives.  As anyone who has been involved in the time crunch of an implementation knows, you rarely have time to think and basically just do what your consultants tell you – fire first, ask questions later!  In the intervening years from our first go live in 2008, I have had some time to reflect on what we did and make some adjustments in how we understand and use activity types.  This knowledge came to me mainly through trial and error, but also through the help of John Evanoff of Hitachi Consulting (who goaded me into writing an article about indirect activity allocation for SAP Experts), various publications, and even (which has a lot of information in it but also requires a lot of interpretation and effort to translate that information into practical terms).

The first thing to know about activity types is that they are not all created equal.  The way an activity type is defined will determine how planning and posting of activities will take place. Depending on that definition, two different activity types will behave in much different ways. 

Activity types are defined using transaction KL01.  First, an activity type is assigned a unit of measure.  This unit of measure should reflect the purpose of the activity.  For example, KWH can be used for an activity type related to electricity consumption and HR can be used for an activity type representing machine hours.

Second, an activity type must be assigned a secondary cost element of type 43 (Internal Activity Allocation).  The assigned cost element is used to post the cost of the activity, crediting the sender cost center and debiting the receiver cost object.
Third, an activity type is assigned a category and price indicator which determine how planning will be performed.  The category defines the method used for planning. 
The price indicator defines how the planned activity price is calculated.
Fourth, an activity type is assigned a category to determine how posting will be performed …
and assigned a price indicator to determine whether the actual value of the activity will be calculated based on actual cost element postings.
Now that you have seen some of the details concerning the definition of activity types, I plan to look into how each of the Actual Allocation activity categories behaves.  Since these blogs are about activity type posting, I am going to ignore the planning side of things and assume that everything is planned manually.  As you will see, there are distinct differences in how each posting category behaves and it will be necessary to go into some detail with each of the 5 categories.  My hope is that most of this information will confirm what you already know, but that you may find some things that you don’t know or haven’t thought about that will help you in the future.  Next, I plan to discuss the posting behavior of category 1 activity types.  Let’s get ready to dig in!

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Tuesday, 21 May 2019