Monthly Archives: October 2017

Cost accounting (13)

22 Sunday Oct 2017

Posted by in Cost accounting

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This post focuses on cost distribution policies and how they differ from cost allocation policies. According to the D365 documentation, cost distribution and cost allocation policies differ in a way that cost distributions always occur at the level of the primary cost element of the original costs.

Applied to the previously used example, cost distribution policies should distribute the costs from the indirect cost centers to the direct ones, as indicated by the arrows shown in the next figure.

To verify this, the following cost distribution policy has been setup:

Please note from the previous screenprint that cost distribution policies also refer to a cost object dimension (‚INDIRECT CC’), as cost allocation policies do. Yet, different from cost allocation policies, a cost element node needs to be specified. The remaining cost behavior and allocation base columns are once again identical to what has been shown for cost allocation policies.

 The cost distribution policy used in this post makes once again use of the previously used employee related statistical allocation base.

After setting up the cost accounting ledger and processing the data and the cost distribution policy, the following costs can be observed from the cost controlling workspace for the different indirect cost centers:

As one can identify from the prior screenprints, some costs remain at the indirect cost centers no. 120 and 130. The underlying reason for this outcome are cost distributions that are made within the group of the indirect cost centers. Those distributions are caused by the employee allocation basis used. The next graphical overview aims to illustrate the underlying issue.

To avoid that costs remain at the indirect cost centers, the cost distribution policy is slightly modified in a way that a hierarchy allocation base (‚DEMF_P13_B’) is used.

 The major advantage of using a hierarchy allocation base is that one can specify to which cost objects cost distributions (or cost allocations) shall be made. In the example shown above, to the direct cost centers (‘DIRECT CC’) only.

Reprocessing the cost distributions with the modified cost distribution policy finally results in the cost data shown in the next figures.

The next graphic has been prepared for a better overview of the cost distributions made.

Before ending this post, please note the following concluding remarks:

  1. The distributed costs won’t be shown as secondary costs even if a cost rollup policy is defined and assigned to the cost accounting ledger.
  2. The same outcome that has been shown above can be achieved by making use of a cost allocation policy that is not linked to a cost rollup policy.

The next post will introduce how to import statistical measure data from other D365 modules. Till then.

Cost accounting (12)

12 Thursday Oct 2017

Posted by in Cost accounting

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In this post, we will take a look at a more advanced allocation scenario where fixed and variable parts of selected cost elements are allocated from indirect to direct cost centers based on separate allocation bases. The next graphic illustrates the allocation approach applied in this post.

 

Step 1: Setup dimension hierarchy

To get this allocation approach incorporated into D365, the previously used dimension hierarchy that differentiates between direct and indirect cost centers is used once again.

 

Step 2: Setup cost behavior policy

The next setup required concerns the cost center behavior policy of the different cost elements. The following screenprint documents how this setup has been made.

Please note the different fixed percentage rates for the cost elements 853000, 854000 and 855000 from the screenshot shown above. To ensure that no other fixed costs are setup and caught by the allocation policy, an additional cost element dimension hierarchy node (‘DEMF CEH’) – with a fixed percentage rate of 0.00% – has been included in the cost behavior policy rule section.

 

Step 3: Setup hierarchy allocation bases

The third setup step relates to the hierarchy allocation bases that will be used for allocating the fixed and variable costs.

The first hierarchy allocation base (‚DEMF_P12_FIX’) that will be used for the allocation of the fixed costs from the indirect cost centers to the direct cost centers refers to the numbers of bikes produced.

 Please note that the allocation base (‘3. BIKE PROD STAT DATA’) is a statistical member that has already been used in prior posts.

The second hierarchy allocation base (‘DEMF_P12_VAR) also allocates costs to the direct cost centers. However, different from the fixed cost part, the employment related statistical measure (‘1. EMPL STAT DATA’) is used as allocation base for the variable costs.

 

Step 4: Setup cost allocation policies

The cost allocation policy shown next, combines the different ‘pieces’ that have been setup and explained before. Because the setup of cost allocation policies have already been explained in previous posts, no further explanations are made here and reference is made to the previous posts on the new cost accounting module.

 

Step 5: Setup cost accounting ledger & process data

After the cost accounting ledger is created and the costs and policies processed – not shown for reasons of brevity – the following costs can be observed from the cost controlling workspace for the different cost centers used.

 Please note especially the fixed and variable cost columns for the different direct and indirect cost centers.

For a better overview of the fixed and variable cost allocations made, the following graphic has been developed, which summarizes the different costs and allocations for the cost centers used.

In the next post, we will take a look at cost distribution policies and how they differ from cost allocation policies. Till then.

Cost accounting (11)

01 Sunday Oct 2017

Posted by in Cost accounting

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Similar to what has been shown in the previous posts on cost allocations, also this post will shown an allocation technique that makes use of a dimension hierarchy that includes additional summary nodes. The allocation technique shown below will once again be based on the financial data that have been used in prior posts.

However, this time a hierarchy allocation base is setup for making the cost allocations.

The hierarchy allocation base that is setup and illustrated in the previous screenprint defines that the previously used formula – which calculates the total direct costs – will be used as the allocation base for those cost centers that belong to the ‘DIRECT CC’ node of the cost object dimension hierarchy.

This cost allocation base is then used in the cost allocation policy shown next and defines that all cost centers that belong to the ‘INDIRECT CC’ node will be allocated to the operative (‘direct’) cost centers based on the total costs that have been recorded on the operative cost centers.

 Different from what has been shown in part 7 of this series on the cost accounting module, the cost allocations ignore the cost relationships within the group of the indirect cost centers because the hierarchy allocation base specified refers to the ‘DIRECT CC’ node only.

As before, the next screenprints summarize the allocation results.

 Please note that the total costs on the direct or operating cost centers no. 210-250 are identical to what has been shown in part 7 of this series. Yet, a detailed investigation of the allocations made reveals that the allocations within the group of the indirect cost centers are skipped.

In the next part, we will extend the hierarchy allocation base allocation technique and investigate how it can be applied to costing scenarios that make use of fixed and variable costs. Till then.