© Baan Development BV Controlling 1 iBaan ERP 5.0c

© Baan Development BV

Controlling 1iBaan ERP 5.0c

2© Baan Development BV

iBaan ERP Course Objective I

TheThe objective of this course is to objective of this course is to

learlearn about the concepts and functionality of n about the concepts and functionality of Multi Dimension Budgeting and Cost Multi Dimension Budgeting and Cost Allocations (Single Dimension Allocations (Single Dimension

Budgeting) within iBaan ERP Finance. Budgeting) within iBaan ERP Finance.


iBaan ERP Course Objective PEG/Support

TheThe objective of this course is to objective of this course is to

learlearn about the concepts and functionality of n about the concepts and functionality of (Multi Dimension Budgeting and) Single (Multi Dimension Budgeting and) Single

Dimension Budgeting within iBaan ERP Dimension Budgeting within iBaan ERP Finance.Finance.


Central InvoicingCentral Invoicing

ProjectsProjects

ServiceService

Quality ManagementQuality ManagementManufacturingManufacturing

WarehousingWarehousing

General Ledger

Order ManagementOrder Management

Accounts Receivable

Budgets

Cost AccountingFinancial Statements

Fixed Assets

Cash Management

iBaan ERP Finance

Purpose: To control and plan the business activities in a financial way.

• Budgets• Iteration• Operation Rates and Surcharges• Deviations

Accounts Payable


FBS/CAT in relation to iBaan ERP

Finance

ACRACR

FAMFAM

Service

TSTSTSTS

Project

TSTSTSTS

Basic Data

IBDIBD

EMMEMM

COMCOM

MCSMCS

Central InvoicingLogistics IBDIBDIBDIBDTDTD

IBDIBDIIIBDIBDIBDIBD

TSTS

TPTP

GLDGLD

TITI

SLISLI

FSTFST

ACPACP

CATCAT

FBSFBS

WHWH

CMGCMG


Cost accounting Background

1970s: Kilger and Plaut developed highly structured and detailed approach to cost control:– through standard costs and flexible budgets– basic principles:

• cost centers are focal point for cost planning, cost control, and production costing

• clear distinction between fixed and variable costs

U.S. cost systems similar to these cost systems

1980s: – use of computers makes it possible to create more frequent reports

displaying direct/indirect costs– activity based costing


Cost accounting What is it?

Process of determining cost of producing goods and services:– manufactured goods:

• allocate direct labor and materials to cost of product• allocate overhead based on actual usage of overhead expenses


Analyze performance of cost centers

Set direct and accurate CP rates

Improve allocation of indirect costs

Analyze profitability and product mix

Produce Management Income Statements

Break Costs into Fixed and Variable Components

Translate Business Plans into Flexible Budgets

Cost AccountingWhy?


The business process

Create annual plans and budgets

Periodically compare budget (what I expect to do) vs allowed costs (what would it cost at standard) vs actual (what actually happened and what it actually cost)

After results possible to readjust our standard to more appropriate amounts


ManufacturingPlan

ManufacturingPlan

Capacitycheck

Capacitycheck

ProductionPlan

ProductionPlan

SalesPlan

Sales by:Customer groupSales regionProduct group

Disaggregation

through Product Fam.

to ProductsHoursManMachineMaterial

Concept - planning cycle


BudgetBudgetProductionPlan

ProductionPlan

Operation rate/surcharges


Cost priceperitem

Cost priceperitem

Fixedtransfer

price

Fixedtransfer

priceStockvaluation

Stockvaluation

ActualActualRouting

BOMProfit

marginsProfit

margins

Evaluation

FixedandVariable



BudgetBudgetProductionPlan

ProductionPlan



Cost priceperitem

Cost priceperitem

Fixedtransfer

price

Fixedtransfer

priceStockvaluation

Stockvaluation

ActualActualRouting

BOMProfit

marginsProfit

margins

Evaluation

FixedandVariable


Manufacturing

Finance


Budget types

Multi dimension budget– Budget amounts can be based on several cost types (one ledger

account and/or one or more dimensions) together– Not performance driven– Baan IV functionality

Single dimension budget– Performance driven budgets that are only based on ONE

dimension at the time– Usage of CAT module for allocation and iteration– Integrating surcharges/rates


Ledger Account Dimension

Dimension Types

(1) (2) (3) (4) (5)DimensionDimensionDimensionDimensionA.

B.

E.

D.

C.

Ledger Account

Ledger Account

Dimension

Ledger Account Dimension Dimension

Dimension

Dimension Dimension

Examples:

Multi dimension budget

Defined in a horizontal way:


Dimension

Ledger Account Ledger Account Ledger Account

Reference Unit (cost driver)

Ledger AccountLedger Account

Reference Unit (cost driver)

Single dimension budget

Defined in a vertical way:


FBS/CAT functionalities

Cost Center Budgeting– Multi Dimension – Cost Allocation (Single Dimension)

Product Costing

Activity-based Costing

Energy

Accounting Dep.

Production Dep.

Warehouse Dep.

Energy Production Dep.

Warehouse Dep.

Product A

Product B

EnergyProduction Dep.

Warehouse Dep.

Cutting

Assembling

Issuing

Receiving

Product A

Product B


Multi Dimension Budgeting

Depreciation expenses

Travel expenses

Ledger Accounts Budget

1500

1000

Actual

1400

1350

145500

150600

300800

100

DimensionLocation

AmsterdamRotterdam

Rotterdam

AmsterdamMunchenNew YorkRotterdam

750

75150

01000

100

7550

10075

Amsterdam

New YorkMunchen

Rotterdam

0250

200505

DimensionDepartment

WRH

PUR

SLS

FIN

PUR

SLS

1100

100

150

150

150

850

1000

100

225

75

145

1205


Set up master dataMulti Dimension Budgeting

Distribution codes– Used for distributing the year amounts among the periods– Factors or percentages based– Multiplier for copying budgets

Budget code– Budget method– Parent budget– Budget currency

Budget Amounts


Distribution codes

Used for distributing the year amounts among the periods

Factor or percentage

Multiplier is used for copying budgets

Quaterly distribution

Quarter 1 15 1,00Quarter 2 25 1,05Quarter 3 40 1,10Quarter 4 20 0,95

Multiplier%Quaterly distribution

Quarter 1 1 1,00Quarter 2 3 1,05Quarter 3 4 1,10Quarter 4 2 0,95

MultiplierFactor


Budget methods

Bottom-up– Budgets can only be defined on sublevel 0 ledger account and/or

dimension– Higher sublevels are build up automatically

Top-down– Budgets can be defined on sublevel 0 or on higher sublevels– No check on consistency between sublevels

Budget method applies for ledger accounts as well as dimensions


32

1

0

2

1 1 1

0 0 0 00 0

Bottom-up Budget method


3

2

1

0

Top-down Budget method


¥

Company level

Branchlevel

Department level

Sales

Europe

Sales

America

Sales

Asia

$

$

£ $

Parent budgets

€


Budget Distribution

Budget Codes

Budget data

Question 1-3Exercises

1-5

Skill Objectives


Budget

Actual

Pat Year

New Budget Year

Current yearBudget

Actual

Estimate

Latest Estimate

Budget Simulation


Budget comparisonExercises

6-9

Skill Objectives


Cost AllocationSingle Dimension Budgeting

Dimension: Cost Centers

Accounting Department

Production Department

Sales Department

Warehouse Department

Purchase Department

MainCost Centers

100 m

1.100 m

100 m

650 m

50 m

2.000 m

Energy

PrimaryCost Center

Expen

ses J

anua

ry:

$ 1

0.00

0

$ 500

$ 5.500

$ 500

$ 3.250

$ 250


Cost Allocation

Dimension: Cost Centers

Accounting Department

Production Department

Sales Department

Warehouse Department

Purchase Department

MainCost Centers

100 m

1.100 m

100 m

650 m

50 m

2.000 m

Energy

PrimaryCost Center

Expen

ses J

anua

ry:

$ 1

0.00

0

$ 500

$ 5.500

$ 500

$ 3.250

$ 250

Performance Quantity

Total BudgetAmount

Budget Rate /

Surcharge

5


FBS versus CATCost Allocation

CAT

Allocation Relations

ImportActual

RetrogradeCalculation

Price Iteration

FBS

AllocationResults

BudgetDistribution

BudgetCode

ReferenceUnits

Hierarchies

ReportStructures

LARelations

BudgetDefaults

PerformanceBudget

Single Dim.Budget

Integrate Results

GLD


Set up master dataCost Allocation

Distribution codes

Budget code

Reference Units

Performance Budget

Single Dimension Budget

Secondary ledger accounts


Hierarchies

Report Structure


Reference unit

Reference Unit = Cost Driver or Surcharge Base

Cost driver • Machine HoursMachine Hours for an assembly department• Man HoursMan Hours for a maintenance department• Kilowatt HoursKilowatt Hours for an energy cost center• Square MetersSquare Meters for a facility cost center

Cost driver • Machine HoursMachine Hours for an assembly department• Man HoursMan Hours for a maintenance department• Kilowatt HoursKilowatt Hours for an energy cost center• Square MetersSquare Meters for a facility cost center

Surcharge base• Direct material costsDirect material costs for a warehouse departmentSurcharge base• Direct material costsDirect material costs for a warehouse department


Reference unitProgressive planning

Total performance of source allocation relation is checked against budgeted performance quantity while defining allocation relations

Direct maintenance of performance quantity not possible

Limited capacity

Forward planning

CC1CC1

CC4CC4

CC3CC3

CC2CC2

Performance Quantity = 100

Allocation q 30Allocation q 45

Allocation q 25

Target Cost

Centers

Source Cost Center


Reference unitRetrograde planning

Performances defined in allocation relations used to determine performance of reference unit as source for allocation relation

Unlimited capacity

Backward planning

CC1CC1

CC4CC4

CC3CC3

CC2CC2

Target Cost

Centers

Allocation q 25

Allocation q 15

Allocation q 5

Performance Quantity = 45

Source Cost Center


Reference unitRetrograde planning

Raw material A

Raw material B

Weld material A Scrap 10%

Cut material B Waste 5%

AssemblingLoss 20%

Steel (0,9m)

Fabric (0,95m)

Chair

€ 25,00

€ 20,00

€ 45,00€ 56,25

€ 22,50

€ 19,00

Cost of 1 item

1m steel plate = € 251m fabric = € 201m steel plate = € 251m fabric = € 20

How much steel and fabric is needed for 100 approved chairs?

100q/80*100=125q assembled

(125q*0,95m)/95*100= 125m fabric

(125q*0,9m)/90*100= 125m steel


Performance Budget

What is the available total quantity of the Reference Unit?

Machine 1.500 machine hours

Maintenance 2.000 man hours

Housing 15.000 square meters

Machine 1.500 machine hours

Maintenance 2.000 man hours

Housing 15.000 square meters



What is the budget amount and rate/surcharge for the dimension/reference unit?

Maintenance

Cost Center

LA Wages

LA Temporary labor

LA Interest

€ 200.000

€ 100.000

€ 10.000

Budget Amount Rate

€10

€ 5

€ 0,50


Effective rates and surcharges

Political rates, based on experienced external/internal (market) policies

Based on the budgeted rates/surcharges

Can be updated manually

Maintenance

Cost Center

LA Wages

LA Temporary labor

LA Interest

€ 200.000

€ 100.000

€ 10.000

Budget Amount Rate

€10

€ 5

€ 0,50

Eff. Rate

€8

€ 6

€ 0,50


Secondary ledger account

Pri

mar

y le

dge

r ac

coun

ts

Maintenance

Cost Center

LA Wages

LA Temporary labor

LA Interest

€ 200.000

€ 110.000

€ 10.000

LA Allocate To (credit)

€ 0

€ 320.000

Assembly

Cost Center

LA Allocate From (debit) € 240.000

Warehouse

LA Allocate From (debit) € 80.000

Secondary ledger accounts



Maintenance

SourceCost Center

Assembly

TargetCost Center

Warehouse

2.000 mh

1.500 mh

500 mh


Retrograde calculation

Used to recalculate performance quantities of retrograde reference units

After recalculation: final capacity

Now possible to calculate operation rate


Price iteration 1

Iterative calculation of reference unit rate gives very good approximation of rate in case of reciprocal allocation relations

Deviation of rates; e.g. 1.00– If the differences of allocation rates are decreased to <1.00 price

iteration ends

Number of cycles; e.g. 8– After 8 iteration cycles the iteration process ends


1

2

3

4

5

6

7

8

Iteration Cycles

Max. 99 cycles

Price iteration 2


Reference Units

Performance Budget



Exercises10-19

Skill Objectives


Hierarchy of general ledger accounts and dimensions according to GL master data

NewNew Hierarchy of general ledger accounts and dimensions according to FBS master data

Hierarchies


Report Structure

To enable the user to define his own report structure

Columns and names are fixed

Rows based on ledger accounts

Possibility to vary with multiple hierarchies

Summation lines can be inserted


Hierarchies

Report Structure

Integrated allocation results with GLD

Exercises20-26

Optional27-34

Skill Objectives

Documents

© Baan Development BV Controlling 1 iBaan ERP 5.0c