The business purpose of Profitability Analysis is to provide information on the profitability of a company's market segments ,

in order to support corporate planning and decision-making, especially in the areas of sales and marketing. The definition of
a market is configured in the system through the selection of characteristics that are to be the subjects of analysis.
Performance figures may either be profit and loss account balances or freely defined value fields. The results of Profitability
Analysis can be analyzed with a multidimensional reporting tool, which allows the dynamic sorting and rearranging of data to
provide multiple perspectives within a single report.

COPA Will come under customer generated data sources. We are generating data source based on some other object
All financial modules- FI (Finance) To Record all the transactions belongs to finance (Cash), the reports coming out from
finance will be used by External users like shareholders and Tax authorities etc.
Sub Modules - FI AR (Accounts Receivable- deal with customers- It will give aging report), FI - AP (Accounts Payable Vendors), FI- GL (General Ledger -Any finance transaction), FI - AA(Asset Accounting - Deals with assets), FI -SL (Special
Ledger)
CO (Controlling) - The reports coming out from Controlling will be used by internal users like production manager, MM
manager and CEOs etc.
Sub Modules ---- CCA - COST CENTER ACCOUNTING, PCA - PROFIT CENTER ACCOUNTING, PC - PRODUCT
COSTING, COPA- CONTROLLING PROFITABILITY ANALYSIS
Only for COPA & FI - SL we need to generate data source (Customer generated data sources)
The reports of CO-PA will be used by Top level people (Whether the company is in loss or profit), CO - PA is sub module of
CO
Why there is no business content data source for CO - PA?
In CO-PA, The FI -CO consultant mainly work with object called Operating concerns, Operating Concerns will have
characteristic fields and value fields. The structure of operating concerns is not fixed, based on client requirement they may
change, so we cant fix the data source.
Operating concerns. Two types of fields
1. Characteristic field
2.Value fields
The FI-Co consultant create the operating concerns based characteristic fields and value fields
CHARACTERISTIS - Sales document number, customer number , material number,
VALUE FIELDS-Cost of goods sold, net sales, billing quantity
The operating Concerns internally it creates four tables, CE1-name of operating concern, CE2-name of operating concern,
CE3-name of operating concern,CE4-name of operating concern
Technical name of operating concern maximum length is four
CO-PA can be used for planning also, The CO-PA (Operating Concerns) will have both actual transactions and plan
transactions

How the actual transactions will come to Operating Concerns?

We cant create transaction in CO-PA, COPA is an integration module
When we perform some transactions in other modules it will reflect automatically in CO-PA
CO-PA central component for all modules, all the modules in R3 will be integrated to CO-PA
SD-Sales order, Delivery, Billing
Once the bill is raised, we will send the bill customer, once the money is collected for this bill, This bill amount will be posted
in CO-PA
There is a button in SD to post the bill to CO-PA will be done by CO-PA Consultant
How my system does understand whether the transaction is planned transaction or actual transactions?
They use one character fields -Value type, If the value type is 10 the transaction is actual, if the value type is 20 the
transaction is planned
CE1- Actual line item data (will be more detailed), CE 2-Planned (More Aggregated), CE3-Segment level table (Segment
number will be primary key and all characteristics) AND CE4- Segment level table (Segment number will the primary key
and all Value fields)
One important filed called version (10 or 20 or v1 or v2 or v3). When you create Bex report we need to restrict net sales with
Value type and Version (V type reporting). Otherwise you dont get Accuracy of data

Overview
Profitability Analysis (CO-PA) enables you to evaluate market segments, which can be classified according to
products, customers, orders or any combination of these, or strategic business units, such as sales organizations
or business areas, with respect to your company's profit or contribution margin.
The aim of the system is to provide your sales, marketing, product management and corporate planning departments with
information to support internal accounting and decision-making.
Two forms of Profitability Analysis are supported: costing-based and account-based.

Costing-based Profitability Analysis is the form of profitability analysis that groups costs and revenues according to
value fields and costing-based valuation approaches, both of which you can define yourself. It guarantees you access at all
times to a complete, short-term profitability report. Cost of Goods sold is recognized after goods are billed and before being
shipped.

Account-based Profitability Analysis is a form of profitability analysis organized in accounts and using an accountbased valuation approach. The distinguishing characteristic of this form is its use of cost and revenue elements. It provides
you with a profitability report that is permanently reconciled with financial accounting. Cost of goods sold is recognized after
goods are shipped and before being billed.
From a technical point of view CO-PA is part of OLTP and thus resides in the same database as other transactions of ECC
(formerly R/3). The main benefit is quicker reporting and access to the underlying transactions and line items. An OLAPbased reporting is optimized for querries and multidimensional pivoting with no access to transactions, but quicker slicing
and dicing of reports. It's provided as an Excel Add-In and called Business Intelligence (formerly BW and BIW). The end
result from the business perspective is the same: actual and planned financial results (values and key figures).

Definition
Profitability Analysis (CO-PA) enables evaluation of
-

Market segments

o Classified cording to products, customers, orders or any combination of these,

Or
-

Strategic business units

o Such as sales organizations or business areas,

With reference to company's profit or contribution margin.
Forms of Profitability Analysis:
Costing-based Profitability Analysis
This form of profitability analysis that groups costs and revenues according to value fields and costing-based valuation
approaches. It guarantees access at all times to a complete, short-term profitability report.
Thus, this method emphasizes on matching the revenues for goods and/or services provided (the value that a company
gains as a result of sales) against the related expenses for those items (the value that is lost when products are transferred
out of the company). Therefore, this accounting method displays profit and loss information in a manner optimized for
conducting margin analyses, and as such it is optimal for the sales, marketing, and product management areas.
Account-based Profitability Analysis
This form of profitability analysis is organized in accounts and using an account-based valuation approach. The
distinguishing characteristic of this form is its use of cost and revenue elements. It provides a profitability report that is
permanently reconciled with financial accounting.
Thus, this method emphasizes on summarizing the activity and situational change over a period of time, for a given
organizational unit. Therefore, this accounting method presents the revenues and primary expenses that have been incurred
during a given period of time and the changes in stock value levels, work-in-process, and capitalized activities. As such, it is
optimal for the production and profit center areas. Profitability Analysis (CO-PA) calculates profits according to cost-of-sales
method of accounting. ProfitCenter Accounting (EC-PCA), on the other hand, supports both period accounting as well as
the cost-of-sales approach.
Answers CO-PA can provide# Determining the largest and fastest growing customers- by studying the contribution of
individual market segments or sales channels.
The definitions of both 'market segments'and 'performance figures' are freely definable, allowing for maximum flexibility in
market evaluation. The definition of a market is configured in the system through the selection of characteristicsthat are to be
the subjects of analyses. Performance figures may either be profit and loss account balances or freely defined value fields.
Market segments are normally some combination of information regarding customers, products, and the selling organization.
Performance figures are normally measurements of quantities, revenues, discounts, surcharges, product costs, margins,
period costs, etc.
1.

Examining achievement of contribution margin goal/targets by the sales force - Margin goals of individual sales
force/entities.
Sales Quantity

Sales Revenue

Customer discount

Sales commission

Direct sales costs

Net revenue
-

Direct material costs

Variable production costs

Contribution margin I
-

Material overhead

Fixed production costs

Contribution margin II
-

Variances

Contribution margin III

-

Overhead costs

Operating profit
1.

Study the success of the most recent sales promotion for a product line- Success of Marketing Activities

2.

Study the impact of a pricing strategy for a group of customers - Revenue and Cost Structure.
The results of Profitability Analysis can be analyzed with a multidimensional reporting tool, which allows the dynamic sorting
and rearranging of data to provide multiple perspectives within a single report.
The method of determining period operating results in Profitability Analysis is based on the assumption that a company's
success can be measured primarily on the basis of its transactions with other companies.
This sales-oriented approach in CO-PA means that no contribution to the organization's success is made until a sales
transaction has been completed. Consequently, the products sold are transferred to CO-PA in accordance with the cost-ofsales accounting method and provide information on the sales revenue and sales deductions.
This net revenue is then compared with the cost of sales. These costs consist of the cost of goods manufactured of the
products sold or services rendered plus any production variances known.
To round off the profitability data, overhead costs can also be assigned to profitability segments in the course of period-end
closing activities.
Views of Profitability Management
Sales Reporting:
CO-PA allows analyzing the profitability of segments of the market segments structured according to products, customers,
orders, and summarizations of these and other characteristics as well as organizational units such as company codes or
business areas. The aim is to provide sales, marketing, planning, and management organizations with decision-support from
a market-oriented viewpoint.

Responsibility Reporting:
EC-PCA allows analyzing internal profit and loss for profit centers. This makes it possible for evaluation of different areas or
units within the company. Profit centers can be structure according to region (branch offices, plants), function (production,
sales), or product (product ranges, divisions). Profit Center Accounting is a component of the module "Enterprise
Controlling".

Integration
Profitability Analysis, along with Profit Center Accounting (EC-PCA), is one of the application components for profitability
accounting.

Features
In the application component CO-PA, users can define own master data, the basic structures of this form of profitability
analysis. This master data includes both, units (that are desired to be evaluated (characteristics)) and the categories (in
which values analyzed).

In costing-based CO-PA, "value fields" to store data for analysis are defined.

In account-based CO-PA, the values are structured by account.

Using the SAP master data (customer, product, customer hierarchy) or CO-PA derivation rules, the system can derive
additional characteristics based on the ones entered manually or transferred from primary transactions. The combination of
characteristic values forms a multidimensional profitability segment, for which profitability can be analyzed by comparing its
costs and revenues.
If company is reorganized into smaller units, such as sales districts or customer hierarchies, the assignments between
characteristics for data that has already been posted can be changed.
Actual postings
Account based CO-PA: The actual postings represent the most important source of information in CO-PA. Both sales
orders and billing documents from the Sales and Distribution (SD) application component can be transferred to CO-PA in
real-time. In addition, an interface program is available to transfer external data to the R/3 System. Costs from cost centers,
orders and projects, as well as costs and revenues from direct postings (G/L account postings in FI, orders received in MM,
and so on) can also be transferred or settle costs from CO to profitability segments.
Costing-based CO-PA: In costing-based CO-PA, incoming sales orders or billing documents can be valuated to
automatically determine anticipated sales deductions or costs. The data can also be revaluate periodically to adjust the
initial, real-time valuation or add the actual costs of goods manufactured.

Planning
In CO-PA planning, a sales and profit plan can be created. Whereas both types of Profitability Analysis can receive actual
data in parallel, there is no common source of planning data. Consequently, a plan is always made either in accounts
(account-based CO-PA) or in value fields (costing-based CO-PA). In costing-based CO-PA automatic valuation can be used
to calculate planned revenues, sales deductions and costs of goods manufactured based on the planned sales quantity.
Planning: manual

The manual planning function allows defining planning screens for an organization. With this reference data in planning can
be displayed, formulas calculated, forecasts created and more. Planning can be performed at any degree of detail. For
example, it can be at a higher level, and have this data distributed top-down automatically.
Planning: automatic
In automatic planning, actual or planning data can be copied and revaluate for a large number of profitability segments at
once. planned sales quantities can also be transferred from (costing-based) CO-PA to Sales and Operations Planning (SOP)
for the purpose of creating a production plan there.

Information System
The Information System lets interactive analysis of existing data from a profitability standpoint using the functions of the drill
down reporting tool. Navigation through a multidimensional "data cube" using a number of different functions (such as drill
down or switching hierarchies) can also be performed there. The system displays data in either value fields or accounts,
depending on the currently active type of Profitability Analysis and the type to which the report structure is assigned.
Each report structure is assigned to either costing-based or account-based CO-PA.
The display parameters can be changed online directly from the displayed report. Report structures with predefined sort
orders, number formats and so on can be stored, and executed online or in the background at any time.
Accounting Methods
Profitability Analysis (CO-PA) calculates profits according to cost-of-sales method of accounting. Profit Center Accounting
(EC-PCA), on the other hand, supports both period accounting as well as the cost-of-sales approach.
Both of these applications can be used --and consequently both methods--at the same time in your organization.
The CO-PA application itself offers two forms of Profitability Analysis: costing-based and account-based. Both of these types
of CO-PA can be used simultaneously.
Profitability Analysis Using the Cost-of-Sales Method
With this method, the emphasis is on matching the revenues for goods and/or services provided (the value that a company
gains as a result of sales) against the related expenses for those items (the value that is lost when products are transferred
out of the company). Therefore, this accounting method displays profit and loss information in a manner optimized for
conducting margin analyses, and as such it is optimal for the sales, marketing, and product management areas.
In cost-of-sales accounting, the cost of sales is set off against revenue using either direct costing or full absorption
methods(contribution margin accounting). Fixed costs can be allocated on a proportional basis or en bloc to any level(s) of a
hierarchy. Standard costs can be used to valuate the cost of sales for the purpose of obtaining a preliminary profit analysis.
Or the variances of production orders and cost centers can also be transferred to Profitability Analysis in order to reconcile
CO-PA with Financial Accounting (FI) on the basis of actual costs.
Costing-Based Profitability Analysis
This type of Profitability Analysis is primarily designed to allow analysis of profit quickly for the purpose of sales
management. Its main features are, firstly, the use of value fields to group cost and revenue elements, and, secondly,
automatic calculation of anticipated or accrual data (valuation). The advantage of this method is that data is always up-todate and therefore provides an effective instrument for controlling sales.
Account-Based Profitability Analysis

This type of Profitability Analysis enables reconciliation of cost and financial accounting at any time using accounts. In
contrast to costing-based Profitability Analysis, this type uses cost and revenue elements, which gives a unified structure for
all of accounting.
The system posts all revenues and costs to both Financial Accounting and Profitability Analysis at the same time and using
the same valuation method. This means that the cost of sales is posted to Profitability Analysis at the point of goods issue.

Account-Based Profit Center Accounting Using the Period Accounting Method

With this method, the emphasis is on summarizing the activity and situational change over a period of time, for a given
organizational unit. Therefore, this accounting method presents the revenues and primary expenses that have been incurred
during a given period of time and the changes in stock value levels, work-in-process, and capitalized activities. As such, it is
optimal for the production and profit center areas.
In period accounting, the performance of a particular business unit (profit center) - that is, its revenues, changes in inventory
and capitalized services - is set off against the total costs of the period. This occurs at the G/L account level and adheres to
the formal structure of Financial Accounting. This gives a uniform structure of report data and allows reconciliation of the
data of cost and financial accounting on the basis of cost elements.
Flows of Actual Values in Profitability Analysis
Actual Postings represent the most important source of information in CO-PA. Both sales orders and billing documents can
be transferred from the Sales and Distribution (SD) application component to CO-PA in real-time. In addition, an interface
program is available to transfer external data to the R/3 System. Costs from cost centers, orders and projects, as well as
costs and revenues from direct postings (G/L account postings in FI, orders received in MM, and so on) can also be
transferred or costs from CO to profitability segments settled.
In costing-based CO-PA, incoming sales orders or billing documents can be valuated to automatically determine anticipated
sales deductions or costs. Data can also be revaluated periodically to adjust the initial, real-time valuation or add the actual
costs of goods manufactured.
Objects in Profitability Management (CO-PA part)
Profitability Segments
-

Characteristics

Characteristic values

Value fields or accounts

Profitability segmentsare the market channels or strategic business units that are to be analyzed in CO-PA. They may be
combinations of product, customer, and sales structure information, and/or may encompass company code, business area,
and profit center information.
Since reporting margins and other profitability figures along marketing lines (as defined by these profitability segments) is
the primary purpose of CO-PA, its design has been optimized for producing profit and loss statements under the cost-ofsales accounting format and philosophy.
Parallel Currencies in Profitability Management
In costing-based CO-PA, all amounts are stored at minimum in an operating concern currency, which is specified in the
operating concern attributes.

It is also possible to configure the attributes to store values in the local currency as well; this has the effect of doubling the
stored transaction data, though.
Account-based CO-PA stores all transaction in three currencies, the transaction currency, the local currency, and the
controlling area currency.
Structures
The Master Data determines the basic structure of CO-PA. This includes both units to be evaluated (characteristics) and the
categories in which values are analyzed. Thus master data provides the fundamental data and content within the structures
and is determined by characteristics and value fields.
Using the SAP master data (customer, product, customer hierarchy) or CO-PA derivation rules, the system can derive
additional characteristics based on the ones entered manually or transferred from primary transactions.
The combination of characteristic values forms a multidimensional profitability segment, for which profitability can be
analyzed by comparing its costs and revenues. *Creation:*The creation of structures determine the possible valuation levels
and are required to be created first.
To create the structures, the following need be defined:
-

The operating concern

The characteristics and

Value fields belonging to the operating concern from different field sources.

Identify and set non-segment-level characteristics

From a technical point of view, this actually amounts to creating different tables.
In the operating concern, structures can be defined so that the revenues and sales deductions (= value fields) are shown
that correspond to the respective levels (customer, customer group, sales office, and product (= characteristics)).
Thus master data is closely linked to the structures in Profitability Analysis. Master data consists of the individual values that
the characteristics and value fields can take. The combination of the latter specifies the valuation level. In other words, the
combination of particular characteristic values forms the actual analysis object, called the profitability segment+.
+Organizational Units
The operating concern is the highest reporting level within CO-PA; it defines the limit of sales and marketing information,
which can be reported together from this module. One or more controlling areas are assigned to an operating concern when
organizational structures are defined. Often, corporations have only a single operating concern, which is recommended for
the sake of simplicity and convenience if all controlling areas and company codes share the same fiscal calendar.
The structure of an operating concern is determined by
-

Analysis criteria (characteristics) and

The values to be evaluated (value fields) (only in costing-based Profitability Analysis).

G/L accounts (only in account-based Profitability Analysis).

In a first step, the characteristics have to be defined for the operating concerns. Characteristics are defined in the
Customizing activity Maintain characteristics. For costing-based Profitability Analysis, value fields also need to be
defined. This is done using the activity Maintain value fields. These characteristics and value fields can be used in several
operating concerns. Their definition applies to all clients.

After this, the structure of the operating concern has to be defined, by selecting the desired characteristics and adding them
to the data structures of the operating concern, in the activity Maintain operating concern. If costing-based Profitability
Analysis is active, the required value fields also need to be selected and added. The structure of an operating concern is
valid in all clients.
In the step "Maintain operating concern", the attributes of the operating concern (fiscal year variant, currencies) are also
specified. By maintaining the attributes, an operating concern is made "known" in the current client. The attributes are clientspecific.
The controlling area is an organizational unit delimiting the organization's independent cost accounting operations (cost
center accounting, profit center accounting, and order accounting). Company codes are assigned to controlling areas when
organizational structures are defined. Often, a 1:1 relationship exists between the company code and the controlling area.
However, a controlling area can also incorporate several company codes to take cross-company cost allocations into
account.
The company code is an independent accounting unit within a client. The legal requirements of a balance sheet or profit
and loss statement are fulfilled on the company code level. Plants are assigned to company codes when organizational
structures are defined.
The plant represents a production facility. It is the primary organizational unit in the SAP R/3 Materials Management and
Production Planning application component

Planning in COPA SAP

Planning in COPA can be made at various levels. SAP allows to plan:
1- By manually inputting figures for segments. You need to create planning layout in KE14, this can be
used then in KEPM (Planning framework).
2- By manually inputting Sales Quantity only, and rest of valuation would be done using valuation strategy
as configured in IMG (KE4U) & Revenue would be planned using costing sheets.
First method is quite straightforward; where there is a lot of manipulation of data, as required. However in
second method; only quantity is planned; rest of valuation is done automatically.
For second method it is required to configure in different areas in IMG to work, below is detailed working
step wise:
Manual & Automatic Planning (Point of Valuation 03 & 04) in COPA
In IMG; assign valuation strategy to point of valuation (Transaction code: KE4U)

Input Point of Valuation 03 (manual planning) & 04 (automatic planning) against version, where you want
to valuate your planning data.

In IMG: Select "Assign costing keys to Material Types" in order to assign point of valuation (03 & 04) & to
relevant material type (Transaction Code: KE4J):

Input point of valuation 03 & 04 for record type F "Billing Data" against material types relevant for costing
(say FERT & HALB) for relevant plan version.

In IMG: Select "Assign value fields" in order to assign Point of Valuation (03 & 04) to cost component
structure (Transaction Code: KE4R):

Input Point of Valuation 03 & 04 for all cost components, for which you want to valuate planning data.

In IMG: Check "Valuation Simulation" to verify the configuration made in above steps (Transaction Code:
KE21S):

Select any posting date; Record Type "F", point of valuation 03 0r 04 & version for which you are planning
your data.

Input Parameters in Selection Screen (e.g Company Code, Product & Plant etc)

Input Sales Quantity with unit of measure & click on valuation icon above

You can see the results in level 2 under After valuation; that means valuation is done successfully.

For automatic valuation, you need to tick automatic valuation option in planning framework (tcode
KEPM). Whenever you would plan data in this framework; it would be automatically valuated.

Maintain COPA Costing Sheets for Sales Revenue

Planning
You have two options regarding costing sheets; either you use costing sheet created in SD or you create
in COPA.
In order to create Costing Sheet in COPA; Please follow following steps:
In IMG: select condition tables; condition tables are used to identify fields, for which you want to plan data
i.e. Sales Revenue or Deductions/Surcharge or other cost segments.
(Transaction Code: KE4A)

Enter Code for table between 501 & 999

Select fields (Characteristics) by double clicking

In IMG: Select Access Sequence for table created above

Please be aware that! Creation of Access Sequence is Cross Client Activity.

Create Access Sequence and define accesses for same

Enter table created above.

Here you can see fields selected in table

In IMG: Select Condition Types and Costing Sheets to create condition parameters and condition records
for costing sheet (pricing procedure)

Click on Create button (

) under condition types menu (on left side) & give condition type & its
description (on right side).
Choose Access Sequence created in previous step.

Select Prices in Definition of Condition Type

Select Price with change in Quantity in Prices options:

Click on Records for Condition Type to enter planning data

Enter Planned Data in form

Now click on Create Button under Pricing Procedure Menu to create costing sheet

Enter relevant name for Pricing Procedure & Description and input condition type created above in table
below

In IMG: Select Define and Assign Valuation Strategy in IMG menu to assign costing
sheet to valuation strategy

Input Costing Sheet against Application Class "KE", however if you want to use costing sheet from SD,
you will assign same against Application Class "V".

In IMG: Select "Assing Value Field".

For COPA costing sheet, you have to assign condition type to value field

Input Value Field against Condition Type here (Transaction Code: KE45)

After all above settings; simulation can be checked to verify results (Transaction Code: KE21S)

Select any posting date; Record Type "F", point of valuation 03 0r 04 & version for which you are
developing planned data.

Input Parameters; i.e. Company Code & Product/Plant

Input Quantity with Unit of measure & Click on valuation

A new line has been generated in valuation analysis with valuation method "Costing Sheet", please click
on analysis icon to check results

For Amount planned for product, you can see revenue calculated:

Under Results of Valuation you can see assignment of condition type against value field.

You can maintain table fields; for faster/most granulated input (Transaction Code: KE4A)

You can enter condition records (say planned price) using transaction code KE41.

Please use KE42 to change & KE43 to display planned inputs.