Predistribution of Fixed Costs

Description

Predistribution of fixed costs is part of marginal costing.

Planning in marginal costing benefits from the determination of production costs based on full costing. Therefore, along with the allocation of variable (marginal) costs via internal activity allocation, predistribution of fixed costs from sender cost centers to cost objects must be provided for. Fixed costs, as preparation costs, are notproportional to operating rates, and thus should not be based on the activity output of sender cost centers.

Predistribution solves this problem by distributing the fixed costs in their entirety to the cost centers with plan activity inputs. If the receivers in a reconciled activity plan request activity inputs from the senders, it stands to reason that preparation costs are fixed no matter what the final operating rate is.

The fixed plan costs appear as actual costs on the cost centers by sender activity type used in predistribution. The distribution of fixed costs to the receivers remains in proportion to the plan activity input quantities.

Allocation amount = Plan activity input quantity

of the receiver cost center X Fixed activity price

of the sender cost center

In this way, independent of the operating rate, the R/3 System balances the independent cost portions with those cost centers responsible for the plan activity inputs.

As receiver objects, predistribution uses cost centers (and, in some cases, business processes), not planning-integrated orders and projects.However, if you enter these objects for a cost center used in plan settlement, predistribution proceeds for the receiver cost center.

Orders drawing on activities with predistributed fixed costs cannot be settled in actual with the complete settlement run.

Further notes

For more information, see: