Hi Let me add my two cents Reporting is mandatorily done at company code level. However, additional reporting is also possible at cost center, profit center and segement levels also. Cost centers are created time centrically and company code centrically and can be used for reporting. Profit centers are created time centrically but can get data from multiple cost centers and from across many company codes. In other words, data from multiple ( company code wpecific ) cost centers can be reduced to flow into fewer profit centers ( which are not company code centric). Data from multiple profit centers can be reduced to flow into fewer segments ( geographic or productline segments which are not company code cenric.) According to various statutory requirements segments are becoming mandatory ( 10% above of reporting figures have to be separately reported). Logically total reporting figures may not require more than 10 segments Therefore , Data can flow from Many cost centers into Fewer Profit centers and again into Fewer segments. You capture the profit center into the cost center and the segment into a profit center. ( Cost center contains a profit center and the profit center in turn contains a segment ( Does it not sound like a game of dominoes? You hit the cost center which triggers a profit center and which in turn triggers a segment ). Can you see that additional reporting is rendered easier thus? Regards VidhyaDhar
| | | ---------------Original Message--------------- From: usman khalid Sent: Thursday, June 30, 2011 6:27 AM Subject: Profit Center vs Segment Dear Sitiariyani, Segment is higher in organization level you can easily understand the difference between them through this example Let's suppose your company selling 02 product Bikes and Cars these are the profit centers and theses 02 products were sold in 03 cities (segement) Bikes Car Karachi xxx xxx Lahore xxx xxx Faisalabad xxx xxx Segmental reporting can be made by: ? Division. ? Product or product line. ? Sales territory. ? Service center. ? Sales Person. ? Store or branch office. ? Domestic or foreign operations. SEGMENTAL INCOME STATEMENT Karachi Total CompanyBIKESCARS Sales $ 150,000$ 90,000$ 60,000 Less: Variable costs: Manufacturing 40,00030,00010,000 Selling and admin. 20,00014,0006,000 Total variable costs 60,00044,00016,000 Contribution margin $90,000$46,000$44,000 Less: Direct fixed costs 70,00043,00027,000 Divisional segment margin $20,000$3,000$17,000 Less: Unallocated common fixed costs $10,000 Net income $10,000 Faisalabad Division 2CarsBikes Sales $60,000$20,000$40,000 Less: Variable costs Manufacturing 10,0005,0005,000 Selling and administrative 6,0002,0004,000 Total variable costs16,0007,0009,000 Contribution margin $44,000$13,000$31,000 Less: Direct fixed cost 26,5009,50017,000 Product line margin $17,500$3,500$14,000 Less: Unallocated common fixed costs $500 Divisional segment margin $17,000 The segment margin is the best measure of the profitability of a segment. Unallocated fixed costs are common to the segments being evaluated and should be left unallocated in order not to distort the performance results of segments. Note: Segment manager performance is based on all costs directly controllable by the segment manager. All variable costs ordinarily meet the criteria for both measures. The difference usually arises because a fixed cost is directly attributable to a segment but is not controllable by the manager. For example, a profit center manager may have no control over fixed costs of the segment. In a nutshell, control of costs accounts for the major difference between segment manager performance and segment performance I think u can understand easily Thanks with Regards usman khalid sap fico cosultant @siemens karachi, Pakistan | | __.____._ Copyright © 2011 Toolbox.com and message author. Toolbox.com 4343 N. Scottsdale Road Suite 280, Scottsdale, AZ 85251 | | VidhyaDhar SAP Accounting Top Contributor
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