What is external value added in SAP CO-OM-ABC - Activity-Based Costing?

SAP Term: external value added

• Component: CO-OM-ABC

• Component Name: Activity-Based Costing

• Description: An indication of whether a business process is relevant to, or has a deciding influence on, the production of a product or service from an external standpoint. The degree of influence on the value added is illustrated by means of a ranking order.

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• Key Concepts: 
  External value added is a term used in Activity-Based Costing (ABC) within the Controlling (CO) module of SAP. It is a measure of the value that a company adds to its products or services through activities that are not directly related to the production process. This includes activities such as marketing, research and development, and customer service. 
  
  How to use it: 
  External value added can be used to measure the efficiency of a company's operations and to identify areas where improvements can be made. It can also be used to compare the performance of different departments or divisions within a company. By tracking external value added, companies can better understand how their activities are contributing to their overall success. 
  
  Tips & Tricks: 
  When calculating external value added, it is important to consider all activities that are not directly related to production. This includes activities such as marketing, research and development, customer service, and other administrative tasks. Additionally, it is important to consider the cost of these activities when calculating external value added. 
  
  Related Information: 
  External value added is closely related to internal value added, which measures the value that a company adds through its production process. Additionally, external value added is often compared to total cost of ownership (TCO), which measures the total cost of a product or service over its entire life cycle.