Defining Cost Centers


After completing this lesson, you will be able to:

  • Create a cost center

Cost Center Accounting

The cost center is master data in a CO area that represents a delimited location where costs occur.

You can use cost centers for differentiated assignment of overhead costs to organizational activities based on utilization of the relevant areas (cost determination function), and for differentiated controlling of costs arising in an organization (cost controlling function).

The CO-OM-CCA component tracks where costs occur in your organization. Cost centers can be defined according to several design approaches, such as functional requirements, allocation criteria, activities, and services provided geographic location or area of responsibility. The approach should be consistent throughout the enterprise. As a typical approach, an enterprise can define a cost center for each low-level organizational level that has responsibility for managing costs. As costs are incurred, they are assigned or posted to the appropriate cost center. These costs can include payroll costs, rent and utility costs, or any other costs relevant to a cost center.

The posting and assignment of costs to cost centers makes managerial accounting possible, which is a vital step for utilizing other CO components.

Cost Center Data

The Company Coded Segment represent the close ties between Management Accounting and FI. If a CO area has more than one company code, you must specify the company code that the user links to each cost center. If a segment reporting is required, you can derive the segment via a profit center, which you enter in the cost center master record.

The cost center master record is time dependent and assigned to a node of the standard cost center hierarchy. Additionally you assign the cost center to organizational units like company code and functional area.

The Control data is used to lock the cost center against planning and posting activities.

Statistical Key Figures

Statistical key figures are nonmonetary information that you can plan and post on cost centers (and other cost objects). They are used as additional reporting info in cost center reports, to calculate additional key figures, such as average salaries per employee, and as distribution factors to distribute cost from one cost center to another. An example could be the distribution of cost of a facility cost center to other cost centers according to the space in square meters (or square foot) that they use.

To allow the system to calculate the total, you need to determine the category value, as follows:

  • Fixed: the periodic values can not be added to a total. The system will calculate the total of a period as an average of the single values.

  • Total: the periodic values can be added to a total.

Create and Display Cost Centers

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