After completing this lesson, you will be able to:
Describe the purpose of cost centers
Explain the cost center master data fields
Maintain the cost center standard hierarchy
Create cost centers
A cost center is an organizational unit that represents the location where costs are incurred. Typical cost centers include, for example, a company's accounting department, the information technology (IT) department, and marketing.
What you might be familiar with as the department of a company may be split into multiple cost centers in the system according to the operational and reporting requirements. Manufacturing entities such as the Bike Company typically have a cost center for quality control. There might be a single quality control department with multiple quality control cost centers in the system for each manufacturing plant. However, each cost center is assigned a single person responsible, typically the cost center manager.
Cost centers allow you to control costs and improve product and service valuations:
You can analyze where costs are incurred within the organization.
You can track the efficiency of the cost centers by comparing actual with planned costs.
You can use different methods to assign activities and costs to the products, services, and market segments of your company.
A distinction is generally made between two basic types of cost centers:
Operational and Support Cost Centers
Cost Center Master Data
In the figure below, you can see the master data maintenance screen in SAP S/4HANA. An explanation is provided for a few of the fields that aren't self-explanatory.