Cost Center Accounting Q&A

Cost Center Accounting:

How is cost center accounting related to profit center?

In the master data of the Cost Center there is a provision to enter the

profit center. This way all costs which flow to the cost center are also

captured in the profit center.

Cost centers are basically created to capture costs e.g. admin cost center,

canteen cost center etc

Profit centers are created to capture cost and revenue for a particular

plant, business unit or product line.

What is a cost element group?

Cost element group is nothing but a group of cost elements which help

one to track and control cost more effectively. You can make as many

number of cost element groups as you feel necessary by combining

various logical cost elements.

What is a cost center group?

In a similar line the cost center group is also a group of cost centers

which help one to track and control the cost of a department more

effectively. You can make as many number of cost centers as you feel

necessary by combining various logical cost centers

Infact you can use various combinations of cost center group with the

cost element group to track and control your costs per department or

across departments

What is the difference between Distribution and Assessment?

Distribution uses the original cost element for allocating cost to the

sender cost center. Thus on the receiving cost center we can see the

original cost element from the sender cost center. Distribution only

allocates primary cost.

Assessment uses assessment cost element No 43 defined above to

allocate cost. Thus various costs are summarized under a single

assessment cost element. In receiver cost center the original cost

breakup from sender is not available. Assessment allocates both primary

as well as secondary cost.

What are the other activities in Cost center?

If you have a manufacturing set up, entering of Activity prices per cost

center/activity type is an important exercise undertaken in Cost center

accounting.

What is an Activity Type?

Activity types classify the activities produced in the cost centers.

Examples of Activity Type could be Machine, Labour, Utilities

You want to calculate the activity price through system? What are

the requirements for that?

In the activity type master you need to select price indicator 1 – Plan

price, automatically based on activity.

When activity price is calculated through system whether activity

price is shown as fixed or variable?

Normally when activity price is calculated through system it is shown as

fixed activity price since primary cost are planned as activity independent

costs.

What is required to be done if activity price is to be shown both

fixed and variable?

In this case you need to plan both activity independent cost which are

shown as fixed costs and activity dependent costs which are shown as

variable costs.

Is it possible to calculate the planned activity output through

system?

Yes. It is possible to calculate the planned activity output through

system by using Long term Planning process in PP module.

Explain the process of calculating the planned activity output

through Long term planning?

In Long term planning process the planned production quantities are

entered for the planning year in a particular scenario. The Long term

planning is executed for the scenario. This generates the planned activity

requirements taking the activity quantities from the routing and

multiplying with the planned production.

The activity requirements are then transferred to the controlling module

as scheduled activity quantities. Thereafter you execute a plan activity

reconciliation which will reconcile the schedule activity and the activity

you have planned manually. The reconciliation program updates the

scheduled activity quantity as the planned activity in the controlling

module.

You want to revalue the production orders using actual activity

prices. Is there any configuration setting?

Yes. There is a configuration setting to be done.

Where is the configuration setting to be done for carrying out

revaluation of planned activity prices in various cost objects?

The configuration setting is to be done in the cost center accounting

version maintenance for fiscal year. This has to be maintained for version

0. You need to select revalue option either using own business

transaction or original business transaction.

At month end you calculate actual activity prices in the system.

You want to revalue the production orders with this actual activity

prices. What are the options available in the system for revaluation?

The options available are as follows:-

You can revalue the transactions using periodic price, average price or

cumulative price.

Further you can revalue the various cost objects as follows:-

Own business transaction – Differential entries are posted

Original business transaction – The original business transaction is

changed.