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Part 1: Cost Center Accounting
You use cost center accounting to control expenditure that’s based on areas of responsibility within your organization. It allows you to post all primary expenses from Financial Accounting to cost centers. You’re provided with many tools to analyze and control the costs. Cost center managers can run standard reports to analyze the costs that they’re responsible for and compare plan and actual expenditure. Documents are stored for all transactions, allowing you to drill down from cost items of interest to detailed line item reports and to source documents, such as purchase orders and material documents.
You can enter plan data at the cost element level for cost centers, and run standard reports comparing plan and actual values for each period. You can drill down from the cost center report to line items and source documents. The standard hierarchy contains all cost centers since the hierarchy node is a mandatory cost center field. You set up the standard hierarchy based on your company structure. The standard hierarchy is easily maintainable, so you can make adjustments based on changes to the actual company structure.
You’re also provided with many methods to allocate overhead costs to production cost centers and then directly to production orders for inclusion in the cost of sales. Assessments allow you to allocate costs from high level overhead cost centers progressively to production cost centers. Production and overhead costs are assigned to products through activity confirmations and/or costing sheets. Activity-based costing is also available, providing complete flexibility to allocate overhead costs based on any criteria.
If there’s a balance left on production cost centers at period end, you can either revaluate the activity prices to absorb all the cost center costs, or you can assess the remaining costs directly to profitability analysis. In profitability analysis, you can compare the cost of sales with revenue and sales deductions to provide detailed profitability information for each product or sales region, or any of the many other characteristics available in the standard system.
In this section of the book, you’ll find ideas on working with the standard hierarchy, planning, price calculation, and target cost and variance analysis.
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Tip 1 Understanding Plan Cost Splitting
You can allocate cost center costs across activities using two different methods.
During plan cost splitting, the system splits the activity-independent costs of a cost center among the activity types of that cost center. Plan costs are split automatically during plan price calculation. First, let’s look at activity-dependent and activity-independent costs and then we’ll move on to seeing how the costs are split.
And Here’s How ...
You can plan activity-independent and activity-dependent costs with Transaction KP06 or via the following menu path:
Accounting • Controlling • Cost Center Accounting • Planning • Cost and Activity Inputs • Change
The screen in Figure 1 is displayed.
Figure 1 Cost Element Planning Selection Screen
In this screen, you have the option of entering an activity type:
