Cost & work center interaction in SAP PP

What is a cost center?

• A cost center is an organizational sub-unit that incurs costs
• Its purpose is to enable a transparent overview of costs by organizational and functional criteria
• A cost center is defined having either responsibilities, spatial areas or other more accounting-technical aspects in mind
• E.g. in many companies a cost center can be viewed as an area of responsibility where costs are incurred
• A cost center is assigned to a controlling area
• Mapping costs to cost centers lets managers see where costs are incurred in the organization
• Cost centers are created with TC KS01

Cost center and work center relationship

• Work centers from more than one plant can be assigned to the same cost center
• Within a given period of time a work center can only be assigned to a single cost center
• All work centers have to be assigned to a cost center
• Operations conducted at work centers contribute to the costs incurred by an organization

Activity types evaluated in a cost center

• A cost center evaluates activities
• A cost center evaluates only those activity types that are defined for the cost center’s controlling area
• Activity types are defined in the controlling area and they are used for deriving the internal cost/price for activities performed internally
• A work center can only use those activities that have been defined in the work center’s cost center