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

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